Tweeting from @michaelpmdavis
Today’s swim from Glen Moar up to Orrisdale Head was perhaps the shortest so far. After two days’ break for bad weather, some familial comings and goings and another house move, it was mostly about, as Steve put it, “making sure the arms keep spinning”. It was a bad day to go for a swim – a west/north westerly wind of around Force 6 blowing maybe not into my face but certainly the hollow where my neck meets my left shoulder.
Getting out over the boulders and through the waves was an undignified, falling on arse, ankle twisting affair but on this rather desolate stretch of coast mercifully few witnesses (other than my Mum). Beyond the breakers, though, it wasn’t as bad as I’d feared. With the swell moving from left to right there was a lot of falling into troughs and, in one case, being flipped onto my back by a wave, but less of that sense of being flooded by rollers coming from ahead or behind.
The sensation, swimming in these conditions, is very different. You can’t see anything, and there is a certain violence in the sea throwing you about. But it’s still possible to find a certain stillness in that undulating, but otherwise blank, turquoise space that, intermittently, at least, I can find and quite enjoy.
We didn’t try and get beyond Orrisdale Head, though. From Peel up to here there’s a sort of lull in the tidal flows that course around the Island but beyond the headland they get into a gallop once more and tide vs west/north westerly wind seemed like a recipe for standing waves and some seriously sticky swimming conditions. The wind will still be there tomorrow, but the direction should have shifted so that it’s more likely to push me forwards than backwards.
Such was the strength of the waves that, coming in to the beach at Orrisdale Head, Steve got turned upside down in the surf. But, 2018 British Surf Kayak bronze medallist that he is, he managed to roll upright and gracefully exit his boat to have a cup of tea before paddling back down to Kirk Michael. I staggered along the shoreline to meet him, encountering, en route, an apparently intact bottle of tomato ketchup belched up onto the beach. It occurred to me that, in line with my adoption of the Asda bag for life sailing off the coast of Port Erin, I ought to take it home and conjure up some sort of greasefest to wash it down with. But I opted to consign the sauce to the Beach Buddies bin in the Glen Wyllin carpark instead. It may still be there if anyone’s interested.
Later on in the day my Mum and I went back down to Orrisdale Head to check out access points for kayaks and look out for Steve’s tow line and tam o’ shanter, both of which were snatched off by the waves earlier in the day. Unfortunately, they remain lost to the sea, which is particularly voracious along this part of the coast. It took me a few minutes to figure out that the faint clinking sound coming from the high crumbly banks above the beach was the land falling away, one pebble at a time, to join the sand and water below.
Meanwhile, Mum set a formidable parental example by having a real swim – sans neoprene – against a much more settled silver seascape. Hopefully a sign of conditions to come. But probably not.
Yesterday I included in my blog some observations from John Christensen, the founder of Tax Justice Network, about the Isle of Man and I wanted to build on that given the overlap between some of his insights and my day job: working for an organisation that campaigns against corruption and money laundering. The rest of this post explores this theme a little further.
Isle of Man company acquires Liberian oil block – probably through corruption – and sells it, via an intermediary, to Exxon, for US$68.5 million
The Isle of Man may score badly in the Tax Justice Network indices when it comes to secrecy and policies that facilitate corporate tax avoidance. But is it really implicated in cases of money laundering and corruption?
In grappling with this question I re-read a report published by my
Global Witness colleagues last year called Catch me
if you can: Exxon complicit in corrupt Liberian oil sector and then
sought to write the summary of its findings that follows here. The points of detail about the case are drawn from that report,
which is well worth a read in full.
Where it all began
In 2004, Liberia was just one year out of vicious civil wars that had killed up to 250,000 people. The country was run by a corrupt transitional government which had a mandate to rule until national elections could take place, which they eventually did in 2006.
At this point, the Liberian national oil authority, called NOCAL, decided to auction some of Liberia’s 17 offshore oil blocks. One of the bidding companies was a firm called Broadway Mineral Resources. In 2005, the bid was transferred to a related, Isle of Man-registered, company called Broadway Consolidated. (Broadway Consolidated later changed its name to Peppercoast Petroleum, so I’ll refer to the firm here as Broadway Consolidated/Peppercoast Petroleum.)
Broadway Consolidated/Peppercoast Petroleum admitted it did not “have a specific track record of petroleum agreements.” and lacked funds of its own, only “firm commitments from investors.” This did not deter NOCAL from signing a contract with the company in June 2005 for offshore Block 13.
Why did NOCAL award Block 13 to a company with no experience and no money? The Liberian Government says that the Isle of Man firm was the only applicant for Block 13. Global Witness concluded that there may be another explanation, however, writing that “There are grounds to suspect that Broadway Consolidated/Peppercoast Petroleum obtained Block 13 because the company was likely part-owned by government officials with the power to influence the award of oil licenses.”
Who owned Broadway Consolidated/Peppercoast Petroleum?
