The devastating story of oil and banking in Angola’s privatised war. · 2019-11-12 · The devastating story of oil and banking in Angola’s privatised war. “ALL THE PRESIDENTS’MEN”:DIRECTORS’CUT

The devastating story of oil andbanking in Angola’s privatised war.

“ALL THE PRESIDENTS’ MEN” : DIRECTORS’ CUT A Global Witness ReportStarring JACQUES CHIRAC and JOSE EDUARDO DOS SANTOS

Co-starring BORIS YELTSIN as himself • Special guest apprearances by GEORGE W BUSH and DICKCHENEY • Based on an original idea by CHARLES PASQUA and JEAN-CHARLES MARCHIANI • Lack of

transparency by most of the INTERNATIONAL OIL AND BANKING INDUSTRIES • Introducing thenotion of “PUBLISH WHAT YOU PAY” No rating: uncensured by the INTERNATIONAL COMMUNITY

On general release from March 2002

Global Witness presents...

All The Presidents’ Men

Recommendations

Oil companies should:

● Adopt a policy of full transparency. Thisinvolves:

. Rendering summary figures of taxes and otherpayments made to national governmentspublicly available for all countries of operation.In addition to information already available inthe reports of subsidiaries, data should be listedas total net payments to national authorities foreach country of operation and should beprovided in the parent company’s consolidatedannual reports and in annual returns toinvestment authorities.

. Data should be provided locally in the nationallanguage of each country of operation as wellas in the home language of the company.

. Parent companies should publish the namesand locations of registration of all subsidiarycompanies operating in each country.

● Embrace a unified stand on full transparencyof payments to national governments amongstall companies in the oil sector for all countriesof operation.

● Facilitate the rapid publication of the IMF OilDiagnostic study for Angola.

● Adopt a policy of independent, transparentauditing of social programmes both for thepurpose of the project and for its value formoney.

Commercial banks involved in existing loanarrangements to countries with severe corruptionproblems (such as Angola) should:

● Publish full details of loans provided, includingdetails of the amount lent, recipients, interestrate, expiry date and purpose of the loan.

● Ensure internal systems are in place to preventloans breaching internationally-agreed lendinglimits, such as Angola’s US$ million limiton new lending agreed with the IMF for .

● Clarify measures taken to verify that actualexpenditure corresponds with that stated onbank documentation and during negotiationand insist that such expenditure is verifiable asa condition of providing the loan.

● Diagnose and implement mechanisms toensure fiscal transparency in internationallending in conjunction with multilaterallending institutions. This includesconditionality in loan attribution: loans shouldbe approved when expenditure of previousloans has been verified and approved by anaccredited committee; expenditure should bemonitored and irregularities punished by non-attribution of further loans.

● Ensure that any future loans to Angola arepayable through one appropriately auditedgovernmental channel, rather than the currentsituation with a multitude of parallel channels.

● Immediately subscribe to the Wolfsberg anti-money laundering guidelines. Wolfsbergsignatories themselves – particularly ABN Amro,Citibank and Société General which already loanmoney to Angola - should not collaborate with ortake part in any loans in which all parties are notfully transparent as to their disbursement andsubsequent expenditure.

● Banks such as Lloyds Bank in London, which runsthe Cabinda Trust, should publish regular updatesdetailing the resources held by the Angola oil-backoffshore trusts funds and the demands being madeupon them.

Bilateral Export-Credit Agencies should:

● Impose full transparency on all participants as acondition for future export-credit agreements.

National governments should:

● Ensure that their national oil companies adopt fulltransparency criteria on overseas operations.National governments should require them toadopt a forceful common position on this issue. Inparticular, the French and the Americangovernments should promote transparency in theiroil industry: as major oil extractors in the off-shoreof Angola, TotalFinaElf, Chevron and Exxon’sapathy on this issue is appalling.

● Insist that financial regulators of internationalstock exchanges should legally oblige companiesfiling reports with them to disclose payments to allnational governments in consolidated andsubsidiary accounts.

● Insist that their export financing agencies practicefull transparency as a condition for setting upcredit agreements, and that full transparency offunding partners and recipients becomes a pre-requisite for funding.

● Fast-track the ‘name and shame’ process to isolatejurisdictions that are hiding and laundering dirtymoney and identify and seize assets of corrupt,non-transparent regimes.

The Angolan Government should:

● Immediately implement a policy of transparencyfor government income and its expenditure. TheGovernment should fully clarify all revenues thatare controlled or disbursed extra-territorially, inparallel budgets and/or by the Presidency.

● Attend to civil society’s demands for moreaccountability and increased social spending.

● Publish immediately the oil sector diagnosticresults and allow the IMF to publish this data too.

The IMF should:

● Render publicly and widely available the results ofthe Staff Monitored Programme, in particular theover-due KPMG report on the Oil SectorDiagnostic.


The international community should:

● Institute appropriate national enquiries intoinfluence peddling around access to oil reservesand revenue misappropriation from the Angolanoil industry and facilitate the French investigationinto ‘Angolagate’. Who knew what and when didthey know it?

● Insist that the oil industry and the financial worldinstitute a policy of full transparency on allrevenues and loans to Angola and other corrupt,neo-authoritarian regimes.

● Provide a mandate to require the IMF to provide aretrospective analysis of oil revenues from onwards as part of an international effort toidentify and repatriate misappropriated state assetsin the wake of the ‘Angolagate’ scandal and insistthat the IMF renders public all informationuncovered by the Staff Monitored Programmepublic.

● Ensure that current UN peace-building efforts,focused on UNITA’s war effort, are extended totake into account the lack of transparency overGovernment oil revenues as part of the peace-building and demobilisation process. In addition,the UN must include civil society in any unfoldingpeace process.

● Recognise that the definition of acceptablecorporate behaviour is bound up with theoperation of transparent and accountable businesspractices and the provision of information onpayments to national governments to the citizensof that country. Future regulatory programmes orvoluntary codes-of-conduct should recognise thatthe ‘stakeholder’ concept includes the generalpopulation of a country in whose name theresources of a territory are being exploited. Civilsociety is entitled to be provided with adequateinformation to be able to call their governments toaccount over the management of ‘their’ resources.It is time to move from debating corporate socialresponsibility to corporate accountability.

The G, EU, OECD and the New Partnership forAfrican Development (NEPAD) should:

● End the practice of secret deals betweengovernments and multinational companies byissuing clear contracting guidelines defining andlegislating ‘good practice’ for multinationalenterprises in structuring transparent financialarrangements with host governments. Such aninitiative requires the G and others to make it apriority for national regulatory authorities tolegally require full transparency for all companiesover payments to national governments.

Contents

Recommendations

All the presidents’ men – an introduction

Part One: The Scandal

A story of state looting and a privatised war – a summary

Angolagate – the full story

Pierre Falcone and Sofremi

The Brenco network and deals with Angola

Gaidamak’s business empire

Deals and connections to other countries

Whose billions are in this bank account?

Does Angolagate reach the United States?

The searches and arrests begin

Jean-Christophe Mitterrand

Jacques Attali

Angolans connected to Angolagate

President dos Santos confirms suspicions about Angolagate

Part Two: The Complicity of Oil Companies

Introduction

Development of Angola’s oil industry

The top ten oil companies in Angola

Current practices on tax payment declaration

Company dialogue

Elephant’s tail or elephant – the reality of oil companies

contributions to the Angolan State income

The IMF in Angola

Campaign progress to date

Corporate social responsibility – Genuine sentiment or mere

PR?

Regulating payment disclosure

Risks of complicity

The truth about tax payments to the Angolan Government in 2000 –another case of missing funds?

Complicity-O-Meter

The complicity of oil companies – conclusion

Part Three: The Financing

Introduction – international lending to Angola

The credit tap remains wide open…

New lending since December 1999

The Wolfsberg Principles – Anti-money laundering guidelines

for private banking

Shutting Down the Dictators’ Laundromats

Conclusion

References

Acknowledgements

All the presidents’ men –an introduction

ALL THE PRESIDENTS’ MEN is theproduct of two years of investigations,and provides an update on the campaignfor full transparency in the oil andbanking sector. It continues an exposé,

which started with December ’s A Crude Awakening, intothe mechanisms of wholesale state robbery in Angola.

Central to the issue of state looting is a glaringdiscrepancy: the progressive impoverishment of a countryduring almost four decades of war and civil conflict hasgone hand-in-hand with rising oil revenues. Despiteearning around US$- billon from oil last year (anestimated % of state revenue), social and economicdevelopment in Angola has continued to deteriorate.Three-quarters of the population are forced to survive inabsolute poverty on less than one dollar a day; one in threeAngolan children die before the age of five and one childnow dies of preventable diseases and malnutrition everythree minutes ( every day); life expectancy is a mere years; and about . million civilians have had to flee theirhomes since the war resumed in January .

Rising oil revenues have been diverted straight intoparallel budgets of the shadow state. Information emergingfrom economists involved in analysis of Angola’s oil sectorsuggests that up to US$. billion in revenues – comprisingalmost a third of state revenue – is unaccounted for theyear . Although the exact amount of missing revenueis debatable – information on loans and payments revealedin this report suggest that this amount may, in fact, be asubstantial underestimate – such figures nevertheless standin stark contrast to the US$m the UN barely managedto scrape together to feed the one million internally-displaced Angolans dependent on international food aid.

