Thursday, March 17, 2005

Rafsanjani-Statoil Bribery Covered in Global Corruption Report 2005

Global Corruption Report:
Allegations of corporate corruption received substantial media attention in 2003-04, but it was the Statoil-Horton affair that made the biggest headlines. READ MORE

State-owned Statoil is Norway’s largest company. In June 2002 Statoil signed a 10-year, US $15 million consulting agreement with Horton Investments to exploit Iran’s oil and natural gas. Horton Investments, a company owned by exiled Iranian Abbas Yazdi, was also allegedly a financial intermediary for Mehdi Hashemi Rafsanjani, son of Iran’s former president, director of the National Iranian Oil Company (NIOC) and an influential figure in the country’s energy sector.

In autumn 2002 Statoil was awarded operational control of South Pars, the world’s largest offshore gas field, in partnership with a NIOC subsidiary. Statoil committed to spending US $300 million to construct three production platforms and a pipeline. After completion, control of South Pars reverts to NIOC and Statoil will recover its project costs and a share of NIOC sales.

In September 2003 Statoil’s internal auditors reportedly questioned a US $5.2 million payment to Horton Investments’ account in the Turks and Caicos Islands, leading to an investigation by Økokrim, Norway’s economic crime unit.

Statoil’s chairman Leif Terje Løddesøl and CEO Olav Fjell both resigned.

Økokrim concluded that the payment was an offer of improper advantages in return for influence in securing the Iran deal. In June 2004 Økokrim issued penalty notices against Statoil and the former director of its international department, Richard Hubbard. A NOK 20 million (US $2.9 million) fine was imposed on Statoil.

Statoil was also under investigation by the US Security and Exchange Commission for breaching the US Foreign Corrupt Practices Act, which is applicable because of the company’s listing on the New York Stock Exchange.

The Iranian parliament looked into the allegations against Statoil, while Swiss authorities investigated Abbas Yazdi for alleged money laundering. A major delaying factor in the inquiry was Rafsanjani’s refusal to submit to interrogation, thereby underlining the procedural obstacles facing investigators who seek to enforce anticorruption legislation beyond their domestic jurisdiction.