July 15, 2004
Washington: Senate investigators say three U.S. oil companies may have “contributed to corrupt practices” while doing business in the West African country of Equatorial Guinea.
Examining possible money laundering at Washington’s Riggs Bank, the investigators uncovered information about questionable business dealings involving Exxon Mobil Corp., Marathon Oil Co. and Amerada Hess Corp. in that oil-rich land.
Staffers on the Senate’s Permanent Subcommittee on Investigations pointed to arrangements between the oil companies and entities controlled by the family of President Teodoro Obiang Nguema, as well as to scholarships doled out to relatives of the country’s elite.
Sen. Carl Levin, the ranking Democrat on the panel, questioned whether the oil companies are doing enough to ensure they aren’t helping corrupt government leaders loot Equatorial Guinea of its oil patrimony.
“You’re now in a situation where you are basically in with either the dictator or his family,” Levin said. “It seems to me that as Americans we’ve got to be troubled by that.”
The oil executives contended their transactions were legal and as transparent as possible.
Andrew Swiger, executive vice president for Exxon Mobil Production Co. in Houston, hinted about what it’s really like to try to do business in parts of sub-Saharan Africa.
“It may be virtually impossible to do business in such countries without doing business with a government official or a close relative of a government official,” Swiger said.
But he added: “It is still possible – indeed, it is expected – that we do business ethically and comply with all U.S. and local laws.”
Huge oil deposits
Equatorial Guinea has captured the imagination of a U.S. oil industry hungry for oil deposits outside the Middle East.
With oil reserves estimated at 1.1 billion barrels, Equatorial Guinea has quickly emerged as the third-largest oil producing nation in sub-Saharan Africa. Marathon is already the country’s largest employer.
But the Senate investigators discovered a number of eyebrow-raising arrangements there.
Amerada Hess, for instance, paid more than $450,000 over four years to rent office space controlled by the president’s 14-year-old son.
Exxon Mobil is partners with the president’s wife in an oil distribution business.
And Marathon, after purchasing CMS Energy’s assets in the country, has learned it may be partners with, not a state-owned company,but an entity controlled byObiang.
Oil companies working in Equatorial Guinea are required, as part of their oil production contracts, to help send students abroad to study.
Reducing the potential
The oil companies have tried to take steps to reduce the potential for corruption when working in Equatorial Guinea.
At Amerada Hess, employees in the country can grant an initial authorization for payments. But any such payments “must also be sanctioned by higher management in Houston,” Albert Marchetti, the company’s vice president for international and federal relations, told the panel.
Steven Guidry, leader of Marathon’s Central Africa Business Unit, argued that his company’s presence in the country “goes a great distance toward improving conditions.
“To the extent that we have influence, we think we have a positive effect,” Guidrysaid.
The Senate panel has no plans at this point to refer its findings about the oil companies to the Justice Department. Indeed, officials at both Exxon Mobil and Marathon said they knew of no other investigations by other authorities looking into these issues.
While they may have brought to light some embarrassing details, the Senate investigators provided no evidence the oil companies engaged in a quid pro quo to win contracts or gain other benefits, a key test for any potential violation of the Foreign Corrupt Practices Act.
Exxon draws criticism
The investigation was conducted by both Democratic and Republican staffers.
Levin, the panel’s ranking Democrat, complimented Marathon and Amerada Hess for their cooperation with the investigation.
“Exxon Mobil, I’m afraid, has not been as forthcoming,” Levin said.
Exxon’s Swiger promised his company would produce what it can as soon as practicable.
Corruption and financial transparency have become major issues for the oil industry as it plows billions of dollars into areas like West Africa, a region impoverished and still largely unused to the rule of law.
Two Houston-based oil-field service firms, Halliburton Co. and, most recently, ABB Vetco Gray, have admitted to making improper payments in Nigeria.
At Riggs Bank, Equatorial Guinea’s top leaders deposited more than $700 million.
The bank’s one-time senior international banking manager, Simon Kareri, who handled the Equatorial Guinea business, invoked his Fifth Amendment right against self-incrimination and refused to testify at the hearing.