Somalia corruption probe: minister asked Lord Howard for funding

From the Financial Times

Katrina Manson and Tom Burgis in London

A Somali minister wrote to Michael Howard last year requesting “financial support” from the UK oil company which is chaired by the former Conservative party leader and whose payments to Somali officials are now at the centre of a fraud squad investigation.
The letter, a copy of which has been seen by the Financial Times, raises fresh questions about the British peer’s oversight of Soma Oil & Gas, a company in which he holds a near 4 per cent stake.

Earlier this week it emerged that the UK’s Serious Fraud Office was examining payments made by Soma to the government of war-ravaged Somalia as part of a criminal investigation into alleged corruption.

Soma agreed to pay $580,000 for “capacity building arrangements” at Somalia’s ministry of petroleum, involving funding the salaries of individuals contracted to work for the department. The company is currently negotiating terms with Somalia’s ministry of petroleum that would give it the right to pump oil should the company find commercial quantities along the east African seaboard, touted as the next big frontier for oil and gas

UN investigators, who filed a confidential report to the UN Security Council on the matter on August 3, said the arrangement created “a serious conflict of interest, in a number of cases appearing to fund systematic pay-offs to senior ministerial officials”, according to a copy of the report seen by the Financial Times. Soma denies any wrongdoing.

Lord Howard is due to speak to the SFO as part of its investigation, although Soma has previously said “the SFO have confirmed that no suspicion whatsoever attaches to Lord Howard arising from the business of Soma”.

The March 2014 letter from Somalia’s then minister for petroleum and mineral resources, which was included in the UN report, was marked for the attention of Lord Howard and two Soma executives. It requested “ministry capacity support”, stretching from office repairs to “salary or consulting fees” plus other benefits for “the hiring and contracting of qualified technical staff and expert consultants and advisers, inside and outside of Somalia”.

A Soma spokesman told the FT: “The company rejected the requested amendment in this letter”. Lord Howard’s office referred the request to the Soma spokesman, who declined to say whether the peer had raised concerns about the payment request. However, six weeks later, Soma wrote to the same minister agreeing terms for “Capacity Building Arrangements”.

While there is no reference to some of the benefits requested in the earlier letter such as travel expenses, accommodation allowances and training programmes, the support included salary payments running to $360,000 and the wording closely matches some of the terms in the earlier letter.

The UN investigators said some of the civil servants on Soma’s payroll “occupy positions in which they routinely take decisions directly bearing on the company’s financial interests in Somalia” and as such had “a clear conflict of interest”. They also said the capacity building agreement was also “likely part of part of a quid pro quo arrangement” that protected Soma’s interests.

Soma says the UN investigators have “fundamentally misunderstood” the payments: “No person involved in the [capacity building arrangements] programme was, or is, in a position to influence the decision to grant any commercial agreements for the benefit of Soma,” it says.

The Soma deal, which was signed on August 2013 and gave Soma the right to explore for oil in exchange for access to 12 oil blocks, also raised concerns of a crossover between private business, politics and UK diplomatic interests. At the time it was signed, Lord Howard told the FT the deal may have gone ahead “because of the leading role that the UK government has taken that [the Somali government] were well disposed towards a British company”.

Lord Howard attended a UK-sponsored Somalia investment event in London in May 2013, in which the Somali president took part, and senior UK civil servants again met Lord Howard to discuss Somalia the next month. In a letter dated May 2015, Lord Howard wrote to a UK minister on Soma headed paper with “another request”, this time for the UK minister to meet Somalia’s then oil minister, saying he accepted his position as Soma chairman “with the encouragement of the FCO”.

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