Unaoil – a very complicated win for the Serious Fraud Office

Author: Alex Clemens and Sue Hawley

13 July 2020

  

In a much-needed win for the UK’s Serious Fraud Office, two out of three of those it was prosecuting for corruption in the Unaoil case were found guilty. The case has exposed some ugly competition between global enforcement agencies, and some alarming behaviour by the new Director of the Serious Fraud Office in her pursuit of American style techniques in corruption and fraud cases. But the questions left at the end of the trial are why the victims of corruption in Iraq did not get more of a hearing in court, and whether the bosses of those being prosecuted, who cut a deal with the US Department of Justice, will get off more lightly than their employees, and if so what message that sends about global bribery enforcement.

Verdict

Ziad Akle – former Iraq territory manager for oil and gas company, Unaoil, has been found guilty on 2 counts of conspiracy to make corrupt payments to an Iraqi official. Former vice president of Dutch energy services company, SBM Offshore and subsequently Unaoil’s general territories manager, Stephen Whiteley, was found guilty of one count while the jury could not reach a verdict in the case of former sales manager at SBM Offshore, Paul Bond. The SFO is seeking a retrial in the case of Paul Bond. 

The three defendants had been charged with conspiracy to make corrupt payments in the Iraqi oil industry following the overthrow of Saddam Hussein. According to the SFO, the defendants conspired with members of the Ahsani family, who control Unaoil, and others to pay a key Iraqi official in the state-owned South Oil Company over $600,000 to influence tender exercises in favour of their clients. The SFO argued that in total corrupt payments worth $5.4 million had been paid to senior figures in the Iraqi Ministry of Oil to secure approval for a series of ambitious construction projects including two new pipelines worth $800 million. 

During the trial, the London jury was given a glimpse into how multinational conglomerates operate in war-torn regions, where middlemen are provided with armoured vehicles and personal security escorts to secure and manage multi-million-dollar projects in the oil and gas industry.

COVID-19 interruptions

The trial was one of the first jury trials to resume in the UK following a two month pause resulting from the coronavirus pandemic. A socially distanced trial restarted on 13 May, at the Old Bailey, London’s Central Criminal Court – spread over three courtrooms. Some of the defendants attended remotely via audio link – a fact that the judge stressed when summing up should not to be held in any way against them.

The outcome of the trial will have been closely watched across the legal community for the implications of resuming socially distanced jury trials during the pandemic. As the trial resumed the defence sought to have the case dismissed on the grounds that if a conviction resulted, it might be unsafe because there would “always be a feeling that the jury cowed to the pressure of the pandemic.” The judge dismissed the application noting that while he understood the pressure that the jury might be under, he had spoken in detail with them and urged them to bring him any concerns that might impact upon their ability to fulfil their duty as jurors. 

Corporate greed in a lawless place

The trial painted a picture of almost unlimited corporate greed in a lawless place where almost everything and everyone was for sale. 

During the course of the trial, the SFO read out hundreds of emails and provided a meticulous record of exchanges, meeting notes, and other documents as evidence of the alleged conduct. The prosecution stated that competitors of Unaoil clients were systematically ‘pushed out’ of the tendering process with the help of an Iraqi official, Oday al Quraishi, a key employee at the state-owned South Oil Company (SOC) responsible for the production of oil and gas from southern Iraq.

Al Quraishi was the project manager in charge of overseeing Iraq’s most important oil expansion project after the fall of Saddam Hussein. The trial heard that Al Quraishi passed on a stream of confidential information giving Unaoil’s clients considerable commercial advantage, and how Unaoil in turn tried to manipulate the tender process by inserting requirements and technical specifications that none of the competitors could meet.

Unaoil meanwhile the prosecution alleged made payments to officials in the Iraqi oil ministry through a further middleman, Ahmed Al Jibouri, in order to get the approval for projects on behalf of its clients. Those involved in the conspiracy insisted on ‘obsessional’ secrecy, including using code names and nondescript email accounts.

Unaoil meanwhile made handsome profits on its role both as a middleman and a contractor.

All three defendants argued that their respective role within Unaoil was of little or no significance, that they were detached from the bribery conspiracy and that the payments were made via circuitous routes and code names used for security reasons.

Co-conspirators and absences

One co-conspirator named in the indictment, Basil Al Jarah, pleaded guilty in 2019 and will be sentenced on 23 July. The content and circumstances of his guilty plea were deemed prejudicial and therefore not admitted into evidence, although the jury were informed about his plea.

The chief conspirators however, the Ahsanis, Unaoil’s most senior management, were absent from the London courtroom. The issue of the Ahsanis absence is a telling tale of jurisdictional competition between the US and UK, the more gory details of which may yet emerge in an employment tribunal later this year, in which the former case controller in the Unaoil case, Tom Martin, is suing the SFO for unfair dismissal.

