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Malabu Scam: FG Adds Negligence Claims to $875m JPMorgan Suit

The federal government has added negligence claims to its $875 million London lawsuit against JPMorgan, alleging that the the bank was “grossly negligent” when it purportedly ignored red flags and transferred state funds to Mr Dan Etete, its former oil minister, a convicted fraudster.

This disclosure was contained in the ruling of London’s high court last week.

The suit, filed in the English courts in 2017 relates to the purchase of the offshore OPL 245 oilfield in Nigeria by oil majors, Royal Dutch Shell and Eni in 2011, which is the subject of an ongoing trial in Milan.

The federal government had filed a claim against the US lender, accusing the bank of negligence in transferring funds from the disputed oilfield deal to a company controlled by Etete.

A spokeswoman for JP Morgan had dismissed the accusation, saying the firm “considers the allegations made in the claim to be unsubstantiated and without merit.”

At the core of the case is a $1.3 billion payment from Shell and Eni to secure the block that the lawsuit said was deposited into a federal government’s escrow account managed by JP Morgan.

The lawsuit said JP Morgan then received a request from the finance ministry to transfer more than $800 million of the funds to accounts controlled by the previous operator of the block, Malabu Oil and Gas, controlled by Etete.

The court papers also alleged that JP Morgan transferred the funds to two accounts controlled by Etete, without sufficient due diligence to make sure the money did not leave the accounts controlled by the federal government.

The court filing, made in London in November last year on behalf of Nigeria, said JP Morgan acted with gross negligence by allowing the transfer of the money without further checks.

It said JP Morgan should have known that under Nigerian law, the money should never have been transferred to an outside company.

“If the defendant acted with reasonable care and skill and/or conducted reasonable due diligence, it would or should have known or at least suspected … that it was being asked to transfer funds to third parties who were seeking to misappropriate the funds from the claimant and/or that there was a significant risk that this was the case,” the court filing said.

Reuters reported that the London court yesterday ruled that the six-week London trial will start on the first available date after November 1 next year, meaning that proceedings may not begin until 2022.

JP Morgan declined to comment yesterday.

But a lawyer for the American multinational investment bank, Rosalind Phelps, described the federal government’s suit against the bank as a claim with no real prospect of success.

The bank “had no duty to inquire into or investigate the validity or legality of the instructions it received

“The only allegation that’s left is one of negligence,” Phelps, had told the court.

As part of the proceedings, JP Morgan will also have to disclose within 21 days which individuals at the bank made the final decision to transfer the funds in question.

“Nigeria is pleased that JP Morgan has agreed it will now confirm all the senior figures at the bank who were involved,” Reuters quoted a spokesman for the Nigerian government on this case, as saying.

“This claim will move forward and Nigeria will hold JP Morgan accountable for its central role in the OPL 245 fraud,” the report said.

The damages sought by Nigeria include the monies allegedly sent to Etete, around $875 million paid out in three instalments, plus interest taking the total to $1.7 billion.

The decision is also likely to compel the bank to disclose details of its internal processes. JP Morgan sought to quash the case last year.

The Milan trial began in 2018.

In July 2020, Italian prosecutors asked a Milan court for Eni and Shell to be fined and some of their present and former executives, including Claudio Descalzi, Eni CEO, to be jailed.

They further requested Eni and Shell to be fined 900,000 euros ($1.06 million) each and sought to confiscate a total of $1.092 billion from all the defendants in the case, the equivalent of the bribes alleged to have been paid.

Final defence arguments from lawyers representing Shell, Eni and its executives are being made to the court.

The next hearing is scheduled for November 25.

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