Global Witness’ investigations into this missing revenueculminated in uncovering how top government officialsnow make money out of a highly over-priced militaryprocurement process and benefit financially from almostevery item consumed in the pursuit of the war againstUNITA. A billion dollar bank account connected to thisprocess in the British Virgin Islands is also exposed, whosesignatories include two high-powered Angolans.

Whilst Global Witness does not deny that the majorityof the Angolan Government would welcome genuinepeace, it clear that the political and economic disorderbrought about by the civil war has been deliberatelyexploited to enrich the ruling elite. Meanwhile, the failureof the Angolan state to provide for its citizens has beenblamed on the conflict. The death of sociopathic UNITAleader Jonas Savimbi on th February may heraldthe end to that excuse; the international community mustseize this opportunity to call the Angolan Government toaccount over its use of oil revenues.

‒ follows on from the ‘Angolagate’arms-to-Angola affair that broke in France at the end of. It reveals how what started as a legitimate exercise inself-defence by an internationally-recognized Governmentthreatened by rebel insurgents in the early s, ended upwith full-scale appropriation and laundering of state assetsthrough parallel budgets, over-priced arms deals anddeliberate indebtedness through mortgaging of future oilproduction. Culpability and complicity amongst politicaland economic actors in France and Angola has reached to

“[Question: Do you think there will be peace in Angola?] No. I have stopped

the highest level; significant links can also be inferred to theUS, Israel, Russia and across Europe, including a directlobby in the EU Parliament.

The recent spectacular meltdown of Enron providesclear lessons on the dangers of ‘influence peddling’. Enron’spolitical donations clearly bought a substantial reformulationof national energy policy and diminished regulatoryoversight. It is therefore impossible not to be concernedabout the ‘assistance’ being sought through major donations(subsequently returned) to George W Bush’s electioncampaign by a company connected to a figure central toAngolagate. If the impact of influence peddling can be sosevere for US company employees and investors –theoretically, a domestic audience – imagine what its effectmight be on the far-removed people of Angola.

‒ arguesthat international oil companies operating in Angola arecomplicit in the economic abuses of the ruling elitebecause they choose not to publish the revenues that theypay to the Angolan State. These companies claim that theydo not get involved in the politics of the countries wherethey operate, yet the active decision to withholdinformation about payments to the State, when suchinformation could clearly be provided (and is provided asroutine in the developed world) is itself a politicalstatement.

Under the Angolan Law, ‘all deposits of liquids andgaseous hydrocarbons … belongs to the Angolan people’;thus, it is outrageous that these owners are not allowed toknow – and are actively deterred from finding out – what‘their’ resources are worth. By not ‘publishing what theypay’, oil companies endorse a double standard ofbehaviour that would be unacceptable in the North andmake it impossible for ordinary Angolan citizens to calltheir government to account over the management ofrevenues earned from resources that are meant to be heldin trust for the general population. Instead, oil companyrevenues are diverted into non-transparent arms and othercommodity deals.

Despite the resistance from companies and the AngolanGovernment in rendering public information on revenuedisclosure, Global Witness is pleased to reveal thisinformation for the first time for the year .


The state on its knees. The devastating result of Angola’sprivatised war.

believing in this.You see, the war here in Angola, is like a job … The

ChevronTexaco and TotalFinaElf top the list of hiddencontributions: these two companies are also notable forrefusing to engage in discussions on transparency.Disturbingly, the data show that between the Ministry ofPetroleum and the Ministry of Finance, some US$million unaccountably disappeared, indicating that themissing money from year is only part of a prolongedsequence of economic abuse.

‒ looks at how the internationalbanking sector has operated offshore havens for theseassets and gleaned lucrative commissions on oil-guaranteedloans with minimal oversight. Oil-backed loans represent avast additional source of unaccountable income to theState; investigations by Global Witness suggest that theAngolan Government borrowed over US$. billion bymortgaging future oil production at high interest fromSeptember to October alone. This was providedby various banks with almost no procedures to check thatthe money was actually spent on that for which it wasrequested and, if correct, these figures indicate thatinformal estimates of US$. billion of revenue and loansdiverted may be a substantial underestimate. Certainly,international banks have given no regard to the fact thatthey have vastly exceeded the Government’s agreementwith the IMF to restrict new lending to US$ millionduring . Northern Export Credit Agencies are guiltyof a similar lack of care; taxpayers’ money in Northerncountries is being used to underwrite unaccountable exportfinancing arrangements in highly corrupt countries with notransparency provisions attached.

Despite this pressing need for the natural resourcesector to be open and transparent about payments tounaccountable regimes, there is a startling lack of pressurein this direction from the international community. Angola,for example, has seen the full-scale retreat of any objectiveand principled foreign policy towards the country:recognizing the importance of future oil production,diplomatic efforts have at best refrained from hindering,and, at worst, have actively colluded with, the operations oftheir industrial interests. Policy engagement with theAngolan Government has resolutely focussed onsanctioning UNITA with the aim of moving the groupback into line with its obligations under the LusakaProtocol. Whilst this has been an admirable effort – indeedGlobal Witness made an important contribution to thiseffort by exposing UNITA’s funding through the diamondtrade and continues to negotiate and promote theKimberley Process to address the conflict diamond issue –the international community has failed to examine faultson the side of the Government, including its manifestfailure to provide adequately for the population as aconsequence of corruption.

Without support from a broad international coalitionfor change, oil companies operating in the country are in adifficult position – even if they want to do the right thingand publish what they pay to the Angolan Government,they face immediate reprisals from those with a vestedinterest in the status quo. Indeed, the announcement of apolicy of transparency by BP brought a vicious responsefrom the Angolan State oil company, Sonangol, in aconfidential letter reproduced in this report, which showstheir apparent contempt for the issue. It is clear that asingle company cannot make such a move alone, so there isa pressing rationale for coordinated group action by themajor oil companies in the country, all of whom,according to their fine-sounding corporate missionstatements, are committed partners in equitabledevelopment and social justice.

The international community must also actconclusively to level the playing field amongst competitorsand introduce mandatory disclosure of revenue paymentsto governments by transnational resource companies for alltheir countries of operation. This could be achievedovernight by requiring such summary disclosures in annualreports to major international securities exchanges.

The international community should also identify andfreeze, pending repatriation, all overseas assets that havebeen looted from Angola. This report reveals how themachinery for state robbery and money laundering tookon a global dimension. The events of the destruction ofthe World Trade Centre have created a new sense ofurgency to confront money laundering, arms traffickingand internationalised crime. The same resolution to traceand impound the assets of terrorist groups should also bedirected against the mechanisms used for state looting incorrupt, neo-authoritarian regimes.

As World Bank President James Wolfensohn wrote afterthe th September ‘central to conflict prevention andpeace-building must be strategies for promoting socialcohesion and inclusion, ensuring that all haveopportunities for gainful employment, that societies avoidwide income inequalities that can threaten social stabilityand that poor people have access to education, health care,and basic services such as clean water, sanitation andpower’.

Full disclosure of payments and royalties to all nationalgovernments by natural resource companies is a necessaryprecondition to deliver just and equitable development andis central to preventing the blatant exploitation of politicaldisorder for private economic gain. This report is achallenge to all involved to move forward creatively toaddress the real forces underpinning the Angolan civil warand deliver fiscal accountability of Angola’s oil wealth suchthat it might, for once, deliver some benefit to its realowners.


Angolan Social IndicatorsPopulation 12.4 million Life expectancy 48.9 years National Budget US$5.1 billion GNP per capita (Constant 1995 US $) US$233

ChildrenPopulation under 15 48% Infant mortality rate for children under 1 12.4%Infant mortality rate for children under 5 male 20.9%

female 19.2% School enrollment rate, Primary 37.5% Children under 5 years suffering malnutrition 35%Underweight children 42%

(14% severe)

Poverty StatisticsPopulation living in absolute and relative poverty 82.5%Maternal mortality rate during 1996 1.9%Population without access to drinking water 62%Population without access to adequate sanitation 56%Population without access to healthcare 76%People requiring food aid 3.2 millionEstimated rate of severe malnutrition 13%Internally displaced persons (an estimate) 3.5 million Unemployment rate 80%Adult literacy rate 42%

Land MinesDisabled land mine victims 86,000

The Scandal

A story of state lootingand a privatised war – a summary

FOLLOWING THE DECEMBER report A Crude Awakening, Global Witnesscontinued its investigations into thefinancing of Angola’s war machine. Theresult is a story of how a legitimate

exercise of self defence against UNITA turned into aconspiracy involving highest level politicians andindividuals in Angola and beyond to rob the country ofits wealth through kick-backs related to over-priced armsdeals, financed by oil-backed loans.

Investigations indicated that certain key individualsbenefit financially from the military procurement process,from almost every item consumed in the pursuit of thewar against the UNITA. This leads to a disturbingconclusion: political and economic disorder and a totalabsence of financial transparency of the Government’s oilrevenues are the necessary conditions for this machineryof cash diversion and kickbacks to operate. Recentindications of a will to make peace appear to havereceived a major boost following the death of UNITAleader Jonas Savimbi, providing an opportunity whichshould be grasped with both hands by all sides to theconflict. The recent suggestion of a ceasefire is the firstindication that peace negotiations are a possibility.However it is still far from clear how a genuine peace willbe achieved, and as conflict and instability continues,Angola’s wealth will continue to be siphoned off througha myriad of corporate and offshore centres, courtesy ofthe global banking system, whilst a major proportion ofAngola’s dispossessed are left to the mercy of donorassistance.

