http://www.huffingtonpost.com/entry/unaoil-bribery-scandal-corruption_us_56fa2b06e4b014d3fe2408b9
There’s A Huge New Corporate Corruption Scandal. Here’s Why Everyone
Should Care.
Bribery fuels political instability — and it’s a propaganda tool for terrorists.
03/30/2016 07:04 am ET | Updated 1 hour ago
Most people remember that the Arab Spring started with a guy who lit
himself on fire. What they don’t remember is that he did it as a
protest against corruption: Mohamed Bouazizi, a Tunisian fruit vendor,
decided he’d been shaken down by police officers one too many times.
Bouazizi’s death set in motion the biggest political upheaval of the
21st century. The Arab Spring was “mostly about corruption,” said FBI
Special Agent George McEachern, one of the leading investigators of
global graft. “Corruption leads to failed states, which leads to
terrorism.”
That’s what makes the corruption revealed in a new trove of
confidential emails from a mysterious Monaco-based company called
Unaoil so significant.
On Wednesday, The Huffington Post and its Australian partner, Fairfax
Media — led by reporters Richard Baker and Nick McKenzie — published
the results of a months-long investigation of Unaoil, an obscure firm
that helps big multinational corporations win contracts in areas of
the world where corruption is common.
Hundreds of major international corporations — including Halliburton,
its former subsidiary KBR, Rolls-Royce and Samsung — counted on Unaoil
to secure lucrative contracts in Iraq, Kazakhstan, Libya, Syria,
Tunisia, and other countries in Africa, the Middle East, and the
former Soviet Union, tens of thousands of internal emails and
documents reveal. It’s common for large multinational corporations to
partner with smaller firms with local expertise to win contracts. But
in many cases, Unaoil wasn’t winning contracts because of its
expertise — it was winning them by paying millions of dollars in
bribes to corrupt officials.
Most of the companies that worked with Unaoil denied involvement in
corrupt activities. “KBR is committed to conducting its business
honestly, with integrity, and in compliance with all applicable laws,”
a spokeswoman said. “We do not tolerate illegal or unethical practices
by our employees or others working on behalf of the Company.” Samsung
“has always complied with the laws and regulations when performing
business,” the company said. Rolls-Royce, which sent a Unaoil
subsidiary a letter in 2013 suspending the relationship, citing
corruption allegations, said that it is “co-operating with the
authorities and do not comment on ongoing investigations. We have made
it clear that Rolls-Royce will not tolerate business misconduct of any
kind.”
[Read More: U.S. Oil Industry Giant Paid Millions To Company At The
Center Of Huge Corruption Scandal]
By aiding the corruption of already-distrusted regimes and
accelerating the flow of money and resources out of poor countries,
Unaoil and its partners were risking far more than fines and criminal
penalties. They were creating political instability, turning citizens
against their governments, and fueling the rage that would erupt
during the Arab Spring — and be exploited by terrorist groups like al
Qaeda and the Islamic State.
FAIRFAX MEDIARead The Huffington Post and Fairfax Media’s full
investigation here.
Companies and individuals pay at least $1 trillion in bribes to public
sector officials annually, according to an estimate by Daniel Kaufman,
a governance expert with the World Bank Institute.
The Unaoil emails don’t show corrupt third-world kleptocracies shaking
down helpless Western corporations. They show the opposite: Unaoil,
working for Western companies, is seen slowly corrupting foreign
officials, starting off with small gifts and shopping sprees and
eventually hooking them on major graft.
“There is always somebody who pays,” the billionaire hedge fund
magnate George Soros has said, “and international business is
generally the main source of corruption.” That’s part of the story
that terrorists have long told local populations to justify jihadist
insurgency. In many of the cases uncovered here, it happens to be
true.
* * * * *
Based in Monaco but incorporated in the British Virgin Islands, Unaoil
says it provides “industrial solutions to the energy sector in the
Middle East, Central Asia and Africa.” It was founded in 1991 by Ata
Ahsani, an Iranian-born millionaire who left the country after the
1979 revolution. The company’s work, Ahsani told HuffPost and Fairfax
Media, is “very basic. What we do is integrate Western technology with
local capability.” Two of Ata Ahsani’s sons, Cyrus and Saman, are
deeply involved in the company’s day-to-day operations.
Here’s how Unaoil’s schemes often worked. During the time frame
covered by the documents — most of which date from the end of 2003 to
the middle of 2011 — Unaoil’s practice was to ask its partners for a
percentage of the revenue from any contracts Unaoil helped them win.
Once Unaoil made sure it had a stake in its client’s business, it
would sometimes use a portion of its cut to bribe government officials
— and keep the rest for itself.
