U.S. Oil Industry Giant Paid Millions To A Company At The Center Of Huge Corruption Scandal

While KBR was being inves­ti­gat­ed for bribery in Nigeria, it was part­ner­ing with a com­pa­ny that bribed offi­cials in Kazakhstan.

The American engi­neer­ing and con­struc­tion firm KBR hired Unaoil — an obscure Monaco-based com­pa­ny now involved in a mas­sive inter­na­tion­al bribery scan­dal — to help it win oil and gas con­tracts in Kazakhstan. KBR, which until 2007 was part of the oil­field ser­vices giant Halliburton, paid Unaoil mil­lions of dol­lars from 2004 until at least 2009, accord­ing to thou­sands of inter­nal doc­u­ments obtained by The Huffington Post and Fairfax Media.

Halliburton and KBR have been in trou­ble for bribery in the past. After a years-long fed­er­al inves­ti­ga­tion, KBR plead­ed guilty in 2009 to mul­ti­ple crim­i­nal counts of vio­lat­ing U.S. for­eign cor­rup­tion laws by brib­ing Nigerian offi­cials. KBR agreed to pay $402 mil­lion as part of a set­tle­ment. Halliburton and KBR also paid $177 mil­lion to set­tle SEC civ­il charges relat­ed to the same con­duct. Three years lat­er, Albert “Jack” Stanley, KBR’s for­mer CEO, was sen­tenced to 30 months in fed­er­al prison for his role in the scan­dal. As part of the deal with the Justice Department, KBR agreed to waive many of its legal rights if it was caught vio­lat­ing bribery laws again.

In the midst of the DOJ inves­ti­ga­tion, a KBR employ­ee emailed Unaoil to warn the American com­pa­ny was “tight­en­ing” anti-cor­rup­tion con­trols in response to the fed­er­al probe. Despite this, KBR con­tin­ued to pay Unaoil for work in Kazakhstan for years afterward.

Throughout the emails, Unaoil and Halliburton/KBR employ­ees use code words to refer to part­ners in Kazakhstan. In February 2005, Richard Stuckey emailed Unaoil exec­u­tive Peter Willimont from a Halliburton email address, urg­ing him to start “hob­knob­bing” [sic] with insid­ers imme­di­ate­ly. “My feel­ing is that a good spaghet­ti house is where it is at of course a lit­tle shash­lik for lunch is good to digest also,” Stuckey wrote.

The code names — which referred to an Italian oil com­pa­ny (spaghet­ti) and Kazakhstan’s state oil appa­ra­tus (shaslik, a form of kebab pop­u­lar in Kazakhstan) — won’t pro­tect Halliburton or KBR.

“If those emails were writ­ten after KBR was under inves­ti­ga­tion by the DOJ for pri­or vio­la­tions, then the penal­ty will be far high­er than it would be if this was a first-time vio­la­tion,” says Andy Spalding, a law pro­fes­sor at the University of Richmond who runs a blog on for­eign bribery. “It does­n’t mat­ter what they’re going to argue, because a third-par­ty law firm is going to come in and read all these emails and inter­view all these employ­ees and they’re going to detect real­ly quick­ly that they’re not talk­ing about food.”

In 2004, Unaoil began try­ing to win a joint con­tract for KBR and Petrofac, a British firm, to work on the mas­sive Kashagan oil field. The Kazakh Institute of Oil and Gas (KING), a wing of Kazakhstan’s state-owned oil com­pa­ny, had been pay­ing a man named Leonida Bortolazzo as a con­sul­tant, accord­ing to a memo a Halliburton/KBR employ­ee sent brag­ging about Bortolazzo’s influ­ence in the coun­try. But Unaoil was also pay­ing Bortolazzo as much as $80,000 a month, accord­ing to a con­tract between the Monaco firm and Bortolazzo’s con­sult­ing com­pa­ny. In one instance, Unaoil bought tens of thou­sands of dol­lars worth of high-end fur­ni­ture for Bortolazzo, accord­ing to emails. Unaoil’s con­tract with Bortolazzo also includ­ed a $165,000 sign­ing bonus.