All the Presidents’ Men reveals an international scandalthat encompasses a global process of control over oil andthe predatory nature of the international financial andbanking systems. The miasma of dirty dealing discussedin this section demonstrates how members of theinternational community have sought mutual advantagewith Angola’s shadow state to ensure future oil supplies.From the perspective of oil interests, this has beenlargely successful, but it has been a disaster for theordinary citizens of Angola, who have paid a devastatingprice for access to resources that are being exploited intheir name.

An insight into state looting in Angola?

Angolagate is the name given by French andinternational media to a scandal that saw, amongstothers, the December arrest of Jean-ChristopheMitterrand, son of former French President FrançoisMitterrand. Fortune Magazine wryly commented that, ‘it isde rigeur for French corruption scandals to be verycomplicated’ and, so far, the scandal discussed in thepress only concerns allegations of influence peddling,illegal weapons trading and abuses of public trust by acomplex web of individuals in the supply of arms toAngola during and .

Global Witness’ investigations have uncovered

additional information which, taken together withpublished material, leaves little doubt that Angolagateand associated events of / are but a smallproportion of a much wider international scandalinvolving key international political and business players.In fact, the true story is about the privatisation ofAngola’s war and the architecture of state looting on ascale to rival Mobutu and Abacha. Just how far thisscandal reaches, and which other international politicalleaders are tainted, is difficult to determine. But asPhilippe de Villiers, previously vice-President of formerFrench Interior Minister Charles Pasqua’sRassemblement pour la France (RPF) party explained, ‘Ican confirm in a very explicit manner that theMitterrand-Pasqua affair [Angolagate] is a very seriousstate affair, with inter-continental ramifications…’.

This introductory section provides a summary of, anda background to, the whole affair and explores its widerinternational implications. The full account begins withthe section entitled ‘Angolagate – the full story’. GlobalWitness points out that we are not implying guilt onbehalf of any party, and those individuals that arenamed have yet to be tried or convicted in a court oflaw. Nevertheless, we invite those named to clarify theiractions.


Government does nothing for the people of Angola.They just take the money

Africa is seen from France as a ‘judicial no-man’s land which, in the name of mutualpolitical interests, was to stay for eternity aland of unpunished crimes.’

– Reuters, quoting from Le Monde editorial,December 200092

PART ONE: THE SCANDAL©

Panos Pictures / Anders

Broken promises. Has dos Santos done his ‘best for Angola’,given the web of corruption surrounding oil revenues and oil-backed loans?

The Scandal

The start of French influence peddling inAngola By , despite having won the Angolan elections,President dos Santos’ Government was losing the waragainst UNITA. The latter had reverted to armedconflict following electoral defeat, and at the timecontrolled around % of the country. The Governmenthad neither the arms, nor the financing, to fight back.

The resultant call-for-help from dos Santos wasaimed at sympathies within Mitterrand’s Presidency inParis. It also provided a potential solution to France’sincreasing paranoia about likely United Statesdomination of Angola’s oil sector following the ClintonAdministration’s formal ending of US support forUNITA. However, there was a major barrier to officialFrench help for the Angolan Government due to the factthat President Mitterrand was going through his secondperiod of co-habitation, sharing power with the centre-right Government of Prime Minister Edouard Balladur.Any official military assistance from the FrenchGovernment to Angola would require the support of theFrench Minister of Defence, who at that time was one ofthe strongest supporters of UNITA in Paris. Officialchannels of support were thus closed.

Jean-Christophe Mitterrand allegedly thenintroduced businessman Pierre Falcone to engineer asolution. Falcone headed a group of companies underthe umbrella, ‘Brenco International’, whilstsimultaneously working as ‘key advisor’ for Sofremi, asecurity export company that was controlled by theFrench Interior Ministry, then headed by MinisterCharles Pasqua.

Pasqua’s team immediately saw this as an opportunityto head off US oil dominance in Angola. According tothe press, though Falcone had been brought into thediscussion courtesy of the French Political left, he nowreceived endorsement from Pasqua’s team on the right,and was thus tasked to provide a solution to Angola’sweapons and finance requirements, on the proviso thatsupplies did not come directly from France.

According to numerous French press articles, Falconethen formed a partnership with Russian émigré andbusinessman Arkadi Gaidamak (also spelt ‘Gaydamac’).In a telephone conversation with Global Witness,Gaidamak claimed that at that time, both he andFalcone travelled to Angola where they were providedwith Angolan diplomatic passports, after which theyoperated as de facto Angolan officials. During thisconversation and in earlier press reports, Gaidamakclaimed that the purpose of their cooperation related tothe provision of oil-backed loans for Angola, and hedenied that they had been involved in the supply ofweapons. In a later conversation with Global Witness,Gaidamak subsequently admitted that arms had beensupplied, though he denied direct involvement. Hisjustification was that these deals had been arranged witha legitimate government.

The French press describe a series of contracts thatboth Falcone and Gaidamak reportedly put together tosupply arms to Angola during and , totallingsome US$ million. Documents detailing some aspectsof these contracts have been published and althoughthey appear to contain Falcone’s signature, Gaidamak isconspicuous by his absence.

L’Express reports that Falcone and Gaidamak were the‘tandem who would deliver arms to the Angolan regime’and to do so, they took ‘defacto control of a company,ZTS-Osos, based in the Slovak Republic.’ The paperrefers to arms including ‘tanks, rockets, helicopters,

combat vehicles and troop transporters, all of whichwere of Russian manufacture’, being delivered inreference to contracts from and , and thatnegotiations were ‘conducted in Paris and the moneytransited through a Banque Paribas account in thecapital.’

Banque Paribas, now taken over and subsumed intothe group BNP-Paribas, was also one of the key banksinvolved in the provision of oil-backed loans to Angola.According to Gaidamak, both he and Falcone wereeffectively given control over the disbursements of fundsfrom such loans exercising, as he put it, their duties aseffective representatives of the Angolan Government.

Were any of the loans provided by Paribas used to fundarms supplies through the arrangements discussedabove? Regardless of whether or not this has happened,another major question arises: given the high exposureof banks to risks associated with bad loans, why wasParibas willing to be involved in the provision ofsubstantial loans to a government that was, at that time,by no means sure of its own survival?

Did Angola get value-for-money?

It is not clear if arms supplied from these contractsrepresented value-for-money for Angola. Weaponsclearly were supplied during this period that were ofsufficient quality to change the fortunes of theGovernment, allowing it to fight back to a position ofstalemate with UNITA, which in turn led to the Lusakaprotocol agreement in . However, the issue of armssupplies to Angola in general throughout the ’s,together with the supply of other commodities, havebeen dogged by claims low quality. These claims haveranged from shipments of rotting meat being imported,solely for the commission involved, to the delivery oftanks and other heavy equipment, of such low qualitythat they had to be removed from their delivery vesselsby chains, whereupon they were transported to ‘tankgraveyards’, outside Luanda.

The situation across Africa

This is a pattern that does not affect Angola alone.Investigations conducted by Global Witness into anumber of different African conflict hotspots suggestthat in many cases, arms deals are often extremely badvalue for money. For example, in a number of deals,arms have been supplied worth a fraction of the moneyultimately used to pay for them. On one occasion, thegovernment concerned paid their suppliersapproximately % of contract face value, whereuponthe latter delivered weapons worth around % ofcontract face value, generating an immediate % profiton the deal. As if this was not bad enough, the suppliersthen arranged additional financing from a number ofbanks, secured by revenue from natural resource


for the school and hospital and put it in their pockets. It doesn’t matter to

The scene unfolding before our eyes isoverwhelming.At the heart of the State[France], Socialist and neo-Gaullist networksjoined hands to enrich themselves byfacilitating sales of heavy Russian arms to acountry ravaged by war and misery. It is adisgrace for France and Africa.

– Reuters, quoting from Le Monde editorial,December 200092

The Scandal

extraction, up to the value of the contracts. Theseadditional funds, essentially worth % of contract facevalue, were then added to the % profit alreadygenerated from the up-front payments. The result – thecountry concerned obtained weapons worth a quarter ofwhat they paid, generating enormous profits along theway for those involved in the deals.

Beyond Angolagate – arms traffickingfollowing /

Global Witness’ investigations revealed that at least onefurther arms supply contract was put together by ZTS-Osos in or . Though the date of the contract isnot clear, it is possible that this contract, worthapproximately US$ million, was agreed at roughly thesame time that Paribas provided its th September oil-backed loan of US$ million.

Interestingly, Gaydamac’s (sic) signature appears tohave been included alongside Falcone’s on this /ZTS-Osos contract, reproduced on page . Well-placedsources have suggested that it was very rare forGaidamak to sign documents. However, based onavailable documentary evidence, Falcone’s signatureappears to be genuine; if it is, then Gaidamak, at thevery least, should explain how his name appears on thisdocument.

