Was EU aid money used to finance Nigerian money laundering funds?

A private equity fund financed with EU aid money is under criminal investigation in Europe’s and Nigeria’s anti fraud office for its alleged involvement in the laundering of millions of dollars looted by James Ibori, the ex-Governor of Nigeria’s oil-rich Delta State, according to an inquiry to be aired tonight by BBC Newsnight.

The revelations come on the day that Ibori faces sentencing at Southwark Crown Court after pleading guilty to ten counts of money laundering and fraud. Ibori, who is reported to have stolen up to USD 3 billion from Delta State’s coffers, was extradited to the UK from Dubai, after fleeing Nigeria.

As BBC Newsnight reveals, the European Investment Bank (EIB) – the so called EU house bank – along with other Development Financial Institutions (DFIs) such as DfID (UK), OPIC (US) and Swedfund (Sweden), has financed a US-based private equity fund, Emerging Capital Partners[i], which invested in three companies[ii] that are alleged to have been fronts for laundering Ibori’s stolen wealth.[iii]

The European Union’s Anti-Fraud Office (OLAF) is investigating allegations that ECP possibly defrauded its investors in the ECP Africa Fund II of some USD 5 million.[iv] Nigeria’s Financial and Economic Crimes Commission has confirmed that it is similarly investigating the fund.

All the DFIs involved were alerted in confidence to evidence against the fund by a Nigerian whistleblower, Dotun Oloko. Instead of welcoming his advice and protecting the whistleblower, his identity was passed on to the managers of the private equity fund.

In January, DfID issued an unreserved apology to Mr Oloko after it was forced by a BBC Newsnight investigation to admit that it had betrayed Oloko’s name to Emerging Capital Partners, which then placed him and his family under covert surveillance. Also Swedfund admitted that Oloko’s personal data was passed on. Only the EIB insists that it was not involved in this.

Nevertheless, the EIB’s initial reluctance to inform Olaf and its initial refusal to meet Mr Oloko in person suggest the bank has violated the basic principles and the whistleblower protection provisions of its own anti fraud policyv. The EIB and other DFIs involved insist that the allegations are without foundation. The EIB said it will now co-operate to the Investigation Olaf is currently conducting.

The EIB justifies investments through private equity funds for developing purposes by claiming that it is an important tool to provide capital for SMEs in the South. However, events like these show that the lack of transparency and due diligence makes it sensitive to corruption. In addition to its speculative nature, this seriously calls into question its appropriateness as a tool for development.

“High level corruption is universally recognised as the biggest impediment to development, consequently the failure of the EIB to properly respond to the serious allegations of corruption made against their fund managers strongly, suggests that the EIB is not fit for purpose as it is not possible to aid development while aiding corruption,” comments Dotun Oloko. “The EIB has also failed to take appropriate action when provided with credible information that their fund managers could possibly have defrauded the fund to which EU taxpayers funds have been committed.”

“In the EU which considers democracy and human rights as its core values, whistleblower protection should be self-evident. Both the exposure of the whistleblower’s identity and the refusal of the involved institutions to take the provided information serious, suggest that it is not”, says Antonio Tricarico from Counter Balance.

Notes:

[i] Emerging Capital Partners, formerly EMP Africa, a US-based private equity firm that manages seven private equity funds focused on Africa, totalling more than $1.8 billion under management.
[ii] The four companies are: Notore, a fertiliser company; OandO, an oil company; and Intercontinental Bank.
[iii] For further details, see: http://www.thecornerhouse.org.uk/sites/thecornerhouse.org.uk/files/CDC%20Memorandum_0.pdf
[iv] The European Investment Bank (EIB) only passes files for investigation to OLAF where an initial assessment by the EIB’s Inspector General “concludes that fraud or corruption is likely to have occurred”.
[v] EIB anti fraud policy (2008) http://www.eib.org/attachments...