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Oil Firms' Rich Concessions to Tainted African Ruler Probed

December 18, 2004|Ken Silverstein | Times Staff Writer

WASHINGTON — Six years ago, the president of Equatorial Guinea was invited to invest in a promising venture with one of the U.S. oil giants tapping his tiny nation's reserves.

Mobil Oil Corp. offered the West African leader a stake in an oil trading business for $2,300, according to documents the company filed with a Senate subcommittee that were released last month.

Now, the company says, that stake is valued at about $645,000.

Mobil, now part of Exxon Mobil Corp., was not alone in sharing the wealth with President Teodoro Obiang Nguema Mbasogo, whose regime has been accused of massive corruption and human rights abuses.

Business ties between Obiang and seven U.S. oil companies, including real estate leases and investment in energy production facilities, are the subject of a probe by the Securities and Exchange Commission, according to the companies and lawyers familiar with the investigation. Attorneys familiar with the Foreign Corrupt Practices Act say the investigation involves the broadest examination of the oil industry's overseas practices since the law was passed in 1977.

For The Record
Los Angeles Times Wednesday December 22, 2004 Home Edition Main News Part A Page 2 National Desk 2 inches; 85 words Type of Material: Correction
Equatorial Guinea -- An article in Saturday's Section A included Noble Energy Inc. in a list of companies under investigation by the Securities and Exchange Commission for their operations in Equatorial Guinea. Noble has a minority stake in an energy project in Equatorial Guinea but has not been contacted in regard to the investigation, a company spokesman said. The project operator, Marathon Oil Corp., said in a public filing that it was contacted by the SEC and that it was "cooperating fully" with the inquiry.

Exploration by U.S. companies in Equatorial Guinea, previously an obscure cocoa producer, began to pay off in the late 1990s as the U.S. sought new sources outside the turbulent Middle East to meet its rapidly growing demand for foreign oil. The effort intensified after the Sept. 11, 2001, attacks and again after the invasion of Iraq last year.

The hunt for energy has pushed Washington and the oil industry into relations with regimes in the former Soviet Union and West Africa whose records on human rights and corruption are similar to those of traditional U.S. suppliers in the Middle East.

Under the Foreign Corrupt Practices Act, American companies can do business with government officials but are not allowed to provide anything of value to anyone who can misuse a position of power to help them obtain or retain business.

U.S. government scrutiny of business relations with Equatorial Guinea grew out of a money-laundering inquiry begun in 2003 by the Senate Permanent Subcommittee on Investigations on accounts held by the country at Riggs Bank in Washington. The biggest account contained hundreds of millions of dollars in oil revenue deposited by American companies, according to the Senate report.

That report, along with documents from lobbyists and an industry-funded trade group and interviews with former U.S. officials, show that the companies made multimillion-dollar deals with Obiang and his relatives and helped them win political support in Washington.

Oil companies feted Obiang at Washington affairs attended by federal officials and helped broker meetings between members of the Bush administration and regime officials. The companies lobbied to reopen the U.S. Embassy in Malabo, Equatorial Guinea's capital, which had been closed since 1995. That was in part because of the country's dismal human rights record.

In 2003, the Bush administration reopened the embassy, citing the need to protect U.S. investments and the growing number of American oil industry employees.

With daily output of 370,000 barrels and estimated reserves of 1.1 billion, Equatorial Guinea is the third-largest oil producer in sub-Saharan Africa, a region that provides 15% of U.S. oil imports and is expected to supply 25% by 2015.

American oil companies operate almost all of Equatorial Guinea's energy fields. They have invested about $5 billion in the country.

Stephen Hayes, president of the Corporate Council on Africa, which represents companies doing business on the continent, said oil companies "would be a lot happier with a more transparent government" in Equatorial Guinea, but they were "dependent on the goodwill" of host governments.

"The only choice is: Do we take the oil, or do we ignore it? It's real tough right now with current energy demand to ignore one of the hottest spots in the world," Hayes said. "If we weren't there, there are any number of other countries who would be, at our expense."

Exxon Mobil, Amerada Hess Corp., Marathon Oil Corp. and ChevronTexaco Corp. said their activities in Equatorial Guinea complied with the Foreign Corrupt Practices Act, or FCPA. Three other companies under investigation, CMS Energy Corp., Noble Energy Inc. and Devon Energy Corp., declined to comment, as did Equatorial Guinea's embassy in Washington and Riggs Bank.

"Oil companies are basically in partnership with the dictator or his family," Sen. Carl Levin of Michigan, the top Democrat on the permanent subcommittee, told The Times. "Neither our companies doing business abroad nor our banks here at home ought to be contributing to the corruption problem."


Roughly the size of Maryland with an impoverished population of 400,000, Equatorial Guinea has been run by Obiang since 1979, when he seized power from his tyrannical uncle and had him executed.

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