In one 2005 email to his colleagues, Basil Al Jarah, a Unaoil
executive, described a September meeting in Paris with Laurent
Poidevin, then a sales and marketing VP for FMC Technologies, an
American equipment firm. Al Jarah bragged that he had convinced FMC to
hire Unaoil to obtain a contract to install between four and six new
loading arms at a major port in Kuwait. Here’s an excerpt:
I secured a commitment of 10% to be made in writing by close of
business today. I requested FMC provide three letters as follows:
1% To [another company] for making the introduction.
7% To Unaoil which we will show to the big cheese in Kuwait.
2% To Unaoil which can be split internally.
Mr. Laurent had no problems with that as long as it is not made out in
individual names. He will run this by his CEO when he gets to the
office and send the commitment email at once to be followed by a
consultancey [sic] contract which both parties are expected to sign….
...[Another intermediary] is handling the big cheese in Kuwait and to
decide what portion of the 7% should go to that man.
Poidevin is now the president and general manager of FMC, according to
hisLinkedIn profile. “FMC Technologies has a culture of accountability
and compliance and competes on the strength of its technology,
service, and execution excellence,” an FMC spokeswoman said in an
email. “Employees are expected to uphold our core value of integrity
and are trained to report concerns. We thoroughly investigate all
issues that are raised and take appropriate action. This is a
long-standing commitment FMC Technologies has made everywhere we
operate.”
Did Unaoil bribe public officials? “The answer is absolutely no,” Ata
Ahsani said.
If it did — and the emails suggest as much — the companies that hired
Unaoil could face criminal sanctions or enormous fines. In the U.S., a
federal law, the Foreign Corrupt Practices Act, or FCPA, prohibits
companies from working with any entity that they know — or should know
— bribes foreign government officials. Even offering to pay a bribe is
forbidden. Most rich countries, including Australia, Canada, and the
U.K., have similar laws. And U.S. prosecutors can and do apply the
U.S. law to foreign firms, especially ones that do business in the U.S
or issue stocks on U.S. exchanges. Eight of the 10 largest FCPA
settlements in history, all of them over $100 million, were with firms
based outside of the U.S.
Not all of the companies that Unaoil worked with necessarily knew what
it was doing. That may not matter: The FCPA allows for fines and
criminal penalties for companies that fail to properly investigate
whether their partners are paying bribes. It’s what the law calls
“deliberate ignorance” or “willful blindness,” explained Andy
Spalding, a law professor at the University of Richmond who runs a
leading blog on the subject. “Historically what a lot of these
companies would do is hire these intermediaries,” he added. “The
company might think it’s protected by the statute because it doesn’t
know what the intermediary was doing. But if there are red flags and
the company does not investigate, that can also [create] liability.”
Red flags surrounded Unaoil. Just the fact that the company is based
in a tiny tax haven like Monaco should have made its partners nervous,
argued Richard Bistrong, the CEO of Frontline Anti-Bribery, a
consultancy. “Right away just having an agent in Monaco is going to
give you pause for due diligence,” said Bistrong, who cooperated with
an FBI bribery investigation, served 14 months in federal prison for
an FCPA violation, and now advises companies on how to avoid following
in his footsteps. Unaoil’s business — the energy industry — is also
“risky,” Bistrong said. “It would warrant a very robust and in-country
level of due diligence.” Being incorporated in the British Virgin
Islands is a “big” red flag, too, he said.
But some of Unaoil’s partners were not particularly concerned. In one
egregious example, Kelsey Kalinski, the president of a Canadian
fracking firm called Canuck Completions, emailed his colleagues and a
Unaoil employee, Foroohar Farzadnia, to ask about a deal in Libya.
“What we are curious about is to what type of Baksheesh is needed to
present to these men in order to get work started,” Kalinski wrote,
using a common slang term for improper payments. “I believe this is
common practice in Libya, but we are not sure how to handle this. Is
this something that needs to be done after work hours one on one? A
added value amount to the ticket for them, or a flat fee a month, we
are not sure. What are your thoughts on this?” (TMK Completions, which
absorbed Canuck Completions several years ago— and where Kalinski now
works — declined to comment or make him available for comment.)
A few emails later, Saman Ahsani followed up with an email to
Farzadnia and several others. “I don’t know what kevin [sic] means by
bakhsheesh,” Ahsani wrote. “May i remind everybody of our Group’s code
of conduct and zero tolerance of any facilitation activities. He needs
a talking to.”
Bribery is illegal for a litany of reasons, but one in particular —
the idea that corruption fuels political instability and strengthens
the enemies of free-market democracies — has underpinned U.S.
anti-bribery efforts for decades. When the U.S. passed the FCPA in
1977, “the concern was that U.S. companies paying bribes overseas was
going to weaken the position of the west in the Cold War,” said
Spalding, the Richmond law professor. Corruption, U.S. lawmakers
realized, weakens Western-friendly governments and makes them easy
targets for insurgencies.
