A Swiss non-governmental advocacy organisation, the Berne
Declaration, BD, has uncovered how the Congolese government is denied
millions of dollars from its oil export through a shady deal involving a
Swiss oil trading firm, Philia SA.
The investigation also reveals Philia SA’s links to the Congolese
President’s son, Denis Christel Sassou Nguessoa, and a Nigerian
investment banker, Ikenna Okoli.
The deal mirrors how Nigeria lost over $6.8 billion between 2009 and
2011 through an opaque deal involving the Nigerian National Petroleum
Corporation, NNPC, Swiss oil traders and politically exposed fraudsters.
The investigation also reveals that just like the NNPC, the Congolese
government owned refining company, Coraf, withheld earning from oil
sales that was due to the country’s treasures therefore denying the
oil-dependent country of needed funds for developmental projects.
For instance, Coraf received 6 million barrels of crude worth over
$600 million in 2011 and 2012 and made absolutely no return to the
Congolese treasury.
Though the exact amount of money made by Philia by virtue of this
contract is not known, it is believed to be so significant that Philia,
the newbie and hitherto small player, immediately expanded its
operations into other oil frontiers in Africa such as Senegal and
Gabon.
Philia’s past
Before breaking away into its own independent oil trading activities,
Philia was part of a joint venture, known as Petronoir Limited. The
venture was formed in notorious offshore tax haven, Bermuda, in March
2012.
According to BD, Petronoir was also engaged in the business of
lifting fuel oil and naphtha from Coraf, where Denis Christel serves as
the General Administrator. Denis Christel also known as Kiki or Junior
is the anointed heir of his father, Denis Sassou Nguessoa, one of the
longest serving dictators in Africa.
It is, however, not known if Petronoir’s contract with Coraf was as
opaque and included neglect of due diligence and best industry practices
like that of its offshoot, Philia.
Philia, which started its own independent lifting of fuel oil and
naphtha away from the Petronior consortium in 2013, has 15 employees and
one manager, Ikenna Okoli – a Nigerian banker and former Head of
Investment at Faisal Private Bank, Geneva.
“Mr Okoli benefits from extensive experience in banking and highly
refined competencies in the oil trading sector. He follows the
operations behind each transaction,” a source mentioned.
Mr. Okoli manages Philia together with the company’s sole
shareholder, Jean-Phillip Ndong, who seems to a front for Denis
Christel. Mr. Ndong, a Gabonese, is a teacher turn oil and timber
mogul. He owns luxury apartment in Monaco but prefers to live in hotels
in Nice, Paris and Geneva, the investigation revealed.
BD revealed that Mr. Ndong, is definitely a Politically Exposed
Person, PEP, who has direct business relation with one Yaya Moussa, who
himself was instrumental in helping Denis Christel facilitate the launch
of foundation, Perspectives d’avenir, in the United States.
Mr. Moussa is also the President of Benin-based, Banque Africaine
Pour L’Industrie et Commerce (BAIC). The bank was formed in 2013 and Mr.
Ndong was one of its original three directors. The board was later
expanded to include Atlantic International SA, a Geneva based oil
trading company, and Philia trading pte Limited, which is represented by
Mr. Okoli.
A number of sources claimed that Mr. Ndong and
Denis Christel have a close relationship. The duo occasionally spend
time together in the South of France. The sources also claimed that some
Philia personnel were engaged to provide personal services to Denis
Christel such as recruiting staff for his foundation.
Mr. Ndong denied that he has any unusual relationship with Denis
Christel. He said he “never recruited nor contacted anyone for Mr Denis
Christel Sassou Nguesso’s alleged foundation.” He said he knows everyone
that works in the country’s downstream sector and that it is normal for
him to discuss with them.
The Dubious Contract; Questionable Clauses
Though a minor player, Philia entered the Congolese market with a bang.
Coraf granted the firm a term contract renewable after one year to
export fuel oil and naphtha. The total oil sold to Philia in its first
year was equal to a quarter of all the oil Coraf received that year. In
the period Coraf sold five cargoes to Philia, one of them even before
the contract came into force. Philia made a turnover of $140 million for
the sales.
Investigation shows that Philia made unusually high margins
(between $9.5 and $20.5 per tonne) from its Congolese shipments. A
trader in African petroleum mentioned that “the margins obtained in Congo
are higher than one would expect.”
