Fed Govt to prosecute JPMorgan Chase over $875m Malabu oil fraud

Malabu Oil
Malabu Oil
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A High Court in London headed by Justice Andrew Burrows has granted Nigeria’s plea to allow it proceed with the trial against JPMorgan Chase which alleges the bank enabled the misappropriation of state funds totalling $875m over the Oil Prospecting License, OPL 245.

A press statement released by Comrade Salihu Othman Isah, Special Adviser on Media and Publicity to the Honourable Attorney General of the Federation and Minister of Justice, Abubakar Malami, SAN on Friday disclosed that JPMorgan Chase, a US bank has failed to halt the prosecution brought against the bank by the Federal Government.

Isah said Justice Burrows in a 26-page verdict on Thursday stated that Nigeria had “reasonable grounds” for bringing a claim to the commercial division of the High Court, meaning it can now proceed to trial.

The judge averred that, “The defendant bank has failed to establish that the claimant has no real prospect of success.” According to him, the bank ought to suspect the payments were fraudulent and therefore had a duty to protect the Federal Republic of Nigeria until its concerns were cleared up.

“That duty of care entails that the defendant bank could not simply follow the mandate of abiding by the instructions given by the claimant because the bank’s duty of care, as its core, was to protect the claimant against being defrauded by not paying out unless and until it was ‘off inquiry”, the Judge insisted.

But at a hearing this month, JPMorgan Chase had argued that the case should be dismissed as it had received sufficient approvals from Nigerian authorities before allowing the transfer of funds from a government account to those controlled by former Minister of Petroleum Resources, Mr. Dan Etete who is convicted of money laundering.

The payments, after a 2011 settlement, aimed to end several years of battle over the ownership of a lucrative but controversial oil licence that has ensnared Royal Dutch Shell and Eni in corruption investigations in Milan, Italy.

The licence for the c block was shuffled back and forth between Shell and Malabu Oil & Gas, a Nigerian oil company controlled by Mr. Etete and which was first awarded development rights in 1998 when he was also in charge of petroleum resources, but he has denied any wrongdoing.

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As a result, the Federal Government is now seeking compensation, saying it was “the victim of a serious fraud” as a result of bribes made to former and current Nigerian politicians and oil executives through the transfer of funds via Malabu accounts.

It alleges that although JPMorgan Chase had reasonable grounds to believe the payments out of the government account were intended to defraud the customer, the bank went ahead in breach of its “duty of care”.

Even as the bank had said it had “no responsibility” to look behind any payment instructions, the judge said this was not consistent with the agreement the bank had with its client.

However, the bank was quoted to have said after the judgement on Thursday, that; “While today’s judgment is disappointing, it does not address the underlying claim, which we continue to believe is completely without merit. JPMorgan complied with its legal and regulatory obligations in respect of the payments concerned and will defend the claim robustly at trial.”

The Federal Government said it was now set to going on with its claim and had “full confidence that JPMorgan Chase will be held to account for its actions”.

Meanwhile, Nigeria has filed a separate $1.1bn legal claim against Shell and Eni to “recover the very significant sums lost to corruption and the unlawful activity” of the two energy majors. On its part, Shell and Eni have said their deal with the Federal Government was legal and that the payment was made to the state and they had no part to play in what happened to the money afterwards.

It will be recalled that several recipient banks also refused to accept the payments and returned the money to JPMorgan as a result of compliance issues, according to the suit.

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