Oil bribery scandal

By Independent Investigations

The story behind the news

In August 2010, a source brought to The Independent a series of documents showing bank transfers of large amounts of money to two ministers: Sam Kutesa of Foreign Affairs and Hillary Onek, then of Energy and Mineral Development. According to the documents, Kutesa had been paid by Tullow Oil 17m Euro under a company called East African Development Limited registered (EADL) in Nairobi. Onek had been paid 6.0m Euro to his account with the Emirates Bank in Dubai. On the face of them, the documents looked authentic.

However, because of the volumes of money involved in oil deals, combined with the calibre of oil companies bidding for multibillion dollar deals, the risk that there would be a lot of misleading information is very high.

The Independent recognises that the fight against corruption in Uganda cannot be purely based on legal standards of proof. Rather it has to be a political fight whose aim would not be proof of wrong doing but demonstration of political will that the government does not tolerate corruption.

The Independent made efforts to establish the existence of bank accounts in the names of the ministers in both England and UAE without any positive results. The Independent also made a company search and would not establish the existence of EADL. Finally, recognizing its own limitations, The Independent decided to work with other powers to investigate. It sought audience with President Yoweri Museveni and presented these documents to him in September last year.

President Museveni was told that The Independent does not have 100 percent proof that the said documents are authentic but that The Independent’s position is that they seem credible. He was advised first to use the power of his office to cause an investigation into the authenticity of the documents and also to take both legal and political action against the accused ministers.

Museveni got the documents and sent them to the Inspector General of Police, Kale Kayihura, instructing him to work with The Independent to investigate the matter. In fact Museveni handed the documents to Col. Nalweyiso, one of his aides at State House with clearly handwritten instructions directing Kayihura to work closely with The Independent. The investigations have been continuing with some interesting results.

In spite of lack of any evidence authenticating these documents, Kayihura wanted to go ahead and arrest the culprits. The aim was to use these documents and bring Kutesa, Onek and Brian Grover, then-country manager of Tullow Uganda, to a police station for questioning. But other than the documents, the police had not the slightest other piece of evidence to rely on. There was a discussion at the police. What if these people simply say they do not own banks accounts abroad and the documents are forged, what else would the interrogating officers say?

Finally, the Director of Public Prosecutions (DPP), Richard Butera, advised that there was no basis of prosecution because the documents were not backed by any other iota of evidence to give them credibility. If any arrest was to be made, it would have had to be a political action not aimed at meting out justice but simply at giving a signal that corruption cannot be tolerated. In this case, Kutesa and Onek would be innocent victims, used as sacrificial lambs to demonstrate government commitment to fight corruption and also to scare other oil companies from even attempting to pay kickbacks. But our investigations continued.

The facts

The Independent editorial policy demands that whatever allegations, even of documents, must be investigated to establish their authenticity. We do not need 100% proof but work on former US Secretary of state Gen. Colin Powell’s 40 to 70 percent principle which we turned into a 50 to 70 principle. This principle states that in making a decision about a matter of security significance (in our case to publish some grave allegations against a public official) you must possess a 50 to 70 percent chance of being true.

Although at 50 percent the evidence is shaky, we would still go ahead and publish the allegations if there is an overwhelming public need to know. So we would take the risk and run a story on a weak basis. This is especially so if the newspaper is at the point where it is impossible to get any more information or facts to ascertain the information available. In any case, waiting for 100 percent proof to make a decision may delay you so much so that by the time you actually run a story, years have passed and the objective has been lost.

The editorial view is that below 50 percent certainty, the newspaper would be flying blind – make damaging allegations against a public official on flimsy evidence.

Therefore we needed a few facts. For example, do the alleged accounts exist? Does a company called East African Development Limited exist? We sought to establish the following: One, that these accounts actually exist; two, that they are in the names of Onek and Kutesa; three, that the said monies had been actually transferred to these accounts; four, that the money is substantial; five, that the money came from Tullow. Each of these aforementioned elements had a weight of 20 percent making it 100 if all were verified to be correct. But assuming we found that the accounts exist in the names of the people involved – that would be only 40 percent. We would need to establish that money was paid to these accounts and that it was not just US$1,000 but was actually substantial.

Any substantial payments even without establishing who paid the monies into these accounts would have created a high margin of suspicion that something was happening. We would have been willing to publish the information because we would have achieved the 60 percent mark because of the overriding public need to know.

Upon cross-checking with the registrar of companies in Kenya, we found no company called East African Development Limited. We suspected that possibly someone had formed the company, gotten an address for it and then withdrawn the file. But without any confirmation of the existence of this company, and without any establishment of the existence of the account in London and Dubai, there was not even a 10 percent chance that the information we had was true.

We took the documents to the United Kingdom and sought assistance from the police there without much success. The Independent also used a top level contact in Dubai to gain access to Emirates Bank and could not establish the existence of the account alleged to be that of Onek.

