Anti-fraud agency probes Soma payments to Mogadishu

Soma chairman Michael Howard

financialtimes

 

The UK Serious Fraud Office is examining payments made by a UK-based oil explorer to the government of war-ravaged Somalia as part of a criminal investigation into alleged corruption, according to people familiar with the case.

Soma Oil & Gas, chaired by Michael Howard, the former Conservative party leader, agreed to pay $580,000 for “capacity building arrangements” at Somalia’s ministry of petroleum, which involve funding the salaries of individuals contracted to work for the department.

UN officials, who are part of a sanctions monitoring panel on Somalia tasked with investigating corruption, are concerned Soma’s capacity building payments may not have been provided solely for technical assistance, said two people close to the matter.

Soma is currently negotiating terms with Somalia’s ministry of petroleum that would give it the right to pump oil should the company find commercial quantities.

Soma signed an initial oil exploration deal with Mogadishu in August 2013.

It was the first energy deal signed with a new donor-backed government, but was heavily criticised by non-governmental organisations because it was agreed without an open tender process and despite UN recommendations for a moratorium on oil exploration.

Soma said Lord Howard “has agreed to speak with the SFO” in connection with its investigation.

But it added “the SFO have confirmed that no suspicion whatsoever attaches to Lord Howard arising from the business of Soma” and the company “has always conducted its activities in a completely lawful and ethical manner”.

The SFO said last Friday that it had opened a criminal investigation into three Soma entities and others “in relation to allegations of corruption in Somalia”.

The SFO on Monday declined to comment further.

In an April 2014 letter by Soma to Somalia’s then minister for petroleum, which has been released by the government, the company offered to make payments worth $400,000 for “capacity building arrangements” at the oil ministry.

Explaining the rationale for the payments, the letter said: “We understand the ministry of petroleum and mineral resources of the federal republic of Somalia requires additional financial support for its role in connection with the performance of its functions in relation to the exploration programme . . . including the hiring and contracting of certain qualified technical staff, consultants and advisers, inside and outside Somalia.”

Soma agreed to pay “salary costs” for up to six “staff, consultants and advisers”, according to the letter. These payments would be up to $5,000 per worker per month for one year, added the letter.

The usual monthly salary for a top-ranking civil servant in Somalia’s oil ministry is little more than $1,000.

One person close to Soma said the company had agreed in April to pay a further $180,000 to extend the capacity building arrangements to the end of September.

Soma ended its letter to the petroleum minister by saying it should be able to recoup the cost of the capacity building payments in a future oil production sharing agreement with the government.

“You can’t be paying the salaries of civil servants who are in charge of managing or negotiating your contract . . . it would be a conflict of interest,” said Barnaby Pace at Global Witness, a non governmental organisation.

Soma has previously referred to its capacity building agreement with Somalia in official communications, but declined to comment further on Monday, citing the SFO investigation.

Source: http://www.ft.com/cms/s/0/858424aa-39f2-11e5-bbd1-b37bc06f590c.html#axzz3hmjkSrQs

 

 

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