Investigations also revealed that in addition to arms, asimilar method of financing and supply has been used toprovide food, medicines and other commodities requiredby the Angolan Government in its war effort. One of thekey vehicles used to supply food and medicines for theAngolan armed forces is a subsidiary of Falcone’scompany Brenco International, called CompanhiaAngolana de Distribuição Alimentar (CADA), thatreports have suggested gained a monopoly of supply tothe Government Forças Armadas de Angola (FAA) for aperiod of five years.

Angolagate and legal actionFollowing a complex series of judicial investigations,described later in this report, Pierre Falcone wasarrested on st December . His arrest, togetherwith interviews and searches at the offices andresidences of other individuals allegedly connectedto this scandal, precipitated press reports andspeculation about Angolagate. Prominentindividuals, including Jean-Christophe Mitterrand,Jacques Attali, former advisor to PresidentMitterrand and first Director of the European Bankfor Reconstruction and Development, and somelesser-known individuals were subsequently arrestedand charged for a variety of alleged offences.During , both former French Interior MinisterCharles Pasqua and his right hand man, Jean-Charles Marchiani, were also formally cautionedand questioned in relation to this issue; the lattertwo appear not to have not been formally arrestedbecause they enjoy immunity of prosecution asMembers of the European Parliament.

An international arrest warrant, number, was issued for Arkadi Gaidamak onth January . Nevertheless, it appears thatGaidamak currently enjoys the protection of Israel.Well-placed sources have suggested that hecontinues to travel freely between Israel andAngola, to South America and into the UK.

After numerous legal challenges, Falcone was finallyreleased on st December , after spendingprecisely one year in prison. His release was acceptedon a bail posting of million French Francs(US$,,), more than ten times France’sprevious highest bail demand. Nouvelle Observateurreports that the Court of Appeal reduced Falcone’sbail demand to € million (US$,,), which itsays is to be paid by Angola’s State oil companySonangol, as a mark of Angola’s solidarity withFalcone.

The Brenco group and links to the UnitedStatesReports in both Arizona Republic and in NewsweekMagazine suggested that Falcone is well established inthe United States and that he has strong connectionswith the US political elite. In late , Falconepurchased an immense mansion in Paradise Valley,Arizona, for a reputed US$. million, the highestvalue personal property purchase in Arizonan history.Interviews in Arizona Republic with individuals claimingfamiliarity with Falcone and his Bolivian beauty queenwife Sonia, suggested that they led a dream life,circulating within the party circuit of Arizona’s elite,and spending significant funds on a variety ofphilanthropic ventures.


Angolagate continues …The ‘Anastasia’, apprehended in GranCanaria in February with false documentation and forfailing to declare tons of arms and explosives bound forAngola.

© EFE / Elvira U

rquijo A.

them, because if their child is sick they just send them to Namibia or South

A lesson in transparency – do youkeep accounts like this?Global Witness’ investigations have also identified the existence of abank account – number 15468991 – held at the so-called ‘FirstVirgin Bank’ in the British Virgin Islands (BVI).This account heldapproximately US$1-1.1 billion during 2001, with two high-powered Angolans acting as signatories.The true identity of the‘First Virgin Bank’ remains a mystery. (For further information, seeWhose billions are in this bank account? – page 22.)

The Scandal

Sonia de Falcone runs Essanté, a Utah-registeredcompany specialising in health and beauty products,and of late, a range of products aimed at enhancedsexual pleasure. The company was incorporated inDelaware on th April , with Sonia and PierreFalcone listed as directors. Essanté is also connectedto the Brenco group in terms of shareholdings andcommon addresses, both in the UK, and for holdingcompanies in the British Virgin Islands. According toboth Newsweek Magazine and Arizona Republic, andsupported by US Federal election funding records,Essanté donated US$, to George W. Bush’selection campaign. This money was returned inJanuary , with the Arizona Republic quotingNewsweek ‘the money was returned to avoid questionsabout whether an international weapons merchant wastrying to buy influence with the new BushAdministration.’ The Arizona Republic reported thatFalcone family spokesman, Jason Rose, ‘scoffed at thatinsinuation.’ Newsweek’s January article referred toboth the donation and to Falcone’s December arrest in France.

The US publication In These Times furthered thediscussion about Essanté’s donation to Bush’scampaign. In an article entitled ‘The arms dealer nextdoor’, In These Times reports claims by Sonia Falconethat ‘…her husband had no connections to Essantéand that the company’s political contributions cameout of corporate profits.’ The article went on ‘moresignificantly, Essanté, which has been losing money forthe past seven years, has no profits from which to makepolitical contributions.’ The article then providescomments attributed to the legendary Hollywood PRagent, Lee Solters, which reportedly claimed that‘Essanté spent its first six years, and US$ million,developing its product line. Sales only began in earnestlast September, after Essanté threw a three-day launchparty at the Paris Hotel in Las Vegas. In These Timesconcludes by quoting a source which it described as‘familiar with the family’ ‘the company [Essanté] hascome a long way with Pierre’s generosity, but after afew years he’d like to see some profit. It rubs him thewrong way, but out of love for his wife he’s done it witha smile on his face.’

Had Newsweek not raised the issue of Falcone’sarrest, together with Essanté’s donation, would themoney have been returned by the Bush campaign?According to In These Times, ‘The GOP [RepublicanParty] returned the contributions following Pierre’sdetention – “to avoid the appearance of impropriety,”in the words of a statement issued by the RepublicanNational Committee.’

According to Swissinfo, a Swiss-based web sitecovering Swiss affairs, on the th March , ‘Justiceauthorities in the Canton Geneva […] launchedanother money laundering investigation involvingalleged arms trafficking to Angola.’ The articledescribed how this initiative ‘follows an earlier moneylaundering investigation, also involving alleged armstrafficking to Angola, which was launched by Geneva’stop prosecutor, Bernard Bertossa, in January [].’

According to Swissinfo, as part of this investigation,‘…several Geneva banks have been ordered to revealwhether any of the people or businesses on the list [alist of individuals and companies forwarded to theGeneva prosecutor by the French investigating judges]have ever held accounts with them.’ It continued, ‘ifso, officials are expected to request account statementsdating back to , when Swiss money launderinglaws came into effect.’ According to Swissinfo, ‘one ofthe most prominent names on the list is that of theformer French Interior Minister, Charles Pasqua, andhis son, Pierre Pasqua. European Deputy Jean-CharlesMarchiani, and Sonia Falcone, wife of the allegedarms dealer Pierre Falcone, are also on the list.’ Thereare no suggestions of any charges against or wrong-doing by Sonia Falcone – it appears this request relatesto the investigation into her husband.

Further US connections – a smoking gun?

Shortly prior to Falcone’s arrest in December ,judicial investigations in France led to a raid on theapartment of Falcone’s secretary. According to Frenchpress articles, investigators located some diskettes,containing significant quantities of documentsdetailing activities, contracts and letters relating toFalcone’s activities in Angola. Given that thesediskettes provided sufficiently good quality primaryinformation that led to the subsequent questioning,and in some cases arrests of, amongst others, Jean-Christophe Mitterrand, Jacques Attali, Charles Pasquaand Jean-Charles Marchiani, it is logical to assume thatthe information they contain is considered reliable bythe investigating Judges.

Allegedly, amongst these documents, investigatorsdiscovered a letter inviting then US Presidentialcandidate, George W Bush for a meeting with AngolanPresident dos Santos at Falcone’s Arizona ranch.Global Witness understands that this meeting did notactually take place, though the reason why is not clear.However, given the Bush Campaign’s acceptance ofEssanté’s money until it was publicly embarrassed, onemight conclude that the meeting may not have takenplace due to scheduling reasons, rather than for anyspecific distrust of Falcone, or his overtures.

In a late December article, the Frenchpublication, La Nouvelle Observateur, implied yet anotherclose link between the Falcone and Bush families. Themagazine suggested that, in addition to campaignfinancing, Laura Bush and Sonia Falcone are friends.Meanwhile the publication, In These Times, suggests anysuch relationship is due more to connections generatedby Arizona State Senator Bundgaard, and because offunds provided to Bush’s election campaign, than outof any real friendship. Regardless of the reality of anysuch relationship between the two families, it is notdifficult to imagine that Falcone might have been in aposition to arrange meetings with the future Presidentof the United States.

It seems likely, however, that Falcone’s potential


Brenco boss Pierre Falcone. A figure at the centre of ‘Angolagate’.

Africa and they just send their children to school to be educated outside

© U

nknown

The Scandal

influence did not end with political donations to theBush campaign alone. In These Times reports that ameeting took place between Falcone and three un-named high-level Phillips Petroleum Corporationexecutives in June , some five months prior toFalcone’s arrest in Paris. Phillips PetroleumCorporation holds a % stake in Angola’s Block ,allocated in , but for which negotiations werealready well-underway at the time of the company’salleged meeting with Falcone. The article states thatPhillips refused to comment on the meeting.

Global Witness sought clarification about what role,if any, Falcone might have played regarding theacquisition of Phillip’s stake in Block . BryanWhitworth, Executive Vice President and GeneralCouncil for Phillips, responded in January , statingthat he was unable to identify a meeting in Scottsdalein June , but that there was a meeting inSeptember and a follow-up in Washington in October, ‘...to determine whether or not Phillips wantedto utilize Mr. Falcone as a consultant […] it wasconcluded that Mr. Falcone should not representPhillips.’ Further, the letter stated that ‘Mr. Falcone hasnever been employed by Phillips Petroleum Companynor represented Phillips in any respect on any matters.’This response, of course, raises the question as to whyPierre Falcone should have been considered as apossible consultant in the first place, and on what basisdid Phillips come to the conclusion that he wasinappropriate for such a job afterwards?

