UNAOIL: KAZAKHSTAN – World’s biggest bribe scandal

UNAOIL: KAZAKHSTAN - World's biggest bribe scandal

A Fairfax Media and Huffington Post investigation has uncovered an extraordinary story of bribery and corruption in the oil industry, centred on Monaco-based company Unaoil. In the inhospitable Caspian Sea, Unaoil’s clients sought to make their fortune.

When huge oil reserves were discovered off the coast of Kazakhstan more than 20 years ago, the world’s biggest oil service companies headed to the Caspian Sea.

American multinational Halliburton and its then-subsidiary Kellogg, Brown & Root led the charge. The arrival of the US firms – famous due to their association with America’s military and the firms’ former chairman turned US vice president Dick Cheney – signalled that there was serious money to be made.

So did the arrival of Unaoil at around the same time.

The Monaco-based company specialises in paying bribes for multinational clients on the basis that it can deliver a valuable edge in bidding for oil and gas contracts worth hundreds of millions of dollars.

Unaoil’s assistance also costs big – typically commissions of 3 per cent or more of the total value of the contract – but Halliburton and KBR were happy to pay. So were Britain’s Petrofac and Rolls Royce, Norway’s Aker Kvaerner, Turkish firm Gate, and Singapore conglomerate Keppel and US firm National Oilwell Varco. It’s clear that at least some of KBR’s managers knew how Unaoil got its edge.

In February 2005, a KBR manager urged Unaoil to start “hobnobbing” to help KBR win a services contract on the Kashagan oil field, which is considered to be the biggest deposit found in the past 30 years.

“My feeling is that a good spaghetti house is where it is at; of course a little shashlick for lunch is good to digest also,” the KBR manager wrote using code words – spaghetti for the managers of Italian company Eni, which was managing the Kashagan field alongside Kazakh officials, who were codenamed “shashlick.”

But the hobnobbing that KBR was seeking was no ordinary lobbying. Unaoil was bribing both Kazakh officials and Eni managers.

“We need to convince [KBR]… that we own the Spaghetti House & have a lease on the Shashlik takeaway,” wrote Unaoil executive, Peter Willimont, to his boss, CEO Cyrus Ahsani. “This done we can get our deal signed.”

Ahsani responded, also in code, that the American company must pay Unaoil before it began helping the US firm: “Try to get the paper before we do the rounds. It would help if we had it.”

In other words, KBR should guarantee to give Unaoil a fat commission before it could wield the kind of influence it wanted. Sure enough, by 2008, KBR had promised Unaoil over $10 million in commissions.

“Our ability to live from the reputation of working with KBR is immense,” a Unaoil email states.

OWNING THE SPAGHETTI HOUSE

Willimont’s claim that Unaoil “owns” the spaghetti house was no idle boast.

Leaked internal emails show that several Italian oil executives from Eni, appointed to help manage Kazakhstan’s oil wealth, used their power corruptly. In return for bribes, these men leaked highly sensitive tender information and rigged contracts to support KBR and Unaoil’s other clients.

A huge amount of inside information from supposedly confidential tender committees was leaked to Unaoil.

In one email, Eni manager Diego Braghi told Unaoil that in return for kickbacks, he “can provide all the tender details, clarifications, evaluations” from the tender committee he was appointed to help oversee – and keep confidential.

Five Italian middlemen, including several operating out of London, were used by Unaoil to bribe a network of Eni executives. Of the five, Leonida Bortolazzo was the most powerful.

Formerly an Eni executive himself, Bortolazzo was no stranger to corruption. Leaked emails reveal that Unaoil spent tens of thousands of dollars on upmarket furniture for Bortolazzo’s London home while he was responsible for overseeing large Kazakh oil service contracts in 2004.

The bribing of Bortolazzo by Unaoil continued after he left Eni in October 2004 and began working with an influential Kazakhstan government owned oil company called KING in 2005.

KING was run by Bortolazzo’s good friend, the powerful Kazakh official Serik Burkitbayev (who was later jailed for corruption).

KBR was desperate to secure the support of KING, Bortolazzo and Burkitbayev because they had, according to a KBR memo: “unofficial preferential treatment when tendering… instant access to decision makers in the Kazakh Government and… access to information simply not available to the likes of KBR.”

When this memo was written, in 2005, Unaoil was already bribing Bortolazzo.

Leaked documents show he would, at one stage, be paid $80,000 a month by Unaoil in return for corrupting tender committees to favour KBR and other firms.

In a 2006 email, Bortolazzo wrote that he had been promised $2.5 million by Unaoil in return for the help he had given “KBR” and other companies.

Bortolazzo kept some of these funds for himself and used the rest to pay further bribes to his corrupt “friends” inside Eni.

Bortolazzo and Braghi were approached for comment.

THE SHASLICK TAKEAWAY

Unaoil and its network never wasted an opportunity to win favour among powerful Kazakh officials.

Small inducements were provided without hesitation. At the request of a powerful government official, Unaoil spent 6000 Euros on Monaco hotel rooms; it helped another senior Kazakh official and his wife submit a fraudulent visa request to the Spanish embassy and paid for their holiday accommodation; it helped a front man for an influential Kazakh figure to set up a company in the British Virgin Islands and a bank account in Bermuda.

But the real business of influencing Kazakh officials involved Unaoil advising its clients to give multi-million dollar sub-contracts to companies these officials owned or controlled.

Unaoil and its multinational clients, including KBR, were obsessed about winning the backing of figures such as billionaire Timur Kulibayev, the son-in-law of Kazakhstan’s president. Kulibayev is known for buying the home of British Royal family member, Prince Andrew, for 15 million pounds in 2007 – even though the asking price was 12 million pounds.

He’s also named in US diplomatic cables published by Wikileaks as exercising incredible control over Kazakhstan’s oil industry. In 2006, when Unaoil CEO Cyrus Ahsani invited Kulibayev to his brother’s wedding in Monaco, he addressed the invite to “Your Excellency”.

The leaked emails repeatedly describe how Unaoil and its clients sought to win Kulibayev’s favour, and that of the Kazakhstan government, by engaging in business deals with companies he controlled.

Anti-corruption authorities from the United States and elsewhere warn that such activities may amount to bribery and corruption.

In 2007, Unaoil set up its own joint venture company with a high ranking Kazakh official who it described as being “very close to TK [Timur Kulibayev].”

It also advised its client, Singapore conglomerate Keppel, to use its financial ties to a Kulibayev-controlled company to help win a government funded contract to supply an oil drilling barge.

Failing that, Unaoil advised working out what financial rewards Keppel’s opposition had promised another company, KGNT, which also has ties to Kulibayev, and to attempt to match it. There is no suggestion that Kulibayev ever improperly assisted Unaoil or its clients as a result of Unaoil’s efforts to win his favour.

Nick McKenzie, Richard Baker

http://www.theage.com.au/interactive/2016/the-bribe-factory/day-2/kazakhstan.html

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