We got information that one of the international firms bidding for oil contracts had actually paid some ministers but that it was also forging documents to divert attention from its acts by claiming it is Tullow that was paying the bribes.

Later Kayihura gave The Independent a letter he had received from the police in Malta which confirmed that the Bank of Valetta had actually told the police in that country that the documents are a forgery. Kayihura also gave The Independent a letter from the UK police which also said the alleged account by EADL did not exist.

With police investigations producing negative results, The Independent contacted an international organisation renowned for investigating corruption in the oil sector called Platform in London. Members of staff from Platform came and visited The Independent offices in Kampala and were given copies of the documents. The Independent still had suspicion that the police investigation could be compromised because the people under investigation are powerful in the government. Platform promised to use their powerful and widely spread contacts inside the banking system in UK to establish the authenticity of the documents. They did not find anything.

The accusations

Then on Oct.10 the allegations landed like a bombshell during an extraordinary session of Parliament. It took a petition signed by over 160 MPs on Aug. 20 to compel the Speaker to call the emergency session of parliament. Her earlier attempts to refuse to recall parliament failed when she was threatened with censure because the recall is mandatory under the constitution. The stakes were high.

The accused minister are the most powerful and inner core of President Museveni’s regime by virtue of marriage and historical connections. An attack on them hits very close to the President. Museveni has also been criticised for putting an elite force commanded by his son, Col. Muhoozi Kainerugaba, in charge of oil wells security. A private security firm, Saracen, which is owned by his younger brother, Gen. Caleb Akandwanaho aka Salim Saleh is also involved in providing security to the oil companies.

A report entitled “Oil Extraction and the Potential for Domestic Instability in Uganda” by industry experts has also warned that the Uganda government’s secrecy on oil could increase corruption and civil instability.

“Increases in corrupt behavior would essentially require secrecy in government dealings. A reduction in government transparency in oil and tax revenue management would then incentivise Museveni’s government to become increasingly autocratic in its relationship with the public and political opponents, as has so often been the pattern in other oil producing states,” the report warned.

Then in a rare show of unity in parliament on Oct. 10 and succeeding days, opposition and pro-government MPs led by Theodore Ssekibubo (Lwemiyaga) and Abdu Katuntu (Bugweri) in what they called a bi-partisan platform, tabled a motion on access to oil agreements and demands that the government temporarily halts execution of any oil agreements until an oil law is in place. They said this would make the National Oil and Gas Policy operational. They also demanded for a judicial commission of inquiry into alleged corruption over the oil.

Ssekikubo, while tabling the motion, said Tullow was counting the bribes to the ministers as production costs that Ugandans would have to pay back dearly and get less benefit from oil. He said Mbabazi’s daughter, Nina Mbabazi and her husband Matthew Rukikaire Jr. own an a yard in the east of Kampala city where Tullow parks its equipment, hundreds of miles away from the oil production fields. He named two people he said are employees of Tullow Oil, both holders of a certificate in catering, but getting paid Shs 36 million and 56 million per month.

Youth MP Karuhanga (Western) waved documents he said were proof and named ministers Kutesa, Onek, and Prime Minister Amama Mbabazi as having taken bribes from oil exploration companies.

Karuhanga alleged that Kutesa, through a company called East Africa Development Ltd, was at one point last year paid 17 million Euro from oil exploration and production corporation, Tullow’s Account no. 40037242019 in Malta through his account in EFK Bank in Zurich. He further alleged that at different dates last year, in installments, then-Energy and Mineral Development Minister Hillary Onek was paid 5.6 million Euros from different Tullow accounts in Dubai. Karuhanga also repeated accusations contained in leaked US diplomatic cables that Prime Minister Amama Mbabazi tried to influence the sale of Heritage Oil’s stake in Uganda to Italian company ENI.

Kutesa came prepared for the accusations. He too waived copies of documents he said were the “forged” documents and designed to implicate him in bribery. Who is telling the truth?

The MPs want the government to table all the relevant Bills within 30 days, desists from executing any contract in the oil industry with confidentiality clauses, reviews the Production Sharing Agreements and accounts for the revenues so far received from oil dealings.

MPs demands

The MPs want the signing of the agreements between Tullow, Total and CNOOC, which they said was slated for Oct.15 to be stayed until the capital gains tax assessed by URA payable by Tullow is paid in advance and parliament is informed of the development.

During the debate, there were several references to the Sixth Parliament, which many legislators and observers are still nostalgic about due to its tradition of lively debate and perceived independence. Unfortunately for Kutesa, it was that parliament that censured him for alleged corruption.

This time some MPs called on him and the other named ministers to resign, be fired by the president or face censure.

The 9th Parliament, according to observers, is showing signs of enthusiasm to move against corruption. During the last parliament, Mbabazi and Kutesa were among a string of ministers implicated by the Public Accounts Committee of parliament for misusing CHOGM funds but were absolved by the largely rubberstamp parliament. Mbabazi also survived another attempted censure for influence peddling when he sold his land to the National Social Security Fund without going through the prescribed procurement procedures.