JPMorgan Accused of Ignoring Red Flags in Nigeria Transfers

(Bloomberg) -- Nigeria alleged JPMorgan Chase & Co. ignored “overwhelming” evidence of fraud and stark warnings from its own compliance staff as it kicked off a London trial over transfers to a former oil minister accused of corruption.

JPMorgan acted negligently in transferring some $875 million between 2011 to 2013 from escrow accounts to Dan Etete, who had been convicted of money laundering, Nigeria’s lawyers said Wednesday. They cited an email by JPMorgan’s senior country official saying the matter “had gone right to the top of the firm.” 

The bank says the claim is “baseless” and that Nigeria hasn’t proved that a fraud was even perpetrated. 

The six-week trial will examine the extent of a bank’s duty of care toward clients, and whether the firm should have halted payments even if that meant overriding assurances from government officials. JPMorgan says that Nigeria’s claim would mean that its bankers were expected to know that the transfers were fraudulent.

Nigeria’s current government says a contract awarded by one of its predecessors to explore the deep waters off the Gulf of Guinea, alongside a series of later agreements, was corrupt. 

Such arrangements allowing for the payments to Etete and his firm Malabu Oil and Gas Ltd. over the oil field didn’t just “pardon” the disgraced oil minister, Nigeria’s lawyer Roger Masefield told the court. “It was positively rewarding on a spectacular scale a brazen act of corrupt self dealing.”

The west African nation is seeking damages of around $1.7 billion including interest. 

European and Nigerian courts have been raking over the purchase by Eni SpA and Royal Dutch Shell Plc of the oil license in Africa’s largest crude producer a decade ago. While the energy giants were recently acquitted of corruption charges in Milan in a decision prosecutors are appealing, Nigeria’s government is continuing to seek compensation from JPMorgan.

JPMorgan fell short of what should be expected of a “reasonable and honest banker” throughout the two-year period of the payments, Masefield said. Some of the first tranche of transfers in 2011 were laundered through shell companies and converted to cash through Nigerian bureaux de changes, he said.

By 2013, the “glaring” warning signs were even more obvious, the government has alleged. JPMorgan’s own compliance team spoke of the “great risk” of corruption if the bank continued to process the payments, according to a Nigerian filing prepared for the trial.

‘Several Cronies’

In a memo prepared just before the 2013 transfer, officials said that proceeds from the sale of the oil rights “ended up in accounts of several cronies and business associates of Nigerian government officials.”

The issues around Etete had “gone right to the top of the firm,” Oluwatosin Adewuyi, JPMorgan’s senior country officer for Nigeria wrote in an email in July of that year.

Around the same time, Matt Zames, then-JPMorgan’s chief operating officer and one of the bank’s most senior officials, was “briefed by legal” on the transfers, according to an email disclosed in Nigeria’s filing. Compliance officials also prepared information ahead of a meeting with the executive showing that funds associated with the transfers were subject “to alleged corruption issues.” 

Zames, who’s no longer at the bank and isn’t accused of wrongdoing, didn’t immediately respond to an email sent outside of business hours.

It’s still uncertain “who made or signed off on the decision to pay, and who ‘pressed the button’ in the end,” Nigeria’s lawyer, Masefield, said.

It was then only after the last of the funds were processed, that JPMorgan declared a “significant” anti-money laundering “event,” according to the Nigerian filing. Etete and Malabu were then placed on a list of people who the investment bank couldn’t do work with.

(Updates with details on information prepared for JPMorgan’s-then COO Matt Zames in 13th paragraph.)

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