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Sinopec Under Investigation over Bribery in Nigeria

Posted  August 31, 2017

By the C|C Whistleblower Lawyer Team

The DOJ and SEC are investigating Chinese national oil and gas company Sinopec over allegations the company paid over $100 million in bribes to Nigerian government officials to resolve a business dispute in the country. Sinopec, also known as China Petroleum & Chemical Corporation, is a state-owned oil and gas company, and the second largest oil company in the world by revenue. It is traded on the Hong Kong, Shanghai, and New York stock exchanges. The US agencies are investigating specific accusations that the company funneled money from its Swiss unit, via outside lawyers acting as middlemen and banks located in California and New York, to Nigerian government officials.

The alleged payments were intended to resolve a $3 billion dispute between a division of the company and the Nigerian government relating to drilling costs, tax breaks, and the division of royalties. Shares of Sinopec have marginally increased since news of the probe broke. A probe by Swiss authorities into related conduct was closed in July, with Sinopec paying a $32 million fine and admitting to “organizational deficiencies.” However, no criminal charges were filed.

Sinopec acquired its Swiss unit, also called Addax, in 2009 for $8 billion, with the goal of expansion into Africa. Addax has operated in Nigeria since 2001 under a “side letter” agreement with the Nigerian government under which it was granted special tax breaks and relief from capital costs. Around 2014, the Nigerian government attempted to renege on the agreement and demanded $3B in repayments from Addax.

Bribery allegations surfaced this January after Deloitte, Addax’s auditor, publicly resigned because it failed to obtain a “satisfactory explanation” for an $80 million payment to an engineering company for Nigerian construction projects in 2015. Shortly after that payment, Addax and the Nigerian government reached a court-approved settlement in their dispute. The settlement resulted in the government reversing its position that Addax owed them $3 billion in unpaid taxes and royalties. The agreement was revoked in 2016, on a forward-looking basis only. Deloitte also noted that Addax paid $20 million to legal advisors in Nigeria and the US, from accounts in Nigeria and the Isle of Man. Several whistleblowers allege those payments were also meant to bribe Nigerian officials.

Sinopec has announced that it will end Addax’s operations in Geneva, Scotland, and Houston before 2018.

Tagged in: FCPA,

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