Michael Austin, an Arizona-based friend of theFalcone family and domain name holder of a websitein support of Falcone wrote to Global Witness in an e-mail, ‘…Pierre derives a great deal of income fromExxon Block located within the boundaries ofAngola.’ Given the apparent meetings betweenFalcone and Phillips, and given ExxonMobil’soperatorship of Angola’s Block , ExxonMobil shouldclarify what, if any role is, or has been played byFalcone in Block . In particular, ExxonMobil shouldclarify if it has also held meetings with Falcone, and ifthe latter played any role in advising, or facilitating thecompany’s acquisition of its operatorship of Block .Global Witness sought clarification from ExxonMobilon rd January , and has yet to receive aresponse.

Following Falcone’s arrest in December , theSunday Times hinted at possible links between Vice-President Dick Cheney, in his role as CEO of the oilservices company Halliburton, and Angolagate. Thepaper commented that ‘…as Defence Secretary,Cheney had been an outspoken supporter of UNITA… he now finds himself in the intriguing position ofhaving recently headed a company that pursuedcontracts aggressively with UNITA’s sworn “enemy.”’According to the Sunday Times, during the Americanelection campaign, Cheney was reportedly ‘accused ofusing his connections as a former Defence Secretary tosecure the company [Haliburton] contracts.’ Giventhe suggestion from the Sunday Times that ‘Frenchauthorities [connected to the Angolagate investigation]are scrutinising the activities of several oil companiesthat provide Angola with most of its foreign revenues –including Haliburton Co,…’, a key question arises: DidPierre Falcone play any role in securing contracts forHaliburton? Vice-President Cheney shouldimmediately clarify Haliburton’s success in Angola.

It is obvious from the Enron scandal that influencepeddling is a major problem in the United States.

Interestingly, Enron CEO Kenneth Lay’s US$,donation to the Bush campaign is strikingly similar tothe Falcone’s US$,. We have seen what Enronmanaged to achieve through its ‘donations’ – what wasFalcone hoping to achieve, and perhaps more to thepoint, what would he have achieved, had theembarrassment of his arrest not facilitated the belatedreturn of his money? It is a matter of urgency that afull and thorough investigation into the reaches ofAngolagate is conducted in the United States. It isclearly good, for legitimate US domestic concerns, thatthe current spate of Enron investigations might lead toa clean up and end to efforts by companies to buyinfluence in Washington. However, given the plight ofAngola’s population, suffering from nearly years offighting, and given the strategic value and benefitaccrued to the US from the exploitation of Angolans’resources, nothing less than a full investigation will do.What did the key players know, and when did theyknow it?

Russian debt and guns

Sources suggest a strong Russian involvement in ZTS-Osos, the Slovak-based supplier of arms involved inAngolagate; including significant shareholding in thecompany by a number of Russian State armsproduction companies (See Russian State interests in ZTS-Osos – page ).

According to a number of press reports, bothFalcone and Gaidamak were involved in a deal torenegotiate Angola’s US$. billion debt to Russia.According to a February article in the Genevapublication Le Temps, ‘in , the pair [Gaidamak andFalcone] negotiated the re-purchase of Angola’s debtto Russia: the latter was intended to receive US$.billion instead of the US$ billion owed by Luanda’sGovernment.’ The paper continued, ‘the Angolansagreed to reimburse this amount, thanks to thecountry’s oil revenues.’ Commenting on those involvedin the deal, the paper reported ‘swiss-based companiestook part in the operation: Glencore, in Zug, tradedthe oil; Paribas (Switzerland), together with otherbanks, advanced the money promised by Angola.’

The role of Falcone and Gaidamak in thisoperation is not clear. However Le Temps commentedthat ‘Pierre Falcone was in charge of the distribution ofrevenue from the debt repurchase amongst Angolandignitaries, while Arkadi Gaidamak did the same thingfor the Russian side.’ Both Falcone and Gaidamakhave commented on this deal, with Falcone suggestinghe made a modest, ‘less than US$ million,’ for hisservices – ironically, roughly the amount required topost his bail demand on the st December .Gaidamak has boasted, ‘as a matter of fact, I evensupervised the relations between Russia and Angola,looking after the interests of both parties.’

Whatever the truth of this arrangement, it is clearthat the IMF is concerned about what really went on.By December , the IMF had been unable toobtain any clarification about these arrangements,either in Luanda, or Moscow. It is time, not only forthe Russian and Angolan Governments to betransparent about this arrangement, but also for all thebanks that have participated in oil-backed loans toAngola since , to provide details of what theyknow of this situation.


Angola … They just use the people to fight the war… Most of the time, people

The Scandal

The French connection

Numerous detailed Frenchpress articles leave the readerlittle alternative but to concludethat at the start of the /finance and weapons supplyprogramme described earlier, anumber of top level officials,both closely connected to thenPresident Mitterrand andwithin Prime MinisterBalladur’s party, wereintimately aware of what wasgoing on.

A number of questions haveyet to be asked. Whathappened after the end of theMitterrand Presidency? Whatdid President Jacques Chirac,Mitterrand’s successor, know ofthese events and when? Thesequestions are especiallypoignant given that loanscontinued to be provided,together with the provision ofarms and other commodities toAngola, well into the period of Chirac’s Presidency.

Falcone wrote personally to President Chirac bothin and in , and these letters providedconsiderable detail about projects underway. Further,sources suggest that during President Chirac’s statevisit to Angola in , at least one meeting was held inLuanda between Chirac and dos Santos in whichFalcone was present.

Another area of concern relates to the releaseof three French pilots, who had been shot down overBosnia. According to press reports General Gallois,who was the main negotiator, had successfully securedtheir release but he was formally instructed toterminate discussions prior to bringing them to theirconclusion. A few weeks later, Gaidamak reportedlystepped in to secure the hostages’ freedom, whichresulted in their arrival in Paris, shortly prior to a post-Dayton peace conference on Bosnia, hosted by newlyelected President Chirac.

According to Le Monde, the former Prefect of theVar Region, Jean-Charles Marchiani, presentedGaidamak with the ‘Order of Merit’, in recognition ofhis services in the release of the hostages. However, aJanuary article in Le Monde stressed that GeneralGallois deplored the existence of ‘parallelnegotiations’, and stressed that he did ‘not understandwhy Gaidamak and Marchiani intervened after [him],it did nothing. It only had the effect of slowing downthe release of the hostages.’

In an article about the nd May indictmentof Jean-Charles Marchiani, Le Monde reported that,‘the former Prefect of the Var is also suspected ofhaving received a financial compensation for theattribution, in , of the Ordre National du Mériteto Mr Gaidamak, which was agreed by the President ofthe Republic, Jacques Chirac.’ Le Monde stressed thatMarchiani vigorously denied all allegations that havebeen laid against him.

Given recent articles about corruption and the‘Travelgate’ affair during Chirac’s tenure as Mayor ofParis, any potential involvement of Chirac, or hisknowledge about arms trafficking and state looting inAngola, is of major concern. To date, President Chirac

has simply side-stepped allquestions relating to his tenureas Mayor citing Presidentialimmunity. This has led, forexample, to the bizarresituation with ‘travelgate’,where other members ofChirac’s family have beenrequired to respond toquestions from investigatingJudges, whilst the Presidenthimself is able to maintain hissilence.

It is time for all to comeclean

The essence of corruption inAngola, is that instead ofrelatively small sums, or pettypersonal advantage asepitomised by ‘Travelgate’, herewe are talking about Mobutu-and Abacha-scale state looting.This is a process which hasbeen intimately tied to the

conduct of war in Angola and perpetuated by thehighest-level elites for personal and political gain. It isthe general population of Angola that has had to pay aterrible price – that includes more than , killedfrom - alone, approximately childrendieing every day of preventable causes, a quarter ofthe population displaced, and more than a millioncitizens entirely dependent on emergency food aid;conditions, which despite suggestions of a ceasefire,appear set to get worse before they improve.

It is imperative that decisions should be made on aninternational basis to ensure that the events and actionsdiscussed in this document can never again berepeated. Part of this process of change could so easilybe instituted through the suggested actions andrecommendations in this report with little or no painfor any corporate or national interests, excepting thosethat currently profit from the Angolan shadow state.

In this regard, it is imperative that responsibleleaders must come clean about what they know ofevents relating to the arming and financing of Angola’swar machine. For example, President Chirac is facingthe electorate during , and the conduct of thedemocratic process in France cannot tolerate thecontinued concealment of vital information central tounravelling these events, especially when a lack ofinformation undermines the capacity of Angolans tohold their Government to account for its actions. Thecost to Angolans of international oil and politicalinterests in Angola is too high.


Chirac and dos Santos. When will the Presidents and theirmen come clean?

© A

FP

…that gentleman [Falcone] dealt with sensitivematters which had the consent of the Frenchauthorities and were very useful to Angola.Weinterpreted his action as a gesture of confidence andfriendship by the French State and, for this reason, myGovernment took decisions that permittedspectacular growth of cooperation with France in thearea of oil and economically and financially.