Like their communist predecessors, jihadists have long recognized the
power of anti-corruption narratives to help them win popular support.
“Corruption is a tool that terrorism uses,” said Roger Cook, a
corruption expert with the City of London Police. “It causes
terrorism.”
Jihadists make the case that religious purity is not merely an end in
itself, but a means to a righteous government. In 2004, Osama bin
Laden, in a propaganda video sent to Al Jazeera, warned the Middle
East that the Bush administration was occupying Iraq “with a new
puppet to assist in the pilfering of Iraq’s oil”; he loved to decry
the “pride, arrogance, greed and misappropriation of wealth,” of the
Gulf states. Kim Barker, writing for the Chicago Tribune in 2008,
noticed the phenomenon in Afghanistan. “Corruption is turning more
people toward the fundamentalist Taliban, which is seen as clean in
comparison,” Barker reported from Kabul. “The Taliban may be
remembered for its harsh rule, but it also is remembered for enforcing
that harsh rule. No one took bribes.”
Ayman al-Zawahri, who now heads al Qaeda, similarly decries corruption
at every turn. “These corrupt and rotten regimes are the reason behind
economic injustice and corruption, the political oppression, and
social detachment,” he said in 2009.
In Afghanistan, Iraq, Syria and Libya, jihadists focused much of their
propaganda on the irredeemable corruption of Hamid Karzai, Nouri
al-Maliki, Bashar Assad andMuammar Gaddafi. One of ISIS leader Abu
Bakr al-Baghdadi’s first orders of business after proclaiming himself
caliph, in 2014, was to promise to return property that al-Maliki,
then the Iraqi prime minister, had illegitimately appropriated. “It’s
part of their narrative, that it’s an impure state, that democracy is
synonymous with corruption,” said a senior Iraqi government official
who wasn’t authorized to speak on the record. To prove it takes
corruption seriously, ISIS has crucified several of its own fighters
after alleging they took bribes.
Because insurgents thrive when Western-friendly governments become
corrupt and weak, they are especially pleased when the U.S. and
Western corporations undermine governance by enabling corruption. As
Soros said, somebody has to pay the bribes. Corruption in Afghanistan
and Iraq, for example, has only gotten worse since the U.S. invaded,
bringing Western corporations and money with it. Between 2003 and
2015, Iraq fell from 113th on Transparency International’sCorruption
Perception Index to 161st. “We’ve learned our lesson kind of the hard
way,” said Keith Henderson, who evaluated Iraqi anti-corruption
efforts for the State Department in 2008 and now teaches at American
University’s law school. “If you don’t do something to abate or
address corruption in state institutions, one of the very probable
outcomes is civil unrest and possible insurgency.”
REUTERSSmoke rises behind an Islamic State flag in Saadiya, Iraq.
In Afghanistan, “the sheer quantity of international aid flowing into
the country since 2002 has created enormous incentives for graft,”
Aaron O’Connell, a military historian at the U.S. Naval Academy, wrote
last year. Between 2005 and 2015, it fell from 117th on the corruption
index to 166th, ahead of just North Korea and Somalia.
Sarah Chayes witnessed the damage that flood of Western money — and
the accompanying corruption — did in Afghanistan. When U.S. forces
entered Kabul to oust the Taliban, Chayes was a reporter, covering the
invasion for National Public Radio. She decided to stay and help
rebuild, eventually opening a cooperative that produced soaps and body
oils. She was one of very few Americans over the last 15 years who
lived and worked with the Afghan people rather than behind the razor
wire.
After just a few months, Chayes noticed people she thought of as
moderate, normal folks expressing sympathy for the Taliban. She soon
realized what was happening: the corruption that had been rampant at
all levels since the U.S. invasion was fueling anger and unrest.
Chayes later began working for the U.S. military in Afghanistan,
waging an internal war to persuade policymakers to focus on
corruption. The issue ultimately reached the desk of Secretary of
State Hillary Clinton, who largely dismissed it in a 2010 memo that
remains classified.
Westerners might perceive insurgencies in Muslim-majority countries as
fundamentally about the role of Islam in society, Chayes says. But
insurgents also take advantage of widespread discontent over how their
countries are run. People fed up with corruption tend to look for
leaders who are perceived to be incorruptible. “At the top of the list
of reasons cited by prisoners for joining the Taliban was not ethnic
bias, or disrespect of Islam, or concern that U.S. forces might stay
in their country,” Chayes wrote in Thieves of State, her book on the
threat corruption poses to global security. “At the top of the list
was the perception that the Afghan government was irrevocably
corrupt.” Afghans, she added, “hold Washington responsible for the
Karzai government’s behavior.”
