Liberia Has Burned the Furniture to Warm the House

Recent oil deal represents risk for country struggling to recover from the Ebola crisis and restore order in its oil sector.

When Liberian President Ellen Johnson Sirleaf meets her US counterpart Barack Obama in Washington today, the ongoing Ebola response will be top of the agenda. As the country struggles to get its economy back on track, investigations by Global Witness reveal that the government has sold off valuable oil assets in what appears to be a very bad deal for Liberia. A major oil contract, offshore Block 16, was recently handed to a coalition of three companies. One of these appears to lack sufficient funds to operate the oil block, and another has close links to some of Liberia’s worst tax dodgers.   

This sell-off comes at a time when various oil scandals are brewing in Liberia. On 23 February the government issued arrest warrants against ten former government officials for their alleged role in a 2006 bribery case. Additionally, in December Global Witness received evidence of an unexplained payment of US$ 31,000 made to a Liberian Senator on the day that he signed away Block 16. Two months later the body of a whistle-blower lawyer involved in a separate oil scandal investigation was found dead on a beach. 

“President Johnson Sirleaf will be looking to demonstrate to President Obama that Liberia has made efforts to reform its oil sector, including moves to indict allegedly corrupt officials,” said Global Witness Senior Campaigner Jonathan Gant. “Yet this news is unfortunately offset by a slew of recent scandals, including the award of a valuable oil contract to two dodgy companies, the mysterious death of a whistle-blower, and a suspicious payment of US$ 31,000 to a lawmaker.” 

Liberia put four offshore oil blocks up for bidding at the height of Liberia’s Ebola outbreak, which by December 2014 had killed at least 3,290 people. (1) On 18 December the first, and so far only, of these contracts was finalised. Block 16 was awarded to US-based Liberty Petroleum*, Nigerian-based Pillar Oil, and Liberian-based New Millennium Oil and Gas, who together paid US$ 22 million in signature bonuses and other payments. (2)

US-registered Liberty holds a 90 percent stake in the contract. Yet the company has only seven employees and a 2014 declared turnover of just US$ 3 million. (3) In contrast, assuming that Liberty’s contract complies with the Liberian government’s new model contract (the Block 16 contract is not yet public), Liberty and its junior partners must invest US$ 53 million in the next seven years in oil exploration. (4) Liberty is part-owned, through a series of intermediary companies and trusts, by US Congressman Trent Franks, a Republican representing Arizona’s 8^th District. (5)

“Liberia’s Ebola crisis created an urgent need for funds, and it is understandable that the government would lease oil blocks to meet it,” said Jonathan Gant. “But the country – which has a history of oil companies not meeting their contractual obligations – now needs stable and reputable companies that will develop the sector for the benefit of the Liberian people. Based on available public information serious questions should be asked as to whether Liberty, with such meagre accounts, can make good on its commitments.” (6)

At the same time, Liberian-registered New Millennium, which holds a five percent stake in Block 16, is linked to logging companies that have accrued some of the highest levels of tax arrears in Liberia’s forestry sector. New Millennium lists as a board member, incorporator, and sole agent McDonald Wento. (7) Wento’s history inspires doubt in his intention to manage Block 16 responsibly. As of January 2015, two other companies that Wento partially owns (Geblo Logging and International Consultants Capital, both awarded logging contracts in 2009) had accumulated an unpaid tax bill of US$ 11.7 million. This bill, which represents taxes owed over five years, makes Geblo and International Consultants Capital among Liberia’s worst tax dodgers. (8) As regards Nigerian Pillar Oil, Global Witness does not suggest that it is in tax arrears or has an inadequate financial position to service the oil exploration contract.

“If the aim of the Liberian government was to raise cash when leasing Block 16 it makes little sense to include a company linked to Wento,” said Gant. “The US$ 22 million Liberia received from its oil deal must now be balanced again the US$ 11.7 million owed by logging companies that Wento is linked to. The government will need to ensure that, unlike Geblo and International Consultants Capital, New Millennium makes good on its financial obligations.”

In recent months, Liberia has shown positive signs of wanting to clean up its oil sector. In December 2014, the government passed a reformed oil law aimed at increasing transparency. In President Johnson Sirleaf’s annual address the following month she outlined ambitious plans for tackling corruption, calling it the “vampire of development and the obstruction of progress.” (9) This week, Liberia’s Anti-Corruption Commission also indicted ten former government officials for alleged involvement in a series of bribes for oil contracts starting in 2006. (10) 

However, various other oil industry scandals are simultaneously brewing in Liberia. In December, Global Witness received a copy of a US$ 31,000 check paid from a Liberian government bank account to Liberian Senator Sando Johnson, dated 18 December – the same day the legislature passed Block 16. (11) Global Witness has been unable to verify why Sen. Johnson was paid this money or by whom. Liberian legislators are entitled to compensation when they remain in session through their break, as was the case in 2014. Given Liberia’s history of legislators receiving bribes to approve oil contracts, however, this merits investigation.

Also of concern is the recent death of Michael Allison, a Liberian lawyer at the centre of a government investigation into potentially illegal payments made by the legislature to lawyers during the drafting of Liberia’s new oil law. Allison, who was found apparently drowned on a Monrovia beach on 13 February, had been named by the Anti-Corruption Commission as the possible recipient of an illegal payment, but was also working with the Commission as a “partner.” Two weeks following Allison’s death, the Liberian government is yet to release the findings of his autopsy, or determine whether or not his death was accidental. (12) 

It is not suggested that the block 16 concession companies had any connection with the Sen. Sando Johnson payment or the death of Michael Allison.

“It is positive that the Liberian government has taken some steps to reform its oil sector, including passing a much-improved oil law and possible indictments of individuals suspected of oil bribery,” said Gant. “However, if these reforms are to be meaningful the government must ensure future oil blocks are awarded transparently to companies that are up to the task. The government should also ensure that those who break the law are held accountable, investigate any payments made to the legislature at the time that Block 16 was awarded, and determine whether the death of Allison was related to his role in the Anti-Corruption Commission investigation.”

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*Since publication on 27 February 2015 Liberty Petroleum Corp has contacted Global Witness to say it has an international track record in oil exploration and development, has traditionally facilitated development through joint ventures with larger partner companies and has been held to fair regulatory standards by the Liberian government. Its fuller response is available here.