JP Morgan Chase has acknowledged it knew that a former Nigerian Minister of Petroleum Resources, Mr. Dan Etete, would benefit when it transferred over $800 million proceeds from the sale of Oil Prospecting Lease (OPL) 245 to a company he controlled.
The federal government had filed a claim against the United States lender for more than $875 million, accusing the bank of negligence in transferring funds from the disputed 2011 oilfield deal to a company controlled by a former Minister of Petroleum Resources.
According to the court document, JP Morgan was said to have received a request from the Federal Ministry of Finance to transfer more than $800 million to accounts controlled by the previous operator of the block, Malabu Oil and Gas, controlled by a former Minister of Petroleum Resources, Etete.
The document further alleged that JP Morgan had transferred the funds to two accounts controlled by Etete, without sufficient due diligence to make sure the money did not leave accounts controlled by the Federal Government.
The court papers filed in London in November 2017, on behalf of the federal government, had also alleged that JP Morgan acted with gross negligence by allowing the transfer of the money without further checks.
The federal government argued JP Morgan should have known that, under Nigerian law, the money should never have been transferred to an outside company.
“If the defendant acted with reasonable care and skill and/or conducted reasonable due diligence, it would or should have known or at least suspected … that it was being asked to transfer funds to third parties who were seeking to misappropriate the funds from the claimant and/or that there was a significant risk that this was the case,” said the court papers.
A spokeswoman for JP Morgan had dismissed the accusation, saying the firm “considers the allegations made in the claim to be unsubstantiated and without merit.”
But citing a court document, Reuters reported that JP Morgan made the acknowledgement in its legal response to a lawsuit filed by Nigeria over transactions made by the U.S. bank when Royal Dutch Shell and Eni bought offshore oilfield OPL 245 from Malabu Oil and Gas in 2011.
The $1.3 billion deal has spawned legal cases spanning several countries and involving Nigerian government officials and senior ENI and Shell executives, a number of whom face trial in Italy on corruption charges next month.
Malabu is controlled by Etete, who was Nigeria’s oil minister at the time of the deal and was convicted of money laundering in France in 2007. He could not be reached for comment.
The lawsuit against JP Morgan accuses the bank of negligence over the transfer of funds from a Nigerian government escrow account into which Shell and Eni had deposited money to secure OPL 245. It claims $875 million from the bank.
In its written defence, filed in a British court last week, JP Morgan said Britain’s Serious Organised Crime Agency (SOCA), now renamed the National Crime Agency, had approved the transfers to Malabu. It denied negligence.
The bank had previously said only that it “considers the allegations made in the claim to be unsubstantiated and without merit”.
JP Morgan did not provide a comment on the filing. Lawyers representing Nigeria did not respond to requests for comment.
It was not immediately clear whether JP Morgan’s acknowledgement that it knew of Etete’s links with Malabu will have any impact on the trial starting in Milan in May. Italian prosecutors were not immediately available for comment.
Eni’s chief executive is among those going on trial in Milan on charges of paying bribes to Etete and others, including sums that went to Malabu. Shell and Eni deny wrongdoing in relation to OPL 245.
Shell said in April last year that it “always knew” the Nigerian government would compensate Malabu and that Etete was involved. It had previously told Reuters only that payments went to the Nigerian government.
The lawsuit against JP Morgan said that although it received a request from Nigeria’s finance ministry to transfer funds to accounts controlled by Malabu, the bank showed gross negligence by not making further checks before allowing the transaction.
Denying negligence, JP Morgan said in its response that the transfers were authorised by designated government signatories for the Depository Account — the then finance minister and the African country’s accountant general.
The bank also said it knew Etete was the beneficiary of Malabu by July 2011, one month before it made the transfers, and that by July 14, 2011, it “was aware of Etete’s conviction”.
“It is admitted that the order referred to Etete as Malabu’s principal. It is admitted that by 15 July 2011 JPMC (JP Morgan Chase) was aware of Etete and of his association with Malabu,” it said in the court filing.
JP Morgan also denied that it had acted in breach of Nigeria’s constitution or owed the government or state any further due diligence.
“It is denied that ‘the utilisation of the Depository Account’ was contrary to the constitution… It is denied that JPMC ‘should have been aware’ that this was (allegedly) the case,” the filing said.