Chadian oil corruption case: SFO Court of Appeal victory sets reassuring standard for asset recovery cases

Chadian oil corruption case: SFO Court of Appeal victory sets reassuring standard for asset recovery cases

You may have missed it, because it garnered little in the way of press coverage, but the Court of Appeal in London made an important and welcome decision in an international corruption case last week. The decision, which upheld a freezing order for corrupt assets, suggests that UK courts will take a dim view of overseas orders that are designed to preclude asset recovery in the UK.


The Serious Fraud Office (SFO) secured an order in 2014 freezing £4.4 million belonging to Ikram Mahamat Saleh, the wife of a senior diplomat from Chad. Prosecutors allege that the money is a corrupt payment by oil company Griffiths Energy, now named Caracal Energy, which in 2013 pleaded guilty to bribery charges in Canada.


Saleh has repeatedly challenged the freezing order on the grounds that a Canadian court has already declared the £4.4 million, which is deposited in a Royal Bank of Scotland (RBS) account, lawful and not the proceeds of corruption. However, in a sign that UK courts will not let hasty and ill-thought-out overseas court proceedings scupper asset recovery cases in this country, the Court of Appeal dismissed Saleh’s challenge on 23 January, pointing out that the Canadian order was not based on close consideration of facts or evidence.


The backstory: how the £4.4 million found its way to the UK


Evidence of corruption against Griffiths first surfaced at the end of 2011 when the company was preparing to float on the London Stock Exchange.


Due diligence carried out in preparation for the flotation unearthed evidence that Griffiths had paid bribes to officials in the government of Chad to gain access rights to two oil blocks in the country.


A subsequent internal investigation by Gowling Lafleur Henderson (a Canadian law firm which, following a merger, is now known as Gowlings WLG) revealed the full extent of the corrupt scheme: Griffiths entered into a “consultancy agreement” in 2009 with a company named Chad Oil whose sole shareholder and director was Nouracham Bechir Niam, the wife of Chad’s then-ambassador to the US and Canada. The agreement included a US$2 million payment to Chad Oil.


What’s more, on the same day that the consultancy deal was agreed, Niam and Saleh, wife of Chad’s then-deputy chief of mission to the US, acquired a large amount of shares in Griffiths for a nominal amount. Saleh bought 800,000 shares for just US$745.


In the words of a judge who later reviewed the case, there is no logical reason why Niam and Saleh would have bought shares in a small, private and recently formed Canadian petroleum company unless they were privy to information about Griffiths’s impending oil-block-access deal with Chad’s government.


After Griffiths pleaded guilty to violating Canada’s Corruption of Foreign Public Officials Act in 2013, Canadian prosecutors launched forfeiture proceedings against Niam and Saleh seeking the stock that they acquired.


However, the proceedings took an odd turn of events – Canadian authorities obtained an order to freeze the shares, but then in April 2014 abruptly dropped their forfeiture application without publicly explaining why.


Saleh’s lawyer was then allowed to draft a court document declaring his client’s innocence, and stating that her shares were lawfully acquired. Judge Brooker, the Canadian judge overseeing the case, signed the order as drafted by Saleh’s lawyer.


The judge approved the order without being presented with evidence by the defence or prosecution, and without close examination of the document presented to him. Judge Brooker also signed a separate, more simply worded order releasing Niam’s shares.


Enter the SFO and DOJ.


Not to be deterred by the worrying turn of events in the Canadian proceeding, the US Department of Justice (DOJ) launched its own civil forfeiture case for the value of shares belonging to Niam, whose husband Mahamoud Adam Bechir now serves as Chad’s ambassador to South Africa. This is unsurprising considering the corruption scheme involved Chadian officials living in the DOJ’s own backyard in Washington, DC.


The SFO sought to freeze the value of Niam’s assets following a mutual legal assistance request by the DOJ. However, US prosecutors did not initially seek the value of the shares belonging to Saleh as they feared claims of diplomatic immunity – Saleh’s husband, Youssouf Hamid Takane, remained at Chad’s embassy in Washington, DC until recently.

The SFO acted on its own initiative obtained a freezing order in July 2014 for £4.4 million of Saleh’s money deposited in a RBS account in the UK. Saleh had made £4.4 million after selling her stock in Griffiths to Glencore which acquired the Canadian company in mid-2014, paying £5.50 per share. Griffiths’s lucrative oil assets in Chad were at the forefront of Glencore’s decision to purchase the company.


Saleh challenged the freezing order, first in the High Court in London before Mrs Justice Andrews and afterwards in the Court of Appeal.


Counsel to Saleh argued in both cases that the Canadian order, which declared the shares were not the proceeds of crime, was binding the world over, and the SFO should refrain from contending otherwise.


Unsurprisingly, the Court of Appeal, like the High Court before it, took a dim view of Saleh’s argument. The appeal court said while Saleh’s Canadian lawyers had drafted the order to make it seem conclusive and final the world over, this did not make it so.


Rather, the Canadian order “was plainly not the product of a decision-making process, in which the relevant facts were considered and weighed, in which the relevant principles of law were set out and applied”, the court said. The court also made the point that the judge signed the order without considering or understanding that it was drafted by Saleh’s counsel to bar overseas enforcement authorities from pursuing her assets.

It is reassuring to see that UK courts will not let poorly worded or ill-considered overseas orders hamper attempts by the SFO to pursue the proceeds of corruption.


In the Canadian case there is no evidence to suggest that the judge had any intention to unlawfully protect Saleh’s assets from recovery. However, it is not difficult to imagine proceedings in other jurisdictions with compromised and corrupted court systems where sham orders are passed with the sole intent of preventing asset recovery by overseas authorities. The approach taken by the Court of Appeal – which subjected the Canadian order to minute paragraph-by-paragraph analysis – should be the standard in such cases to prevent ill-considered or even illegal overseas decisions hampering asset recovery in the UK.


But will the facilitators be held to account?


While the approach taken by the Court of Appeal is heartening, the Saleh case also raises significant concerns about the role of UK banks and financial institutions in the laundering of corrupt assets, particularly when the asset in question is stock.


At least two UK companies handled the £4.4 million Saleh received and the £17.6 million Niam received after selling their shares in Griffiths to Glencore: RBS, and stock transfer agent, Computershare Investor Services.


Computershare Investor Services, which is an FCA-regulated UK subsidiary of its Australian parent Computershare Ltd, deposited £22 million belonging to Niam and Saleh in its account at RBS. It seems likely that Computershare had a duty to report suspicious activities.