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Aluko's Luxurious Galactica Star
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In September last year, Beyoncé and her
husband, Jay Z, paid a reported $900,000 to sail the Mediterranean Sea on the Galactica
Star, a 65m private superyacht.
Just after their trip, the yacht’s owner,
Kolawole Aluko, was accused of defrauding the Nigerian government, including
allegations that the yacht was bought with profits from crude oil sales that
had been illegally diverted.
Held through a shell company created by
the law firm at the heart of the Panama Papers scandal, Mossack Fonseca, the
yacht became caught up in a huge investigation in Nigeria.
Aluko, a petroleum and aviation mogul, is
one of four defendants accused of helping to cheat the Nigerian government out
of $1.76billion it was owed from oil sales.
Aluko is part of a constellation of
Nigerian oil executives, state governors, Cabinet ministers, military officials
and tribal chiefs exposed by the Panama Papers leak. Mossack Fonseca, a law
firm with its headquarters in Panama and offices around the world, worked for
three former Nigerian oil ministers, who used companies to buy boats and homes
in London, the records show.
Research by anti-corruption organisations
indicates that Nigeria loses more money from illicit activity, including graft
and corporate tax abuse, than any other African nation. According to Oxfam, as
much as 12% of Nigeria’s annual gross domestic product is lost to illicit
financial flows.
“Our firm, like many firms, provides
worldwide registered agent services for our professional clients [for example,
lawyers, banks and trusts] who are intermediaries,” Mossack Fonseca told the
International Consortium of Investigative Journalists (ICIJ).
“As a registered agent, we merely help
incorporate companies, and before we agree to work with a client in any way, we
conduct a thorough due-diligence process, one that in every case meets and
quite often exceeds all relevant local rules, regulations and standards to
which we and others are bound.”
Mossack Fonseca declined to answer specific
questions and said that, in providing its services, “we follow both the letter
and spirit of the law. Because we do, we have not once in nearly 40 years of
operation been charged with criminal wrongdoing.”
Aluko and Alison-Madueke
In October 2015, London police questioned
Alison-Madueke, Nigeria’s oil minister between 2010 and 2015, as part of
investigations into allegations of bribery and money laundering. The
investigations are ongoing.
The former minister, who graduated with a
degree in architecture from Howard University in the United States in 1992, is
in London undergoing cancer treatment, her lawyers said.
Media reports have described Aluko as a
key ally of Alison-Madueke, a relationship both have previously denied. He rose
to prominence around 2011 when Nigeria’s government awarded valuable oil blocks
on a no-bid basis to two companies he founded or owned. One of his companies,
Atlantic Energy, was created the day before the deals to acquire
multimillion-dollar oil licences were signed.
Aluko is part of a circle of oil traders
who are the subject of frequent media speculation in Nigeria. His lifestyle has
earned him the reputation of being Nigeria’s playboy. He bought an apartment in
Manhattan for $8.6-million and, according to The New York Times, paid a
combined $70-million for four homes in Santa Barbara and Beverly Hills.
The Nigerian government won a court order
in May this year to freeze assets linked to Aluko, two companies he directed
and one of his business partners. The Lagos High Court order listed Aluko’s
yacht, property in London, four homes in California, two penthouses in
Manhattan, one in Dubai, 132 houses and apartments in Nigeria and land in
Canada and Switzerland. In addition, the court ordered Aluko not to sell or
dispose of more than $67-million in four bank accounts in London and
Switzerland, an assortment of watches, or his collection of 58 cars and three
planes.
Through a representative, Aluko told the
ICIJ: “I have never been prosecuted and convicted in any country. I am aware
that a criminal investigation was started in the United Kingdom. However,
to date, I have not been made aware of any law enforcement action to be
undertaken against me.”
He added that the information relating to
the award of oil contracts to his company was “misguided” speculation.
“As a private citizen, I organise my
business and family matters to maximise convenience, as well as operational and
administrative efficiency. My companies operate in accordance with the laws and
regulations of the relevant jurisdictions and, insofar as tax liabilities
arise, they pay taxes in the jurisdictions in which taxes are due to be paid.”