President dos Santos, confirming the vested interest ofFrance, behind the activities of Falcone et al.

don’t expect these things from the government because they don’t know life

The Scandal

Angolagate – the fullstory

ANGOLAGATE BROKE to the world’smedia with the arrest of Jean-Christophe Mitterrand, the son of theformer French President FrançoisMitterrand, on st December .

Jean-Christophe Mitterrand’s incarceration followed theearlier arrest on st December of the lesser-knownPierre Falcone, named in Global Witness’ December report A Crude Awakening as a member of Angola’s‘oiligarchy’.

The story began in when Jonas Sambivi andUNITA reneged on their commitments under May’s Bicesse Accords after failing to win victory inAngola’s first national elections. UNITA’s renewedinsurgency proved relatively successful because most ofthe group’s elite units had remained fully armed andoperative. In contrast, Government’s troops (the FAA)had disproportionately demobilised their forces and sowere comparatively weaker. For the first time, UNITAwas able to besiege and hold large cities, capturing fiveof the eighteen provincial capitals in one the mostbrutal stages of the country’s (then) thirty-year civil war.The UN estimated that some , civilians werekilled between and by direct shelling of citiesor indirectly through landmines and starvation.

At the time, with the collapse of its major supportersin the Soviet Union, the Government lacked theweapons and the finances to turn the situation around.By the spring of , the war was going badly forPresident dos Santos’ Government, with UNITAcontrolling large swathes of Angolan territory andlooking like a potential victor. According to Le Monde, inan effort to turn the war back in the MPLA’s favour, dosSantos decided to appeal for aid to French Socialistsympathies under the Presidency of FrançoisMitterrand. A call was made to Paris to the formerFrench Socialist Party Southern Africa expert, Jean-Bernard Curial, who was asked to come to Luandaimmediately.

Curial’s visit witnessed a dire military situation;however, generating assistance for Luanda at this timeof need was not, according to Le Monde, to be a simpletask. Mitterrand’s centre-left Presidency was goingthrough its second period of cohabitation, whichinvolved power sharing with the centre-rightGovernment of Edouard Balladur. How would it bepossible to obtain official French Governmentassistance, when the key to such assistance wouldrequire agreement from the then French DefenceMinister François Leotard, who was well-known at thetime as one of the strongest supporters of UNITA inParis?

Following his return, Curial met the President’s son,Jean-Christophe Mitterrand, in Paris. By this time,Jean-Christophe had already left his post as ‘AfricanAdvisor’ to his father’s Elysée Palace. Though he couldno-longer directly help, Mitterrand suggested thatCurial should contact Pierre Falcone, the head of agroup of companies under the umbrella ‘BrencoInternational’, based in Paris. Falcone was also a keyadvisor to ‘Sofremi’ (the ‘French Company for theExport of Goods, Systems & Services’), which was apart-private, part-state run organisation operating under

any other way.And even if people do, the first group that even begins to speak


Pierre Falcone and SofremiSofremi is the French acronym for the ‘French Company for the Exportof Goods, Systems, and Services’. It was set up in 1986, under thejurisdiction of the French Interior Ministry, at that time headed byCharles Pasqua, who had been appointed by then French PrimeMinister, Jacques Chirac.125

Sofremi was established to promote the expertise of the FrenchInterior Ministry in the field of security, and to negotiate contracts tosell communication and security equipment to overseas policeforces.126 Such deals could only be put together between Sofremi andthe government, or state institutions of the target countries, and anyresultant contracts required the final approval of CIEEMG, i.e. the Inter-Ministerial Commission for the Study of the Trade of War Material.126

This oversight approach was established to ensure that Sofremi couldnot become involved in arms trafficking. Since its establishment, itsactivities have varied considerably, with a main focus on Latin Americaand the Middle East.

According to Le Monde, Pierre Falcone became one of the mostsignificant advisors to Sofremi, between 1989 and 1997, with hisintroduction to the company coming through an intermediary of thendirector Philippe Melchior. 127 After the March 1993 elections, newlyinstalled Interior Minister Pasqua replaced Melchior with BernardPoussier. Poussier then served as director of Sofremi until 1997.127

On 14th December 2000, Poussier was interviewed under cautionby the Judges investigating the Angolagate case. Le Monde reported hewas then ‘placed in custody [at la Santé Jail in Paris] for ‘misuse of socialbenefits, abuse of trust, influence peddling and aggravated influencepeddling.’’81,128 Poussier was then release on 12th January 2001.

The allegations against Poussier appear to centre around a 1998payment of approximately one million French Francs (US$167,000)129

in cash to Poussier by Pierre Falcone.81 In a 17th January 2001interview with Le Monde, Poussier clarified ‘It [the money] was a loan of“honour” from a friend to whom I confide my problems.Therefore, assoon as my bank was telling me that I was overdrawn, I was talking tohim. He then gave me money that I put into my account.’130

Poussier also insisted that Sofremi did not mix its business interestswith those of Pierre Falcone. He said, ‘It [Sofremi] was never involved inany manner with the sale of Russian arms. In any case at that time M.Falcone was mostly dealing with financial engineering in the petrolindustry.’ 130

On 28th October 1997, following the elections, Henry Hurrandwas appointed the new head of Sofremi. Brought in by Lionel Jospin toclean up the company, he promptly sacked Poussier.According to LeMonde, he was surprised to discover that Falcone’s name ‘features onevery single contract.’127 Le Monde implies that the new director cameto the conclusion that commissions paid to Falcone were ‘excessive’,and that this might have been one of the reasons for the fact thatSofremi had been running at a deficit during 1996 and 1997. 127

On 9th January 2001, Le Figaro carried an interview with HenryHurand. One of his first acts as head of Sofremi had been to conductan independent audit. ‘The most significant point was the omnipresenceof Pierre Falcone,’131 adding, ‘the general rule was that for each marketthere was to be a different representative, but from 1992, Falconebecame the only representative of the Sofremi. It is totally abnormal.He received outrageous fees for every operation.’131 When askedabout the termination of Sofremi’s relationship with Falcone in 1997,he said, ‘Once I took my decision we had a long discussion. I do notthink that he understood my determination. In fact I think that he wasconvinced that nothing will ever change, that his friends will alwaysprotect him and that he was above the law.’131 When asked what wasmeant by the comment ‘his friends’, Hurand replied, ‘I have theconviction that during all these years, Falcone greased the palm ofeveryone.’131

As of February 2001, Sofremi ceased to exist and has beenreplaced by a new structure within the Interior Ministry called Civipol,which will no longer be involved in the sale of arms.127

The Scandal

the auspices of the French Interior Ministry that, at thetime, was headed by Interior Minister Charles Pasqua.

The timing of the request for help could not havecome at a better time given Pasqua’s policy ofpromulgation of French interests across Africa. Fromthe early s, the United States’ policy towardsAngola had gradually shifted away from support forUNITA, to a policy overture to the AngolanGovernment. It was clear to Pasqua and his team that itwas US oil interests that were responsible for thischange. Although the US company Chevron alreadydominated Angolan oil production, it was felt that thispolicy swing would deliver further advantage to UScompanies, posing a serious threat to France’s own oilambitions in the region. In short, it was time for achange in France’s own position to engage with theMPLA. Following the arrest of Jean-ChristopheMitterrand in December , Africa expert andformer head of military police, Paul Barril, confirmedthe selling of arms to Angola was part of a strategy toensure access to a significant part of Angola’s oilproduction.

There are differing accounts regarding the firstmeeting of Jean-Christophe Mitterrand and PierreFalcone. According to his lawyer, Mitterrand first metPierre Falcone following his departure from the Elysée,but according to Le Monde, a former employee ofFalcone places Mitterrand’s first visit to BrencoInternational’s offices, then at Avenue Montaigne inParis, prior to July ; in other words, when Jean-Christophe Mitterrand was still his father’s AfricanAdvisor. Sources report that it was a Mr Jallabert, at thetime in charge of international affairs at the Frencharms and electronics company Thomson CSF, whointroduced the pair whilst Jean-Christophe still workedat the Elysée.

According to Le Monde, about a week after their firstmeeting Pierre Falcone contacted Curial to let himknow that he was able to help. Things moved quickly.By th November , the first deal with the AngolanGovernment had apparently been concluded, accordingto Le Monde. This first deal, worth approximately

US$ million, delivered ammunition, mortar roundsand various artillery pieces by mid December .

More was to come. Le Monde reports that on the ndApril , the scale of Falcone’s arrangement withLuanda was massively expanded by an ‘amendment,’ orfurther deal worth some US$ million. On thisoccasion, the deal was to include fighter aircraft andtanks. By late , according to Le Monde, PierreFalcone had been involved in the selling of weapons toAngola worth some US$ million. Sources indicatethat although the face value of these contracts may havebeen as high as US$ million, a significant proportionof the weapons listed in contracts were delivered muchlater than this date.

According to Le Monde, Falcone’s Angolan contact inParis was Elísio de Figueiredo who had become the‘third Angolan Ambassador’ in Paris through a formalrequest by dos Santos, in addition to Angola’s formalAmbassador and the UNESCO representative. Thisunorthodox arrangement provided for de Figueiredo,

who had previously been Ambassador in Paris, to takeon the role of roving Ambassador, without portfolio andact as dos Santos’ go-between.