Despite being under a European arrest warrant originating from the SFO, in March 2019 Unaoil executives Cyrus and Saman Ahsani pleaded guilty in the US. It transpired that the DOJ had issued their own arrest warrant for the brothers, and persuaded Italian authorities to hand over Saman Ahsani after he was picked up in Rome in early 2018 despite an Italian court ruling that he should be extradited to the UK.

Saman and Cyrus Ahsani are still awaiting sentencing before the US District Court for Southern District of Texas which is now scheduled for October 2020 but the signs are that they have cut a deal with the DOJ as cooperating witnesses which will allow them a lighter sentence and possibly just a fine.  

The defendants lawyers pointed out frequently during the trial that the Ahsanis, who own and control Unaoil through their family trust, were the ultimate decision makers and beneficiaries. At one point, Akle’s defence asked “why on earth” the SFO not only gave up on the Ahsanis, but even gave them rights to free passage through the UK. He described them as “the ‘ringmasters of Unaoil all across the world.”

Paul Bond’s counsel meanwhile also criticized the SFO for failing to arrest and investigate all the individuals listed on the indictment alongside Bond, namely three SBM senior executives.

The other middleman

The Unaoil case provided a glimpse not only into the dealings of Western companies in war-torn countries, but also into the workings of the SFO. At the heart of this lies the curious case of David Tinsley – the American director of “the world’s first and only Judaeo-Christian due diligence agency”, who acted on behalf of the Ahsani family and presented himself as a ‘deal maker’ engaging in backroom negotiations between prosecutors and those under investigation in the US and UK.

Before the trial started, Zaid Akle’s defence brought an abuse of process argument, to throw the case out on the grounds that Tinsley’s involvement amounted to “egregious misconduct” on behalf of the SFO and that their client could not receive a fair trial. At the heart of this argument was the role that David Tinsley had played in negotiating between Zaid Akle, Basil al Jarah and the UK’s SFO on one side and the US Department of Justice on the other. 

In court it emerged that David Tinsley, who was not a lawyer, approached Akle and Al Jarah directly, circumventing their legal representatives. He claimed he could have off the record contact with Ms Osofsky and that he was in a position “to stop everything in the UK and move the case to the US”.  Tinsley did indeed develop direct communications with the SFO’s Director, Lisa Osofsky, who is said to have described Tinsley as “a gift from god.

Tinsley claimed he would be “mending the relationship” between the SFO and the FBI and “build something great”.  He is also said to have sent an article to Ms Osofsky with the message “mercy means valuing relationships over rules” – a message which Ms Osofsky is said to have found “inspiring”.  In his ruling the judge remarked that he is “not a philosopher” and “not sure what this expression is supposed to mean, but if it is an invitation or excuse not to apply the rule of law before the application of mercy, I doubt that it has proper application to the work of the SFO.

The defence also highlighted that in contravention of the SFO’s own code of conduct, a SFO investigator did not record large sections of his encounter with Tinsley. The relationship with the SFO was such, they said, that at one point, Tinsley asked the agency to delay a hearing to assist his credibility with the Ahsani family. Eventually, Basil al Jarah pleaded guilty, while Zaid Akle did not. The defence claimed that Tinsley was instrumental in Al Jarah’s guilty plea.

The prosecution acknowledged that the SFO’s contact with Tinsley was ‘unwise’ and an ‘error of judgment,’ but dismissed Tinsley’s involvement as ‘a matter of style’ rather than substance. They pointed out that Akle was aware that Tinsley was acting for the Ahsanis and that Tinsley’s role was therefore not covert. 

The court rejected the abuse of process application, finding that Al Jarah pleaded guilty on his own accord and not as a result of Tinsley involvement. However, it was scathing of the SFO’s role in the affair. The SFO should not have “taken the bait” and encouraged Tinsley’s contact with Al Jarah and Akle, who were represented by UK lawyers, the judge stated. And the judge remarked that in due course the SFO should consider an internal review into its relationship with Tinsley and see “what lessons can be learned from that.”

The SFO has stated that it will conduct an independent review which it appears will take place once its retrial of Paul Bond is over – a retrial that the Judge has suggested may not be in the public interest. 

Cooperating witnesses – where does this leave the UK? 

Unfortunately, the Tinsley affair may have done considerable damage to one of Osofsky’s key flagship policies – to improve the SFO’s use of cooperating witnesses. The Tinsley affair underscores how the American trained Director was hoping to bring US style tactics – where US prosecutors have enormous amounts of discretion in how they act – to the UK. Osofsky has on various occasions raised potential ways in which SFO investigations could be expedited by making greater use of cooperating witnesses – a method used in the US with considerable success to nail cases. 