Criminal charges for alleged crude oil
fraud against Aluko were dropped in July. Media reports indicate that this was
as a result of authorities’ inability to locate and serve a summons on the
Swiss resident.
Despite repeated efforts, the ICIJ was
unable to reach Alison-Madueke. In previous statements published online and
attributed to the former minister, she has denied all wrongdoing.
International
investigations
News reports in Nigeria and the UK
indicate that the FBI, the UK’s National Crime Agency and Switzerland’s
attorney general are investigating Aluko for his role in companies and
transactions that were allegedly used to conceal Alison-Madueke’s transfer of
wealth outside Nigeria.
The office of the Swiss attorney general
confirmed that it had received a request from the UK in relation to Aluko.
British authorities and the FBI did not confirm or deny the existence of an
investigation.
Slippery
oil deals
Long before Aluko, Mossack Fonseca had
faced questions about its Nigerian customers. In 2007, when the firm’s
employees realised that an offshore company was being used by a former adviser
to Olusegun Obasanjo, Nigeria’s president between 1999 and 2007, Jürgen Mossack
reminded his staff: “In this firm, everyone knows that dealing with Nigerians
always gives you headaches. It’s inevitable that this case involves a crime or
fraud.”
One crude oil sale contract between three
offshore companies, for example, provided for commissions so high that, one
expert consulted by ICIJ said, the most obvious explanation is that the oil was
stolen. Another leaked file shows a $12-million loan from a shell company to a
Nigerian typed on half a sheet of paper.
In 1995, 15 years before Alison-Madueke
became Nigeria’s first woman petroleum minister, chief Dan Etete held the post.
Etete, a mustachioed power player from the
oil-rich Bayelsa State, served as petroleum minister until 1998. His tenure
became the subject of investigations after he left office. He was convicted of
money laundering in France, and authorities in three countries continue to
examine allegations that parts of a billion-dollar oil deal involving a company
linked to Etete were transferred or pocketed as bribes by political figures and
middlemen.
The Panama Papers reveal that Etete and
the company Malabu Oil & Gas signed a consultancy agreement with an
offshore company created by Mossack Fonseca to negotiate the sale of oil blocks
to China, a deal that never proceeded. Other documents appeared under Etete’s
reported alias, Omoni Amafegha. Amafegha’s company, Pentrade Securities,
featured the signature of Richard Granier-Deferre, a French oil trader who was
fined about $200,000 in 2007 by a Paris court for being an accessory to Etete’s
money laundering. The company was incorporated in 1998 when Etete was oil
minister and opened a bank account in Gibraltar. Amafegha also owned Henkel
Investments, which bought a boat in January 1998.
Etete denied using Amafegha as an alias
and said he had never heard of Pentrade Securities or Henkel Investments. He
denied owning or having owned Malabu.
“It’s all just enemies that created this
misinformation,” he said.
“I have nothing to do with any Panamanian
companies,” Etete told the ICIJ.
“I have never been there or sent anyone
there to open an account.”
At his peak, Aluko was a globetrotter
whose face regularly graced celebrity Instagram pages and entertainment
tabloids. In 2013, he launched a $500-million infrastructure development fund
alongside Hollywood actor Jamie Foxx and partied in New York at Leonardo
DiCaprio’s 39th birthday bash. He was also photographed with rapper P. Diddy in
Ibiza, Spain, the following summer. The music star tweeted a photo of himself
alongside a smiling Aluko with the caption “Nigeria I love you”.
At the time, Aluko was regularly cited in
Nigerian media as one of “the minister’s men”, a clique of Nigerian oil traders
who had secured a string of oil licences from Alison-Madueke’s office with
startling ease.
In 2011 and 2012, Aluko’s Atlantic Energy,
which boasted of “strong government relationships”, was awarded eight crude oil
licences in the western Niger Delta. Atlantic Energy sent tens of millions of
dollars of crude oil to Italy, the US, Germany and the Netherlands throughout
2012 and 2013, according to documents seen by the ICIJ.
