JP Morgan Chase image by Mike Segar/Reuters via The New York Times
BY EMILY FLITTER
Under the rule of the Nigerian dictator Sani Abacha more than 20 years ago, a handful of high-ranking government officials looted billions of dollars from the country’s coffers.
Now the Nigerian government is demanding some of its money back — from JPMorgan Chase.
In a British court, lawyers for the country are suing a subsidiary of the largest United States bank, charging that it enabled corrupt former officials to extract nearly $900 million between 2011 and 2013 from a government bank account in London.
JPMorgan says it was following instructions it received from senior Nigerian government officials. The country’s attorney general himself wrote a letter attesting to the legitimacy of the instructions. But the bank has been unable to persuade a British judge to throw out the case, in part because of the unusual circumstances surrounding the money transfers — including the fact that two banks to which JPMorgan wired the money rejected the transfers because of concerns that they might violate money-laundering laws.
At the heart of the case is whether JPMorgan did enough to safeguard Nigeria’s money. Under British law, banks are required to act in their customers’ best interests, even if someone connected to a customer tries to get them to do otherwise. Even as it tried to send money to various recipients, JPMorgan reported to regulators its concerns that it might be transferring funds to a convicted money launderer. It made the transfers anyway.
It is the latest example of a major American bank getting caught up in a foreign corruption scandal. In Malaysia, Goldman Sachs and some former executives have been accused of participating in a multibillion-dollar fraud involving a government investment fund. Unlike those executives, however, no JPMorgan employees have been accused of wrongdoing.
In the London lawsuit, the Nigerian government is seeking damages from JPMorgan of nearly $900 million.
The bank’s decision to do business with Nigeria — a country that is ranked 144th out of 180 countries on Transparency International’s corruption list — involved a calculation of risk.
“A head of state known or alleged to be corrupt is the riskiest type of client, both because of potential civil and criminal liability and because of reputational damage should details of the relationship come out, as they often do when there is a change in power in the relevant country,” said Joshua Kirschenbaum, a former director at the Treasury Department’s anti-money-laundering agency, FinCEN.
A JPMorgan spokesman said it would fight Nigeria’s legal claim, which “is completely without merit.”
The bank has argued in court filings that its agreement with the Nigerian government specified, at the time it was signed, that JPMorgan would follow whatever instructions it received, even if it had reason to believe that the instructions were “not in the best interests” of the account holder.
It also claims that Nigeria has failed to identify specific things it could have done differently, since it reported each suspicious set of instructions to its British regulator.
Aside from the London lawsuit, JPMorgan has not been accused of wrongdoing in connection with the Nigerian affair.
Court papers from the London lawsuit and a related criminal trial underway in Italy provide a detailed record of the alleged scheme. (JPMorgan is not a subject of the criminal trial.)
It began when Mr. Abacha, the president at the time, awarded a license to drill oil near the Niger River Delta to Dan Etete, Nigeria’s oil minister. Mr. Etete paid just $2 million for the license, which was expected to generate billions of dollars in revenue.
Mr. Abacha’s successors accused Mr. Etete of corruption and tried to revoke the license. They were unsuccessful. Mr. Etete has denied wrongdoing.
In 2007, though, Mr. Etete was convicted of money laundering in an unrelated case in France, and two oil companies, Royal Dutch Shell and Eni, offered to buy the drilling license. In 2011, they struck a deal to pay the Nigerian government, then led by Goodluck Jonathan, more than $1 billion for the license.
But under the agreement, according to Italian and Dutch prosecutors, most of the money was slated to go to Mr. Etete and Mr. Jonathan’s friends, and not the Nigerian government.
Nigerian officials opened an account at JPMorgan in London, and an Eni subsidiary deposited about $1.1 billion on May 25, 2011. Within days, the Nigerian officials instructed the bank to transfer the money to an account at a Swiss bank, Banca Svizzera Italiana.
When JPMorgan sent the funds, B.S.I. officials sent them right back, telling JPMorgan that they were “not comfortable” with the transfer, citing “compliance reasons.” Emails among B.S.I. employees, published in Italian court filings, show that the Swiss bank suspected that the funds were bound for Mr. Etete.
After B.S.I. rejected the transfer, JPMorgan told British regulators that it, too, harbored concerns about whether the money was headed to Mr. Etete. It was the first of six suspicious activity reports that JPMorgan sent to British regulators in relation to the Nigerian account that summer. While JPMorgan was suspicious, it did not close or freeze Nigeria’s account.
(Swiss authorities in 2016 forced B.S.I. to sell itself or shut down after finding that the bank had helped Malaysian officials illegally siphon money out of the government investment fund 1MDB.)
In July 2011, Nigerian officials requested that JPMorgan transfer the entire $1.1 billion to a Lebanese bank.
By then, a large portion of the funds had been frozen in court.
JPMorgan submitted a letter to a British judge from Nigeria’s attorney general attesting to the legitimacy of the planned Lebanese transfer. The judge released $800 million, but told JPMorgan lawyers he was concerned that “the court was about to become if not a participant in at least an aide to a money-laundering exercise,” according to a court filing.
JPMorgan transferred the $800 million to Lebanon’s Banque Misr Liban. But the Lebanese bank sent the money back, saying it could not accept it without more information about the purpose of the transfer, according to a judge’s ruling in Italy and a London court filing made on behalf of Nigeria’s government.
Raymond Baker, the president of the Washington-based nonprofit advisory group Global Financial Integrity, who has followed the case of Mr. Etete’s oil license, said JPMorgan at that point should have sought a detailed explanation from Nigeria about the purpose of the wire transfers.
“There is a culture of ‘take the money, handle the money,’ regardless of other issues that might come up,” Mr. Baker said.
After the Lebanese bank rejected the money transfer, the Nigerian government asked JPMorgan to send $400 million each to accounts at two Nigerian banks held by Mr. Etete. JPMorgan again flagged the transactions as suspicious to British regulators. The regulator, Britain’s Serious Organised Crime Agency (now called the National Crime Agency), consented to the transfers, although it cautioned that the consent did not mean JPMorgan would be legally off the hook if problems with the transfers later arose, according to London court filings that cite the suspicious-activity reports.
The money transfers went through.
Two years passed, during which the Financial Times and The Economist published reports on the alleged scheme to pocket the oil money. In fall 2012, an investigator for the anti-corruption group Global Witness wrote a letter to JPMorgan’s chief executive, Jamie Dimon, asking questions about the money transfers.
In 2013, acting on another set of instructions from Nigerian government officials, JPMorgan sent the remaining $74 million in the account to one of Mr. Etete’s corporate accounts in Nigeria, according to the London court filing. The JPMorgan account had been set up as a “single purpose” account, established only to handle the money from the drilling-license agreement. Now that it was empty, it ceased to exist.