While the UK’s legal framework allows prosecutors to use cooperating witnesses, under the Serious Organised Crime and Police Act 2005 (SOCPA), sentences for such witnesses must be at the discretion of the judge. UK courts jealously guard their right to determine sentence and have expressed disapproval of sentence determinations in plea agreements. This contrasts with the US where prosecutors have broader powers to negotiate what sentence a cooperating witness can get and as a result can provide more predictability for such witnesses.

The use of cooperating witnesses is rare in UK economic crime investigations and is not without controversy. In 2011, a series of supergrass convictions were reviewed by the Criminal Cases Review Commission amid growing concern over the safety of using such criminal witnesses and the millions of pounds spent to cultivate them. The CPS code for prosecutors meanwhile stipulates that that “where sufficient evidence exists to provide a realistic prospect of conviction, the public interest will normally require that an accomplice should be prosecuted whether or not he or she is to be called as a witness” and “only in the most exceptional cases will it be appropriate to offer full immunity.

While collar crime lawyers have broadly welcomed Osofsky’s desire to push greater use of cooperating witnesses in the UK, and have pointed out that under UK law, the SFO could give complete immunity to those who come forward.

The fact that Unaoil’s bosses, the Ahsanis, seem to have been offered some sort of cooperating witness deal in the US while their staff faced full prosecution in the UK is not a good look for international anti-bribery enforcement however. While the Ahsanis are still to be sentenced in the US, it will leave a bad taste for many if those who most controlled and most benefitted from Unaoil’s wrongdoing get off the most lightly.

Given the difficulties of prosecuting senior executives in the UK, as evidenced in several recent SFO trials, one would hope that the lessons learned from the Tinsley affair are that:

  • Firstly, any UK cooperating witness scheme should focus heavily on potential immunity for those lower down the hierarchy who might be able to help bring successful cases against their bosses; and
  • Secondly, it must be done with full due process.

What next for Unaoil’s clients?

At the heart of the jurisdictional turf war over the Ahsanis, and their role as cooperating witnesses, lies the issue of who gets the spoils from levying criminal fines against Unaoil’s clients. By nabbing the Ahsanis as cooperating witnesses, the DOJ is in a position to use any information they provide to go after the big oil companies which Unaoil worked for. The $295 million fine imposed by the DOJ on French oil giant Technip in June 2019 for a bribery scheme in Iraq involving Unaoil, as well as bribery in Brazil, may well have been the fruit of that cooperation.

That raises the question of where the SFO’s Unaoil related investigations into big-name companies are left as a result. Some of these, like Petrofac, face ongoing investigation. In February 2019, a Petrofac executive pleaded guilty to eleven counts of bribery in connection with the award of contracts to Petrofac in Iraq and Saudi Arabia. His sentencing has been held up by the trial of Akle, Bond and Whiteley.

But in May, the SFO announced that it was dropping a linked investigation into Swiss-Swedish corporation ABB after it concluded that the “case did not meet the relevant test for prosecution as defined in the Code for Crown Prosecutors.” The SFO did not give any further information as to why it did not. It’s worth noting that in the US, an investigation into ABB is still ongoing.

The SFO’s Unaoil related investigations also included Amec Foster Wheeler, and KBR.  Both are still under investigation according to the SFO’s website. However, when John Wood Group, Amec Foster Wheeler’s parent company, announced in March that it has reserved $46 million to cover costs associated with possible settlements it mentioned with U.S., Brazilian and Scottish authorities, but not the SFO. 

While it remains to be seen how the Unaoil verdict will affect the remaining investigations, a key question left hanging in the air is whether failing to get the Ahsanis in the dock may impact on the SFO’s ability to bring home its cases against Unaoil’s clients.

Unaoil’s victims

What was striking about the trial was the extent to which the narrative about Iraq was dominated completely by the defence. A Middle East expert, Professor Gareth Stansfield, from the University of Exeter, was called as a witness to back up their argument that post-war Iraq was a lawless place where cash-based transactions were commonplace. The defence even sought to call a former UK consul in Iraq as witness to support their case.

The prosecution on the other hand prosecution did not address the situation in Iraq at all or provide any account of the impact and harm caused by corruption on a country like Iraq. No witnesses were called in this regard. It would have been easy for the jury to be left with the impression that corruption is a victimless crime and that bribery is an unavoidable evil faced by Western companies operating in unstable overseas jurisdictions.

Iraq’s oil contributes 60% of its GDP, 99% of its exports and over 90% of Government revenue. Extractive industries like oil, gas, and mining are particularly prone to the corruption risks that undermine good governance.

Nations with access to untold wealth from their natural resources are also home to some of the world’s poorest people – Iraq is no exception. Iraq’s oil wealth seems to largely benefit a relatively small elite in its power structure, while 23% of Iraqis live in poverty. The corruption boom set off by resource wealth has been devastating for Iraq and its people and it is in that context that the story of Unaoil and its corporate clients needs to be told.