Halliburton had tried unsuc­cess­ful­ly since 1998 to secure con­tracts in Kazakhstan but hit repeat­ed road­blocks. The devel­op­ment of the Kashagan field, one of the biggest reserves dis­cov­ered in decades, is man­aged by the clunky bureau­cra­cy of Kazakh dic­ta­tor Nursultan Nazarbayev with the help of a clique of inter­na­tion­al ener­gy giants.

KBR’s part­ner­ship with Unaoil was designed to give it an advan­tage in the Kashagan con­tract­ing process just as the inter­na­tion­al oil com­pa­nies that were man­ag­ing the field began mov­ing ahead on their final plans to devel­op it.

Unaoil’s focus on Italians, includ­ing Bortolazzo, shows that it knew whom to tar­get. Bortolazzo was a for­mer man­ag­er at ENI, an Italian oil firm that’s been repeat­ed­ly accused of cor­rup­tion. ENI — the “spaghet­ti house” in the emails — is one of the small­est oil com­pa­nies involved in man­ag­ing the Kashagan field, but it has tak­en the lead on the reserve’s devel­op­ment under a 2001 agree­ment between the for­eign con­glom­er­ates and Kazakhstan’s state-owned oil com­pa­ny. Leaked Unaoil emails indi­cate that Unaoil exec­u­tives were try­ing to con­vince Halliburton/KBR man­agers they could pro­cure con­fi­den­tial infor­ma­tion from paid sources with­in ENI and the Kazakh government.

“We need to con­vince Richard [Stuckey, of Halliburton/KBR] … that we own the spaghet­ti house & have a lease on the shash­lik take­away,” Unaoil’s Willimont wrote, for­ward­ing Stuckey’s February 2005 email to Cyrus Ahsani, the CEO of Unaoil and the son of the com­pa­ny’s founder. “This done we can get our deal signed.”

Convincing Halliburton/KBR of its influ­ence in Kazakhstan required Unaoil to accom­mo­date some unusu­al requests. In August 2008, after KBR had split from Halliburton, Unaoil spent tens of thou­sands of euros on hotel rooms for Kazakh offi­cials vis­it­ing Monaco, where Unaoil is head­quar­tered, accord­ing to emails. That par­tic­u­lar expense shows just how much suc­tion Unaoil won in Kazakhstan for its American client: Among the offi­cials it host­ed was Kairat Boranbayev, at the time the chair­man of the board of the Kazakh state oil com­pa­ny’s joint ven­ture with Gazprom, Russia’s state-owned gas monop­oly. Unaoil offi­cials were at pains to find him space at a “Prestigious Hotel” giv­en that he was vis­it­ing right as Monaco was host­ing high-pro­file soc­cer match­es. Boranbayev end­ed up in a suite at the Fairmont worth €1,700 a night. His aides stayed in more basic rooms that only cost €900 night­ly. Boranbayev is today known for his ties to the Kazakh dic­ta­tor (his daugh­ter mar­ried Nazarbayev’s grand­son at a 2013 wed­ding fea­tur­ing Kanye West), lav­ish moves like pay­ing Pussycat Dolls star Nicole Scherzinger more than $100,000 to per­form at his posh London home and his con­trol of Kazakhstan’s McDonald’s franchise.

The expens­es were worth it for Unaoil because of KBR’s high pro­file. “This is the best agency we have have ever had,” Willimont wrote in a June 2008 email to Cyrus Ahsani. “Our abil­i­ty to live from the rep­u­ta­tion of work­ing with KBR is immense.” Unaoil would tout its work with KBR in mar­ket­ing mate­ri­als for years to come.

Did Unaoil bribe pub­lic offi­cials? “The answer is absolute­ly no,” Ata Ahsani, the com­pa­ny’s founder, told The Huffington Post and Fairfax Media.

The “alleged behav­ior” of “some” of “Eni’s employ­ees is in detri­ment of the com­pa­ny, as well as in direct and obvi­ous con­flict with Eni’s code of ethics that any employ­ee is required to ful­ly com­ply [with],” an Eni spokes­woman said in an email. “We do not com­ment … on the results of pos­si­ble inter­nal inves­ti­ga­tions.” The spokes­woman was not refer­ring to Bortolazzo specifically.

Bortolazzo did not respond to a request for comment.

