Former Oil Bosses Defrauded Company to Boost Their Pay, Prosecutor Says
(Bloomberg) -- Former bosses of collapsed oil and gas producer Afren Plc conned the company into transferring $400 million to firms in which they secretly had a personal interest to boost their seven-figure pay checks and enrich favored colleagues dubbed the “A Team,” U.K. prosecutors said.
Ex-Chief Executive Officer Osman Shahenshah and former head of operations Shahid Ullah were driven by a feeling that their compensation fell short of the success they were bringing to Afren, prosecutor John McGuinness said Tuesday in London on the first day of what’s expected to be a two-month trial.
Shahenshah pocketed more than $9 million, with which he bought a villa on the Caribbean island of Mustique, while Ullah bought his own Caribbean mansion from the $7 million he made from the fraud, McGuinness said.
The two men are charged by the Serious Fraud Office with two counts of fraud and two counts of money-laundering between May 2013 and July 2014. The pair have both pleaded not guilty.
The frauds "were done for the purpose of enriching themselves at the expense of their employer” and took place “behind the back” of Afren board members, McGuinness said. “The defendants were very deeply involved in those agreements being made.”
Afren, once among the 250 biggest companies listed in London, made most of its revenue from two Nigerian oil projects, Ebok and Okoro, both of which it developed with local partners. The company collapsed in 2015 after the alleged fraud was discovered, resulting in a two-year investigation by the SFO.
Shahenshah’s overall pay package was 6.6 million pounds ($8.5 million) in 2012, while Ullah made 3.8 million pounds, McGuinness said.
The first alleged fraud related to Ebok, in which Afren had a 40 percent stake, according to McGuinness. The rest was owned by Oriental Energy Resources Ltd., a company owned by Muhammadu Indimi and his family. Afren put up the capital to develop the oil field and the two companies agreed to split the profits evenly after that investment was repaid.
When Indimi asked for an advance on his profits, the Afren board agreed after Shahenshah had advised it to do so, McGuinness said. It didn’t know that Shahenshah and Ullah had a deal with Indimi that a British Virgin Island-registered company Ullah and Shahenshah’s wife owned would get 15 percent of $300 million that Afren paid, McGuinness said. Some of the money also went to other Afren employees, he said.
The second fraud concerned another Nigerian oil project called Okoro, for which Afren was also putting up the capital, but didn’t have a stake. On Shahenshah’s advice, Afren agreed to pay Amni Petroleum $100 million to balance out uneven taxation on the two partners, McGuinness said.
What Shahenshah and Ullah didn’t tell the board was that the money was actually being used by Amni’s main shareholder to buy out his partners and that the pair were also to become shareholders in the project, he said.
©2018 Bloomberg L.P.