ALMATY: The indictment of an American citizen on charges of funnelling $60 million in oil payments into his boss’ secret Swiss bank accounts, and speculation surrounding Kazakhstan President Nursultan Nazarbayev’s role in the fraud, is sending shudders throughout the oil industry, experts say.
The investigation, says Scott Horton, a Columbia University law professor who advises oil companies on Central Asia, appears to be the biggest ever undertaken under the 28-year-old Foreign Corrupt Practices Act (FCPA), which forbids US citizens and companies from paying bribes to obtain contracts.
“It is also one of the most significant criminal investigations of any sort to target the oil industry,” he added.
James Giffen, 62, a US advisor in oil deals, was arrested March 30 and released on bail pending trial expected next January.
According to the indictment, between 1995 and 2000, Giffen received 138 million dollars in bonuses and commissions from oil majors, of which he is alleged to have passed on 60 million dollars to Nazarbayev and 17 million dollars to Nurlan Balgimbayev, the head of the state oil company Kazakhoil and later the prime minister.
The allegations contained in the indictment follow a pattern: giant oil companies anxious to secure access to Kazakhstan’s huge oil deposits, neglected in Soviet days because they were too difficult to extract, pay millions in various bonuses to the indispensable Giffen.
He is alleged to have then engineered a series of transfers and “sham agreements”, with an unindicted accomplice at Credit Agricole Indosuez in Geneva, that paid millions into secret Swiss accounts controlled by the two Kazakhstani officials.
His accomplice, Jean-Jacques Bovay, is still under investigation in Switzerland according to a source close to the investigation.
The indictment does not name them, but biographical and other details make it easy to recognize Nazarbayev as Kazakhstani official two and Balgimbayev as Kazakhstani official one.
The companies paid the bonuses to secure access to Kashagan, the world’s fifth-largest oilfield; to Tengiz, the sixth-largest; to the Caspian Pipeline Consortium, which carries Tengiz crude to the Russian coast of the Black Sea; and to Karachaganak, the country’s third-largest field.
In all, these companies plan to invest some 30 billion dollars over the next two decades — dwarfing the amounts involved in the alleged kickbacks — to triple oil production from the current one million barrels a day, propelling Kazakhstan into the ranks of the world’s top four or five exporters.
The companies who negotiated these deals are Mobil Oil Corporation, now a unit of ExxonMobil; Chevron Corporation, now ChevronTexaco; Total, now TotalFinaElf; Royal Dutch Shell; British Gas; Amoco, now BP, and Phillips Petroleum, now ConocoPhilips.
“The anxiety level at ExxonMobil is pretty much off the chart,” said a source close to it. Another source added, “Everybody is keen to know what’s going on with the prosecution, but nobody wants to betray the depth of his company’s interest.”
The chief concern among these companies is that Giffen may decide to cooperate with the prosecution and provide information that could lead to more indictments in exchange for a lenient sentence.—dpa