Left: Copy of letter,published in Le Monde,to Elísio de Figueiredo,indicating his role as go-between. Followingaccusations that hereceived US$ millionfrom Brenco, Figueiredoleft France. He has sincereturned and retains hisposition as‘Ambassador’.

Right: ZTS-Osos’November armsdeal for US$ million,published in Le Monde,suggesting that the dealwas signed in Paris.(Note the address,

Avenue Montaigne, thethen address of Brenco,written above Falcone’ssignature on behalf ofZTS-Osos.)

Angola’s monumental embassy on Avenue Foch – one of the mostexclusive avenues in Paris.

about these things will be punished or killed. So the people just continue to

The Scandal

Introducing Acardi Gaidamak –is he part of Brenco?

Reports suggest that Pierre Falcone didnot manage this process alone. Falconeappears to have formed a partnership withArkadi Gaidamak, a Russian émigré whohad spent sufficient time in Israel to pickup an Israeli passport before moving toreside in France. Le Monde suggests thatGaidamak had joined Falcone’s companyBrenco, and together they had becomerepresentatives of a Slovak armsproduction factory, ZTS-Osos, which wasto supply the bulk of the arms to Angola.

An interesting aspect of this stage ofthe operation is the absence ofGaidamak’s signature on thedocumentation published by Le Monde,which would suggest that Gaidamak wasnot involved in these shipments.Gaidamak confirmed to Global Witness ina telephone conversation that he had beeninvolved with Pierre Falcone at this time,but that their operation only concernedthe provision of pre-financingarrangements against future oil production throughthe French bank, Banque Paribas. He strenuouslydenied that this operation had anything to do withthe sourcing of weapons for Angola. However, in alater conversion, Gaidamak admitted that weaponshad, in fact, been supplied, though he denied directinvolvement. His justification was that these deals hadbeen arranged with a legitimate government.

But all is not roses!

Although it would seem that these deals provided afirm footing for Pierre Falcone and Arkadi Gaidamakin Luanda, their operation was not without problems.On th November , Charles Pasqua’s loyallieutenant, Jean-Charles Marchiani, allegedly visitedLuanda to conclude what Le Monde refered to as a‘global agreement’ – an all-encompassing agreementwith President dos Santos that not only provided thebasis for further weapons procurement and oil-backed financing to the Angolan Government, butalso benefited French business interests.

The timing of Marchiani’s visit seems to haveupset the apple cart. Because of the impendingFrench Presidential elections, due in May ,tensions had been growing for some time betweenJacques Chirac, who saw himself as the next FrenchPresident, and Charles Pasqua. According to LeMonde, Chirac had long been convinced that Pasquawould officially support his opponent, EdouardBalladur. The paper continued, ‘if this were tohappen, a grip on Angola would be a major asset,’and then taking the argument further stated ‘as aresult, and because Pasqua did offer his support toBalladur, Chirac’s supporters provided informationabout Gaidamak and Falcone to the French InlandRevenue.’ Subsequent investigations by the InlandRevenue remain a bitter controversy to this day.According to Le Monde, ‘even though the arms did nottransit through France, the Inland Revenue is usingthis particular point to recover unpaid taxes, becausethey claim the deal was signed in Paris.’ HoweverAllain Guilloux, Brenco’s lawyer in Paris, hasreportedly claimed the deal was signed in Luanda.

The freezing of bank accountsSources suggest that the French Financial Brigaderemoved some , documents from a variety ofoffices and other premises connected to bothGaidamak and Falcone during raids in early .

According to Le Monde, the first raid by the FinancialBrigade took place at the offices of Brenco on thDecember , which reportedly led to the FrenchInland Revenue freezing Brenco account number Q, held at a rue d’Antin, Paris, branch ofParibas in late . An earlier report in Le Mondestated that an account belonging to ZTS-Osos held ata branch of Paribas was frozen in December .

It has not been possible to determine whether the twoaccounts referred to are in fact the same.

In a separate article, Le Monde reported that a‘fiscal enquiry’ into a ZTS-Osos account, held atParibas, resulted in the account being ‘closed down…in December .’ Le Monde explained that thefiscal enquiry had shone light on ‘transactions withAngola, through an intermediary of the Statecompany, Sonangol, which remunerated ZTS-Ososthrough a bank account opened in Paris, at a Paribasbranch, in .’ According to the article, ‘Falconeand Gaidamak, who retained a procuration on theaccount, did not declare the revenue.’ Sourcesindicate, however, that this might represent an over-simplification of French Financial Brigade’s interestin the activities of Falcone and Gaidamak.Reportedly, control visits were made by the FinancialBrigade in and then during those that took placein , some different accounts were identified.

In late , the French Inland Revenue Servicedemanded Brenco should pay back-taxes totalling,,, French Francs (approximately US$million), which if successful, would make this thebiggest payment of back-taxes ever to have takenplace in France. A tax bill of US$ million ontrades worth some US$ million seemsextraordinarily high: could the size of this taxdemand indicate either that trade with Luanda wassubstantially higher than previously documentedduring this period or that substantial shipments ofmateriel continued beyond the end of ?


suffer because there is nothing they can do” –Displaced man, early 2001a “We left

© REA

Arkadi Gaidamak (left) and friends. His rapid accumulation of wealth continues to attractattention.

The Scandal

The house of cards starts to fall

Though the arrest of Pierre Falcone was widelyreported in the French media, it took the arrest ofJean-Christophe Mitterrand on st December to make the story of Angolagate international news.What went wrong with Falcone and Gaidamak’soperation and led to the arrest and, in some cases,incarceration of numerous prestigious individuals atLa Santé jail in Paris?

Although both Gaidamak and Falcone hadpreviously been investigated, enquiries did not resultin any charges. It is clear from numerous articles thatboth had strong political allies. Despite the fact thatsources and articles indicate that the FinancialBrigade demonstrated a persistence in theirinvestigations, they were ground down by politicalopposition. Indeed, it was not until additionalevidence of alleged impropriety was uncoveredthrough a series of unrelated investigations thatpolitical resistance seems to have finally given way.

So far, the reader will have the impression that theAngolagate story is one of finance, arms supply andtax evasion during and – this is certainlyhow it has been portrayed in the French media.However, Global Witness believes that the real storyof the financing of Angola’s war effort goes farbeyond and , and for that matter, beyondsimply French and Angolan national interests;perhaps even to the heart of international policy ofoil interests. The following sections provide someinsight into these events.

The story of the ‘big French ears forAngola’

According to L’ Express, an un-named informerprovided detailed testimony to Judge Marc Brisset-Foucault, relating to a secret deal involving efforts bythe French company ‘Communication et Systémes’(CS) to export communication intercept equipment(the ‘big French ears’) to Angola, L’ Express did notsuggest that charges have been levied in this matter.

It seems likely the th May raid on the offices ofboth Falcone and the Vice-Chair of CS, formerGeneral Claude Mouton, in response to theinformer’s evidence, provided significant informationof use to more recent investigations into the wideroperations of Falcone. Interestingly, in July ,Mouton became a Director of Brenco France.

The raid on the CS offices reportedly involved anargument between the police and Raymond Nart(who is not under investigation), former deputydirector of France’s DST internal intelligence agency,and at that time, head of international relations atCS. It was Nart who later provided a letter oftestimony (i.e. a character reference) for ArkadiGaidamak during the latter’s September libelaction against the French publication, La Lettre duContinent.

Allegedly, this deal involved two different kinds ofcommunication monitoring equipment: the Murenesystem used for monitoring GSM-type mobile phonesand the more sophisticated Menta system, which isused to monitor satellite phones. Another reportadds further details about this equipment; inaddition to its capacity to tap satellite phones, theMenta system is also able to provide triangulationpoints, enabling the location of specific satellitephone users – a surely useful attribute for the

Angolan Government in their efforts to locate JonasSavimbi in the bush.

L’Express reported that the second deal, thoughapproved by the French Ministry of Defence, hadbeen put together without being approved by theInter-Ministerial Commission for the Study of theTrade of War Material (CIEEMG), whose approvalis required prior to the export of sensitive militaryequipment. L’Express also reported that a sum ofUS$ million disappeared, and that ‘withoutreservation, the structure of the deal did not allow thepayment of hidden commissions.’ Claude Moutondenied any illegality had taken place and to date,Global Witness is not aware of any publishedcomments from Falcone about this issue.

An unrelated case leads to Angolagate

In November , investigating Judges PhilippeCourroye and Isabelle Prévost-Desprez inherited aninvestigation into a case of suspected moneylaundering in Morocco., This investigation soonpointed them towards Allain Guilloux, a well-knowntax lawyer.,

Guilloux had included several well-knownpersonalities in his client list. These included Jean-Claude Mery who, prior to his death, recorded thenow famous video-cassette of corruption allegationsconcerning Jacques Chirac’s tenure as Mayor ofParis. Le Monde reported that Guilloux was alsoacting on behalf of Gaidamak and Falcone, it seemsafter , in order to deal with the issue of thefrozen bank accounts at Banque Paribas, (See Thefreezing of bank accounts – page ). According to LeMonde, following the investigators’ discovery of files atGuilloux’s office that related to the Brenco/Paribascase, the Financial Brigade police, once again, raidedBrenco’s premises.