According to Broadway Consolidated/Peppercoast Petroleum’s shareholder documents, the company was owned by a number of UK residents and one Liberian: a lawyer named David Jallah. Mr Jallah appears to have held eight percent of Broadway Consolidated/Peppercoast Petroleum’s shares and 51 percent of the company’s options, at least in 2011, the last year for which such data is available. He said that he held shares in the company up until 2013 and repeatedly insisted that he was Broadway Consolidated/Peppercoast Petroleum’s only Liberian shareholder. Mr Jallah passed away in 2018.
However, Global Witness found evidence (set out on pages 13 and 19 of the Catch Me If You Can report) suggesting that David Jallah may have been acting as a front for Jonathan Mason, who between the end of 2003 and 2005 served as Liberia’s Minister for Lands, Mines and Energy; and also Mulbah Willie, who served as a Deputy Minister in the same agency. Their positions would have given these two men considerable influence over the awarding of Block 13 by NOCAL to Broadway Consolidated/Peppercoast Petroleum in 2005.
It is illegal under Liberian law for companies to be owned by officials and hold oil blocks at the same time, a key anti-corruption provision that exists precisely to prevent officials from awarding themselves valuable pieces of public property. In a July 2011 letter to Global Witness, a representative of Broadway Consolidated/Peppercoast Petroleum denied that Jonathan Mason held shares in the company.
Isle of Man company Broadway Consolidated/Peppercoast Petroleum’s acquisition of Block 13 ratified via bribery
In 2006 and 2007, NOCAL made payments of US$118,400 to members of the Liberian legislature to facilitate the ratification of Broadway Consolidated/Peppercoast Petroleum’s acquisition of Block 13 and three additional oil blocks awarded to another company. These bribes were highlighted in a report by the Liberian General Auditing Commission and later exposed by my Global Witness colleagues in 2011.
Global Witness concludes that “there are grounds to suspect that part of NOCAL’s bribery fund may have come from [Broadway Consolidated/Peppercoast Petroleum]”. According to minutes from a meeting of NOCAL’s Board of Directors in August 2006, Broadway Consolidated/Peppercoast Petroleum had made a payment to the oil agency – which appeared unsure what it was for – of US$75,000. Six days after the meeting, on August 28, NOCAL paid the first of its bribes to the legislature.
Exxon’s purchase of Block 13 from Broadway Consolidated/Peppercoast Petroleum
In December 2011 Exxon – at the time headed by future U.S. Secretary of State Rex Tillerson – met Liberian officials to discuss purchasing Block 13. Exxon’s presentation to the meeting – which Global Witness obtained – stated that Exxon wanted to buy Block 13, but it had “concern over issues regarding US anti-corruption laws.”
There were, according to Exxon, two issues in particular. The first issue was that “Liberian shareholders/beneficial owners of [Broadway Consolidated/Peppercoast] may have been government officials at the time of the allocation.” The second was “Payments made to legislators by NOCAL as outlined in the Liberian Auditor General’s Report and [the] September 2011 published report by Global Witness.”
However, Exxon had a plan it thought would allow the company to buy Block 13 while skirting US anti-corruption laws. This would be done by having a third company act as a go-between, buying Block 13 from Broadway Consolidated/Peppercoast Petroleum and then selling the majority of the license to Exxon. The company Exxon would use was Canadian Overseas Petroleum Ltd (COPL). With a few small changes, Exxon appears to have had its way. In 2013, the company signed a deal to pay US$120 million to buy Block 13, using COPL as a go-between with Broadway Consolidated/Peppercoast Petroleum, which meant Exxon did not pay the Isle of Man company directly.
How much did the Isle of Man company Broadway Consolidated/Peppercoast Petroleum get?
On 5th April 2013, Exxon paid US$120 million from a Citibank account in New York to an account with a branch of Ecobank in Liberia, the bank used by NOCAL. Ecobank then paid the Liberian Government US$50 million in signature bonuses and transfer fees, an amount equivalent to more than 70 percent of the country’s health care expenditure that year. Of this money, US$45 million went to the Ministry of Finance while US$5 million went to NOCAL. The bank also paid itself US$1.5 million in fees.
The remaining US$68.5 million of Exxon’s money went to Broadway Consolidated/Peppercoast Petroleum, its creditors and owners, and was also paid on 5th April. If, as the Global Witness report suggests, Broadway Consolidated/Peppercoast Petroleum was part-owned by Jonathan Mason and Mulbah Willie through the lawyer David Jallah, then some portion of around US$3.3 million of the money paid by Exxon would have come their way (or in the case of Mulbah Willie, who died in 2012, to his estate). When asked about this, David Jallah again denied that he held shares for other Liberians, while Jonathan Mason did not respond.
Broadway Consolidated/Peppercoast Petroleum pockets its share and promptly disappears
Having banked US$68.5 million of Exxon’s money on 5th April 2013, the Broadway Consolidated/Peppercoast Petroleum company continued to exist for less than a month. On 2nd May, at an extraordinary general meeting held in Douglas, a special resolution was passed that it be wound up.
