UK enforcement: Former oil execs convicted of $45 million kickback scheme

Two top executives of a now-defunct oil company were found guilty Wednesday of fraud and money laundering after a six-week trial in London.

Osman Shahenshah, the former CEO of Afren, and Shahid Ullah, the former COO, took $45 million from a secret deal they made with their company’s business partner in Africa.

They used $17 million for themselves, buying luxury homes in Mustique and the British Virgin Islands. They split the rest with some of the partner’s employees.

The SFO said Shahenshah and Ullah struck the secret side deal to “increase their pay” after Afren’s shareholders objected to their salaries of £6.6 million ($8.5 million) and £3.8 million ($4.9 million).

They tricked the Afren board into investing $300 million in a deal in Nigeria. They didn’t disclose that the partner, Oriental Energy Resources Ltd, would kick back 15 percent or $45 million to a Caribbean shell company they controlled.

Shahenshah, 56, and Ullah, 59, were found guilty by the jury at Southwark Crown Court of one count of fraud by abuse of position and two charges of money laundering.

The jury acquitted them of a second count of fraud for a $100 million payment connected to a management buyout at another partner, Amni International Petroleum Development Company.

SFO director Lisa Osofsky said Shahenshah and Ullah “failed in their duties as company directors, abused their positions, and lied to their board.”

“Instead of acting in their company’s best interests, they used Afren like a personal bank account to fund an illicit deal, with no regard for the consequences,” she said.

Afren’s internal investigation uncovered the fraud in 2014.

The SFO started a criminal investigation after Afren collapsed in June 2015. The defendants were charged in September last year.

The oil exploration firm was once a FTSE 250 company with a market cap of more than $2.6 billion.

Shahenshah and Ullah are scheduled to be sentenced on October 29.

The FCPA Blog | October 24, 2018