Nigeria alleged JPMorgan Chase & Co. ignored “overwhelming” evidence of fraud and stark warnings from its own compliance staff as it kicked off a London court fight over transfers to a former oil minister accused of corruption.
JPMorgan acted negligently in transferring some $875 million between 2011 to 2013 from escrow accounts to Dan Etete, who had been convicted of money laundering, Nigeria’s lawyers said Wednesday.
They cited an email by JPMorgan’s senior country official saying the matter “had gone right to the top of the firm.”The bank says the claim is “baseless” and that Nigeria hasn’t proven that a fraud was even perpetrated.
The six-week trial will examine the extent of a bank’s duty of care toward clients, and whether the firm should have halted payments even if that meant overriding assurances from government officials.
JPMorgan says that Nigeria’s claim would mean that its bankers were expected to know that the transfers were fraudulent.
Nigeria’s current government says a contract awarded by one of its predecessors to explore the deep waters off the Gulf of Guinea, alongside a series of later agreements, was corrupt.
Such arrangements allowing for the payments to Etete and his firm Malabu Oil and Gas Ltd. over the oil field didn’t just “pardon” the disgraced oil minister, Nigeria’s lawyer Roger Masefield told the court.
“It was positively rewarding on a spectacular scale a brazen act of corrupt self dealing.”
The west African nation is seeking damages of around $1.7 billion including interest.
European and Nigerian courts have been raking over the purchase by Eni SpA and Royal Dutch Shell Plc of the oil license in Africa’s largest crude producer a decade ago.
While the energy giants were recently acquitted of corruption charges in Milan in a decision prosecutors are appealing, Nigeria’s government is continuing to seek compensation from JPMorgan.
JPMorgan fell short of what should be expected of a “reasonable and honest banker” throughout the two-year period of the payments, Masefield said.
Some of the first tranche of transfers in 2011 were laundered through shell companies and converted to cash through Nigerian bureaux de change, he said.
By 2013, the “glaring” warning signs were even more obvious, the government has alleged.
JPMorgan’s own compliance team spoke of the “great risk” of corruption if the bank continued to process the payments, according to a Nigerian filing prepared for the trial.
‘Several Cronies’In a memo prepared just before the 2013 transfer, officials noted that proceeds from the sale of the oil rights “ended up in accounts of several cronies and business associates of Nigerian government officials.”
The issues around Etete had “gone right to the top of the firm,” Oluwatosin Adewuyi, JPMorgan’s senior country officer for Nigeria wrote in an email in July of that year.
The bank made the payment weeks later.It was then only after the last of the funds were processed, that JPMorgan declared a “significant” anti-money laundering “event,” according to the Nigerian filing. Etete and Malabu were then placed on the interdiction list
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