A Liberian perspective
My Global Witness colleagues investigate a lot of cases that involve shell companies. These structures are often used to make it hard to identify their owners and the architects of schemes that are questionable, if not criminal. For the same reason they also make it hard to tell the story; to explain what is really going on, who really did what and why anyone should care.
To get some answers to that question of why people should care about this case, I thought I’d better ask someone from Liberia.
Alfred Lahai Gbabai Brownell Sr is an Associate Research Professor and the Distinguished Scholar in Residence at the Northeastern University School of Law in the U.S. He is a former board member of international anti-corruption scheme the Extractive Industries Transparency Initiative (EITI) and a founder of the Kimberley Process Civil Society Organizations (KPCSO) coalition working to end the trade in blood diamonds.
This year Alfred was awarded the Goldman Environmental Prize – the most prestigious prize, internationally, for environmental activism. The organisers explained their decision to give him the prize as follows:
“Under threat of violence, environmental lawyer and activist Alfred Brownell stopped the clear-cutting of Liberia’s tropical forests by palm oil plantation developers. His campaign protected 513,500 acres of primary forest that constitute one of the world’s most important biodiversity hotspots, enabling indigenous communities to continue their stewardship of the forest. For his safety, he is living in temporary exile in the United States.”
I got to know Alfred nine years ago. The two of us were the sole nongovernmental organization (NGO) members of an inspection team – under the auspices of an international scheme called the Kimberley Process – sent to review the Zimbabwean government’s controls of its diamond mining production. Zimbabwe’s substantial diamond deposits had come on stream just a few years before and, after an initial ‘gold rush’ scenario, the army moved in to take over, killing dozens of freelance diamond miners as they did so.
The year before our visit, Alfred had been part of a similar Kimberley Process inspection team, whose damning findings prompted international restrictions on Zimbabwean diamond exports. When we arrived in Harare in 2010 – against the backdrop of threats by the Zimbabwean government to declare Alfred persona non grata – Robert Mugabe’s government was desperate to shake these restrictions off. From our opening meeting with the government, at which the two of us were harangued by a catatonic mining ministry mandarin, it was clear that our hosts held Alfred particularly responsible for their inability to cash in on the diamonds.
For the remainder of our stay Alfred declined to drink any of the bottled water supplied to his hotel room, deducing – quite reasonably in my view – that there was a risk of it having been poisoned.
What follows is some questions from me and Alfred’s answers in italics:
From the perspective of Liberia, why does this case involving the offshore oil block, the Isle of Man shell company and Exxon matter?
This case matters because Liberia is a classic case study of what is known as the resource curse. Here a transnational oil company is fully aware of the corrupt and toxic legacy of an oil and gas transaction in Liberia, a poor fragile state just emerging from a debilitating civil war, but decides to facilitate a cleansing scheme and become complicit.
It is very clear who the losers are here – the people of Liberia. If you want an answer to why African countries are rich in natural resources and yet suffer from grinding poverty, here is your answer. This is why countries like Liberia are perpetually depending on overseas development assistance.
What do you think of the role played by the Isle of Man shell company in this case?
From what I can see, the Isle of Man shell company was basically a part of a scheme to dupe the Liberian people and sanitise a corrupt and toxic transaction. Often, we read about corrupt African leaders but very little is heard about corrupt corporate leaders. I am shocked that there hasn’t been a criminal investigation into this case.
Do you think people should be allowed to set up shell companies with hidden ownership?
No. Imagine for argument’s sake, that the hidden owners of such a company are actually the political leaders (president, vice president, leader of the legislature and army as well as justices of the supreme court) of Liberia. Just think about the implications on the stability, rule of law and governance of a country emerging from a severe war.
What difference would it have made if Liberian activists and journalists had been able to access, through a public register, details of the beneficial (real) owners of Broadway/Peppercoast?
It would have helped prevent corruption, promote better governance over Liberia’s natural resources and therefore contributed to the peace and stability of the country.
What do you think the Isle of Man authorities should do now?
I think they should conduct a comprehensive and thorough investigation, make their findings publicly available and hold accountable anyone responsible for any corruption or other types of crime associated with this case.
Questions for the Isle of Man authorities
The evidence assembled by Global Witness suggests that an Isle of Man company obtained and then sold a corruptly-acquired asset. This raises questions for the Isle of Man authorities, notably whether those aspects of these dealings that occurred with the Island’s jurisdiction met with its legal and regulatory standards.
I have discussed this case with the Isle of Man Financial Intelligence Unit and, at their request, sent them some additional information. I have also shared a memo outlining the main elements with the Financial Services Authority. As of right now I am awaiting an update on how, if at all, either body has followed up on this data.
The next swim may have to be a long one, as I need to cover as much distance as I can before the weather gets really hostile on Wednesday. I’ll try and post something tomorrow and find some space to talk a bit further about what can be done to reduce the risks of Isle of Man company structures being misused.