Kazakhstan’s embassy in Washington did not imme­di­ate­ly respond to a request for com­ment on the role of the state-owned oil com­pa­ny and asso­ci­at­ed offi­cials. A spokesper­son for Boranbayev said he was on vaca­tion and not avail­able for comment.

Halliburton and KBR deny wrong­do­ing. “Halliburton main­tains an active, com­pre­hen­sive Ethics & Compliance Program which includes busi­ness prac­tices and poli­cies to ensure that Halliburton and its employ­ees are com­pli­ant with all reg­u­la­to­ry laws and require­ments glob­al­ly,” Halliburton said in an email to The Huffington Post. “We have no cur­rent or recent rela­tion­ship with [Unaoil]. Halliburton has not owned KBR since 2007 so we have no knowl­edge of its busi­ness relationships.”

KBR “is com­mit­ted to con­duct­ing its busi­ness hon­est­ly, with integri­ty, and in com­pli­ance with all applic­a­ble laws,” the com­pa­ny said in a state­ment. “We do not tol­er­ate ille­gal or uneth­i­cal prac­tices by our employ­ees or oth­ers work­ing on behalf of the Company.”

But emails between Unaoil and Halliburton/KBR employ­ees dur­ing the Justice Department’s inves­ti­ga­tion into pre­vi­ous bribery alle­ga­tions show a com­pa­ny rush­ing to dis­con­tin­ue prac­tices that could raise red flags with inves­ti­ga­tors, but not sev­er­ing the under­ly­ing part­ner­ship. In July 2005, Tony Fossey, KBR’s finance man­ag­er for the Kashagan Project, emailed Willimont to dis­cuss KBR’s “Nigerian agent prob­lem,” refer­ring to the Justice Department’s inves­ti­ga­tion into the group brib­ing Nigerian offi­cials to win con­tracts. Fossey, who left the com­pa­ny that year, refused to com­ment on the record.

At the time, Unaoil list­ed a London address on its con­tract with KBR, but request­ed pay­ment from KBR through a wire trans­fer to Monaco. “A part of the fall-out from [the DOJ inves­ti­ga­tion], is a con­sid­er­able, ‘tight­en­ing’ or our US management’s approach to con­trol­ling the whole are­na of agent pay­ments,” Fossey wrote to Willimont, explain­ing that send­ing pay­ment to Monaco, a coun­try not list­ed on the con­tract, could vio­late FCPA rules. It’s not clear from the emails whether the pay­ment ever went through.

In 2006, Halliburton object­ed to mak­ing a pay­ment to a bank account in the Channel Islands, a noto­ri­ous off­shore tax haven, on the grounds that the Unaoil sub­sidiary named in their con­tract was in fact based in Monaco, accord­ing to emails. Unaoil agreed to accept pay­ment at its Monaco bank account.

In 2008, Unaoil employ­ees deter­mined the com­pa­ny need­ed a new bank account in Kazakhstan to receive pay­ments from KBR. “We need to open a new Bank Account… in Kazakhstan into which our future KBR rev­enues will flow,” Sandy Young, Unaoil’s finance man­ag­er, wrote to anoth­er employ­ee in February of that year. “More and more our prin­ci­pals are ask­ing to have the right to audit our com­pa­nies as part of their gov­er­nance rules and it is much eas­i­er for us to com­ply with this request if we use a sep­a­rate bank account (this way we can lim­it the access we give them to infor­ma­tion about our com­pa­ny activity).”

As late as January 2009, KBR was mak­ing pay­ments to Unaoil. That month, it paid $936,713.37 to Unaoil’s new account in Kazakhstan, accord­ing to a bank trans­fer record includ­ed in one of the emails.

A few weeks lat­er, on Feb. 11, KBR entered into a deferred pros­e­cu­tion agree­ment with the Justice Department regard­ing its activ­i­ties in Nigeria, and agreed to pay a $402 mil­lion crim­i­nal fine. Its work with Unaoil did­n’t come up.

Patrick Stokes, one of the three lawyers who pros­e­cut­ed the Nigeria case against KBR, is still a top offi­cial at the Justice Department divi­sion charged with crack­ing down on for­eign bribery.

Original source of arti­cle: www.huffpost.com