The role of Western companies in aiding corrupt foreign behavior has
long been obscured. But the Unaoil emails make clear just how
complicit some firms are in foreign corruption – and how eager others
are to turn a blind eye towards it.
Consider the case of Dhia Jaffar al Mousawi, the man codenamed
“Lighthouse” in the emails. When Unaoil started dealing with Dhia
Jaffar, who currently serves as Iraq’s deputy oil minister, he was
still an official at the South Oil Company, Iraq’s most important
state-owned energy firm. “When Prime Minsters [sic] visit Basrah, he
accompanies them first and holds private sessions with them,” Al Jarah
wrote of Dhia Jaffar in 2008. At the time, Al Jarah and Unaoil were
focused on gradually plying him with small bribes.
The emails and documents contain dozens of examples of payments to
government officials involving different Unaoil employees. But Al
Jarah was consistently one of the company’s least discreet
correspondents. He described his efforts to woo Dhia Jaffar in an
email:
We haven’t done much for [Dhia Jaffar] really, but here is a list:
1) Took him clothes shopping on two occasions (around $1-2K each time)
2) Related sub agent got $30k for assistance with al Kassim order.
3) Gave his son a 2 week English course in Dubai. Arranged interviews
to employ the son in Adnan’s company, but the boy found alternative
work.
4) For the past 8 months working on getting him a UAE residency visa,
but without success.
That’s it.
“Lighthouse” paid Unaoil back, providing inside information and
tipping the company off to potential customers. “In general discussion
with Mr. Lighthouse this evening, it transpired that TPIC” — Turkish
Petroleum International Company — “is close to winning an order of
$325m for drilling 45 wells in south of Iraq,” Al Jarah wrote in a
August 2009 email to Ata and Cyrus Ahsani. “He says they applied
openly and he is not aware of any special connection to an Iraqi
entity pushing their bid forward. I immediately requested Lighthouse
to hold processing anything until he hears from me. We need to move
urgently to reach this company and give them the full works that
Unaoil can make their life easier in the Ministry, SOC.”
Until she retired in December, Debra LaPrevotte was one of the FBI’s
top special agents investigating global oil industry corruption. The
Unaoil playbook to ease officials into corruption is familiar. “It’s
the modus operandi,” she said. “Give them a rug, and then a car, and
then a Rolex and then it escalated to, we can pay your children’s
tuition.”
“The money they have to throw at things allows them to do things like,
‘Let us send your family on a vacation. Let us get you tickets to
World Cup soccer, to the Super Bowl,’ to things you’d like to go to
but maybe you couldn’t afford,” LaPrevotte added.
The Obama administration has belatedly acknowledged the idea that
corruption is a national security threat. “Corruption is a radicalizer
because it destroys faith in legitimate authority,” Secretary of State
John Kerry said at the World Economic Forum in Davos earlier this
year, singling out Iraq, Syria, Libya and Nigeria as examples. “It
opens up a vacuum which allows the predators to move in. And no one
knows that better than the violent extremist groups, who regularly use
corruption as a recruitment tool.”
Lukman Faily, Iraq’s ambassador to the United States, says the
government has learned its lesson. Informed of the allegations of
corruption connected to Unaoil, Faily said Iraq’s new prime minister,
Haider al-Abadi, is chairing a new committee that will review all
major contracts within the ministries. He also said the country has
banned middlemen, at least for military contracts. In the defense
sector alone, he claimed, cutting out the middlemen has saved roughly
$2 billion.
Unaoil is still hard at work in Iraq. “We have recently become aware
of some... claims that Unaoil has bribed its [International Oil
Company] clients as well as [National Oil Company] clients and
Government officials in order to win work,” Saman Ahsani wrote in a
2015 memo to employees titled “Lies About Unaoil In Iraq.” The timing,
Ahsani added, “is not coincidental - as many of you know, we are close
to securing some major new awards from IOCs. We will shortly be
reporting other new wins outside Iraq as well.”
In July, Unaoil declared victory. “Sulzer Rotating Equipment FZCO, a
joint venture between Unaoil and Sulzer Pumps operating in North
Rumaila, Iraq, has been awarded a three-year pump maintenance contract
by Basra Gas Company,” it bragged in a press release. The contract
could be worth millions.
Akbar Ahmed, Richard Baker, Zach Carter, Blair Guild, Nick McKenzie
and Jessica Schulberg contributed reporting. Map by Alissa Scheller.
Received on Wed Mar 30 2016 - 12:37:28 EDT