But, in September 2014, rumours in the
Nigerian media suggested that Aluko and his companies had fallen out of favour
with Alison-Madueke. By September, Atlantic Energy defaulted on its loans and
owed Nigeria $1.3-billion in cash and other obligations. The Nigerian
government and banks sent out confidential pleas to potential angel investors
in the hope they would be willing pay the $700-million deficit left by Atlantic
Energy’s bankruptcy.
Two months later, during a routine
background check on Aluko, Mossack Fonseca employees discovered online news
articles claiming that Nigerian authorities might ask Interpol to help
extradite the businessperson. Interpol has denied that he was in its sights and
Mossack Fonseca continued to provide services to Aluko.
It wasn’t until June last year that
Mossack Fonseca took a second look at Aluko, after it received a demand from
the British Virgin Islands Financial Investigation Agency to produce documents
about Earnshaw Associates.
Mossack Fonseca told British Virgin
Islands authorities that it did not have information about any bank accounts or
assets held by Earnshaw, despite having signed documents more than a year
earlier to help Aluko’s company register a private jet.
In August 2015, the situation grew worse
when the law firm realised it had no contact or personal documentation for
Aluko. One Mossack Fonseca employee was worried that this was a potential
breach of the requirement that offshore middlemen keep such information for at
least five years after a company is mothballed.
An employee sought help from Aluko’s Swiss
wealth manager, Johnnie Ebo Quaicoe, and shared links to four unflattering
online news articles.
“I’m dumbfounded that Mossack Fonseca will
print excerpts from tabloids,” Quaicoe wrote from Geneva.
“If Mr. Aluko is truly a wanted person,”
Quaicoe chided Mossack Fonseca, “he would not be difficult to find because he
is a resident in Switzerland”.
Brushing the concerns aside, Quaicoe
instead asked Mossack Fonseca to assist with a “major” $30-million mortgage
with a Luxembourg bank. The loan was to be provided by Banque Havilland SA. The
collateral securing the loan would include the Galactica Star, the boat that
Beyoncé and Jay Z had rented for their Mediterranean cruise.
Mossack Fonseca agreed to process the
paperwork needed to secure the loan.
But concerns continued. In September last
year, a Mossack Fonseca employee discovered new media reports that alleged
Aluko was “on the run from the law over several controversial and fraudulent
dealings in the petroleum industry”. Employees handling the loan deal asked
colleagues for “comfort to proceed without being seen as facilitators to
money-laundering activities and corruption”.
By October, Mossack Fonseca had had enough
– almost. It finally cut its ties with three of Aluko’s four companies, which
had been inactive since 2014, and prepared a memo for British Virgin Islands
authorities outlining the law firm’s concerns about Aluko’s activities.
But, before sending the memo, Mossack
Fonseca certified the $30-million loan for Earnshaw Associates. A Mossack
Fonseca employee justified the decision to help push the paperwork through by
noting that the firm had already been working on the loan transaction for
months.
Quaicoe told the ICIJ he could not discuss
his work with Aluko.
“I conduct business in accordance with the
laws of the relevant jurisdictions pursuant to the contracts of services
concluded with my clients,” he said.
Ross S. Delston, an attorney and
anti-money-laundering expert in the US, said, in general, banks, other
financial institutions and financial intermediaries such as law firms, real
estate agents and trust and company service providers should be sceptical
whenever they’re dealing with clients who are involved in the oil business, are
rumoured to have close connections to politicians, have been the subject of
negative news stories and come from countries such as Nigeria that are
considered high-risk geographies for corruption, money laundering and other
financial crimes.
“Taken together, these indicators and risk
factors present not just red flags for money laundering or other financial
crime but rather can be characterised as fireworks,” Delston said.
As Aluko was securing his loan, the
pressure on Alison-Madueke and her associates was building up. In October, a
small number of Alison-Madueke’s family members appeared in a London court on
bribery and corruption charges, and police seized some of the minister’s
assets, including $39,000 in cash. Nigerian authorities have continued to
arrest and arraign other alleged Alison-Madueke confidants.
In July 2016, Nigeria’s Economic and
Financial Crimes Commission laid charges in court against several Nigerians
with alleged ties to Alison-Madueke. In a last-minute change, Aluko’s name was
dropped from the charge sheet after government prosecutors admitted they had
been unable to serve him with documents.
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