One of the reason’s Philia made unprecedented margins from its Congo
shipments was its involvement in what is referred to as “flipping
cargoes” in industry jargon. Flipping cargoes was the method used by
briefcase companies owned by PEPs in selling crude bought from the NNPC,
as revealed by a 2013 investigation.
By flipping cargoes, Philia did not lift its shipment but instead
sold it immediately to a third parties. In fact, the company resold its
shipment at the point of purchase in Pointe-Noire, where Coraf refinery
is located. Essentially what Philia did was to act as an intermediary
with international market by buying product and reselling it at the
point of purchase thereby denying the Congolese government earnings it
would have made if it sold the product directly on the international
market.
The harm caused by flipping cargoes is even more painful when one
realises that Philia pays no tax whatsoever to the Congolese government
for the transactions despite it being conducted on Congolese soil.
Philia pays very insignificant taxes in Switzerland and Singapore, the
countries where it is registered.
Though it is hard to calculate the exact amount Philia makes
in profit from flipping cargoes, it believes from it analyses that it is
substantial and would have represented a huge earning for Congo, a
resource dependent country.
Philia also saved cost by not being involved in the physical
operations connected to the transactions and its attendant financial
obligations. For example, Philia made $400,000 in profit by reselling
fuel oil and naphtha directly to third parties at Pointe-Noire in just
three transactions in May, October and November 2013.
Besides the opportunity to directly resell the petroleum products to
other oil traders, the contract between Coraf and Philia also has other
questionable clauses that are overwhelmingly beneficial to Philia but
stifling to Coraf and indirectly the Congolese people who lose millions
of dollar the country would have used for developmental projects.
First, the contract was obtained without a public tender therefore
illegally edging out other competitors. Also, unlike the industry
standard that gives oil traders the grace of between 8-10 days after
signing the bill of lading to pay for shipments, Philia was granted “no
later than 60 days after the bill of lading date” to pay for its
shipment in one instance.
Out of seven invoices obtained, Philia was given a payment
period of 60 days after loading in one instance. It also got a grace of
30 days in four instances, and 15 days in two other instances. According
to reports, these unusually long period given to Philia to pay up meant that
it essentially bought the products without making any financial
obligations.
“Two senior finance manager from large Geneva-based banks view it as
‘a form of credit’ granted Philia by Coraf, positioning the refinery
therefore as the former’s de factor bank. In fact, Philia is able to
finance the shipment (and quite possibly others too) for free, thanks to
the cash flow that it benefits from during the period between the
receipt of the sale to third parties and the repayment of the purchase
to Coraf (between 20 and 50 days for these five transactions). In
comparison, Coraf must wait much longer to receive its payments than the
‘standards’ generally upheld by the industry,” our source explained.
Philia did not respond to questions on the unusually long period it was given to pay for its shipments.
Further, Article 12 of the contract stipulated that the payment would
be made in US dollars “or in euros using a conversion rate that is
mutually agreed upon before the date of payment”. This opaque
clause, we learnt leaves the exchange rate open to manipulation. In fact a source
told revealed that Philia makes “undue commission” through the manipulation of
the exchange rate sometimes up to 200,000 per transaction.
Philia said it has done nothing wrong but refused to explain further
arguing that doing so would amount to revealing its commercial secret to
competitors. Mr. Okoli also said that competitors and ex-employees who
are envious because they did not win the contract are attacking the
company.
More questionable benefits
Philia also benefitted from a method of payment called open credit.
Open credit which usually benefitted the buyer, does not require the
buyer to provide any financial guarantee. What this means is that if
Philia
defaulted on the payment, since it did not provide any financial
guarantee, Coraf would incur the maximum loss of the values of the
shipment. And sometimes a shipment could be worth as much as $30
million.
“Open credit is [therefore] reserved for entities that have worked together for a long time”, one trader said.
“It is not normal that such a small company benefits from open
credit. It is a model that can be justified between two private parties
that trust one another, but no state owned company should ever risk
public finances through such practices,” the Director of Trade Finance
at a large Geneva Bank disclosed.
Open credit payment method also helps Philia to avoid paying bank
fees that is associated with the issuance of a letter of credit.
In other to end corruption in the opaque oil trading industry and to
plug the losses incurred by resource dependent countries such as Congo,
BD advocated for more transparency in the system. It also called on the
Government of Switzerland, the country with the highest number of oil
traders to enact laws that would force companies to maintain due
diligence in their dealings.
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