The diskettes and the fall of themighty

According to Le Monde, one such raid took place inSeptember at the apartment of Pierre Falcone’ssecretary, Isabelle Delubac, who investigatorsdiscovered had hidden some computer-disketteson Falcone’s orders. The diskettes provided a detailedcase-by-case history of Brenco’s deals involvingAngola from -, and named numerousindividuals and companies as well as providing detailsof specific payments.

These diskettes, together with other sources ofinformation, provided the Judges with food forfurther investigation, and this in turn led to searchesof various premises and the interrogation of anumber of individuals named on the diskettes. Insome cases, these procedures led to individuals beingcharged with a variety of offences. Prior to discussingthe arrests and charges that have been brought by theinvestigating Judges, the next section provides furtherdetails about deals with Angola.


because of death and famine … we were farming but everything was always

The Scandal

The Brenco network and

deals with Angola

SO WHAT were Falcone and Gaidamakup to? The Brenco group ofcompanies, Pierre Falcone and hisrelationship with Arkadi Gaidamak andthe Slovak based company ZTS-Osos

have been the subject of significant press speculationsince the breaking of the Angolagate scandal in late. This section draws these sources together andprovides supplemental information.

The main parent company of the Brenco groupappears to have been Brenco International, whichwas based, together with Brenco-France, at a numberof different addresses in Paris. In December ,Liberation provided an insight into the possible numberof Brenco subsidiaries and their location worldwide.This is likely not to be an exhaustive list but itincluded:

Brenco Trading Ltd in the Isle of Man, UK;Brenco Investment in Montreal, Canada; Brenco Ltdin London, UK; Brenco Coren SA in Bogota,Colombia; and unnamed subsidiaries in Burma andArgentina. The article refers to Brenco operations inColombia, Guinea, Madagascar, Russia andKhazakstan.

Some reports have suggested that Brenco is asubsidiary of ZTS-Osos, whilst others have suggestedthe opposite. Despite the reported connectionbetween the two companies, Global Witness’investigations have not been able to uncover any on-paper formal link between them. Nevertheless,according to Le Monde, during , both Gaidamakand Falcone were signatories on a Brenco accountnumber Q at the Paribas branch on the rued’Antin.

During the first few arms contracts between ZTS-Osos and Angola in and , Brenco Francewas located at Avenue Montaigne in Paris. It isinteresting to note that this address and Brenco’stelephone and fax numbers, are included on theinitial US$ million ZTS-Osos contract, togetherwith Pierre Falcone’s signature, suggesting a close linkbetween Brenco and ZTS-Osos. The ZTS-Ososstamp, adjacent to Falcone’s signature, is annotatedwith the legend ‘Russian-Angolese Affairs’.

In December , L’evenement du Jeudi published acopy of this first ZTS-Osos contract with Angola

and included a breakdown of the material provided:

30 tanks T-62, manufactured between 1961 and 1972,115mm gun, range 500 km.

40 armoured vehicles BMP-2 with 4 anti-tank missiles, a75mm gun and a 7.62 mm machine gun.

24 howitzers, 2S1 Gvozdika, fixed on tank chassis,manufactured in 1970.

artillery guns M-46 (130mm).18 artillery guns DCA ZU-23/2 (23mm).12 multiple rocket launchers Grad P.50 automatic antipersonnel grenade launchers AGS-17

Plamya (30mm)250 light machine guns RPK.500 mortars PKM.150 bazookas Schmel.5,500 kalashnikovs: 7.62 mm AKM and 5.45 mm AK-74,

with the Kastor grenade launcher fixed under thegun.

13 million rounds of ammunition (7.62mm).750,000 rounds of ammunition (5.45mm).10,000 offensive and defensive grenades.21,000 grenades (30 and 40mm).5,000 mortar shells (82mm).50,000 30 mm armour piercing shells.10,700 projectiles (115, 122 and 130mm).1,500 MPB detonators, B429 and B90.

According to L’evenement du Jeudi, military specialistssuggested that such a list could supply a motoriseddivision of , men. However, the paper suggestedthat the ammunition content was not sufficient tosupply an offensive action for a significant period,hinting at the likelihood of further contracts and bythe end of , as already described, the total valueof contracts with Angola allegedly stood at US$million.,

L’evenement du Jeudi’s article referred to a previousarticle that it had published two months earlier abouta shipment of Russian trucks to Angola, stating,‘L’evenement du Jeudi explained the circumstances inwhich Falcone and Gaydamac sold…Russian trucksto Angola, the same ones that the Russian armyuses.’ The paper continued, ‘already at the time, wementioned the contract [arms contract for US$million – the subject of this later article] betweenRussia and Angola.’ The paper reports that at thetime of the original article ‘Falcone and Gaydamac’vigorously denied being involved, insisting that theywere both ‘disgusted by the arms trade.’


either taken by the government or by Unita. If it wasn’t the FAA that came

What went on behind the closed doors of Brenco’s headquarters in thevery prestigious Avenue Kléber in Paris?

The Scandal

Later in the article, having published details of theUS$ million contract for arms, which the paperclaimed demonstrated that Falcone must be an armsdealer, Falcone is quoted ‘one has to read between thelines of this contract,’ and ‘we came to the rescue ofa legal government, the one of President dos Santos.The moral is on our side’. Though the articlesuggests that Gaidamak continued to deny knowledgeof the contract, he was reported as saying, ‘if thiscontract exists, you will notice that it helped bringingback the peace. It is the only thing that matters.’

Following the and deals, Brenco’sheadquarters moved to the very prestigious address of Avenue Kléber in Paris, adjacent to theArgentinian Embassy, and within short walkingdistance of the Angolan Embassy on Avenue Foch.

Paris as a location for deal signing?

To date, the press has discussed arms trafficking withAngola that took place in and . The presshas also raised the fact that Brenco, Falcone andGaidamak have all been pursued for alleged non-payment of taxes related to these deals.

The distinctly French character of the originalUS$ million contract should be noted,undermining claims that the deals were conducted inAngola. Not only was the document written inFrench, but it was allegedly also sent to Elísio deFigueiredo who was based in Paris. The then Parisaddress for Brenco appears on the contract, togetherwith Pierre Falcone’s name, signed under theinscription ‘Pour ZTS-Osos.’, It is these collectiveaspects of the document, together with informationfrom sources, that suggested it is likely this contractwas signed in France. Presumably, it is these factorsthat explain the efforts of the Financial Brigade tobring charges of non-payment of taxes.

Another ZTS-Osos contract with Angola– Gaidamak comes on board?Global Witness can reveal the existence of a furtherweapons contract worth US$,, that datesfrom /. It is possible that this contract was puttogether at approximately the same time as a thSeptember agreement between Banque Paribasand the Angolan State oil company Sonangol for aloan of US$ million which saw oil tradingcompany Glencore International AG tied in to lift aspecified volume of future oil production to repay theloan.

In a telephone conversation with Global Witness,Gaidamak stressed that both he and Pierre Falconehad been made Angolan citizens and that they hadbeen given diplomatic passports, after which theywere both ‘made signatories on the accounts’ thatthey had set up with Banque Paribas for the processof generating oil-backed loans. Gaidamak wassaying that he and Falcone had been given controlover funds obtained from the loans, which were, ineffect, a significant part of the Angolan State budget,located and disbursed entirely offshore from Angolaitself. During this first conversation, Gaidamak waskeen to point out the finance side of their relationshipto the Angolan Government, denying that arms wereinvolved.

The / arms deal shows some importantstylistic differences from the earlier contract. Mostobvious is the change of language to Portuguese. Thistime the contract is concluded ‘Pela ZTS-Osos’ andboth the names Pierre J. Falcone and ArcadyGaydamac (sic) appear on the document. Againsteach of these names, a signature is provided. Somesources have suggested that Gaidamak rarely, if ever,signed anything. However, the signature providedagainst the name Pierre J Falcone appears genuinewhen compared to original signatures provided in the


Above: Banque Paribas’ September US$

million oil-backed loan agreement with Sonangol.

during the day for the batidas, it was Unita that came at night.At some point,

ZTS-Osos’ /

arms deal for US$

million. Falcone’ssignature on the contract(below) appears to matchthat in his report to UKCompanies House (left).

The Scandal

we had almost nothing left to eat, so we decided to flee through the bush …”

official year-end filings of Falcone’s UK-basedcompanies.

The logo on the company stamp for this newdocument no-longer states ‘Russian-Angolese Affairs,’but now has the legend ‘Vrutky Slovakia.’ This time,the shopping list included combat vehicles and trooptransporters, annotated in Portuguese [GlobalWitness headings added] and including:

Item Quantity Unit cost (US$) Total cost (US$)

Carros De Combate

BMP-2 35 350.000,00 12.250.000,00

BMD 30 153.000,00 4.590,000,00

Transporte De Tropas & Cargas

?RAL 4320 100 65.000,00 6.500.000,00

?RAZ 260 ND 200 59.125,00 11.825.000,00

??AZ Cavalo mecanico 10 80.000,00 800.000,00

All question marks indicate where the text was unreadable (see below).

The document refersto additionalequipment listedbelow the textdescribed above.Although some ofthis text is unclear,items such as‘T/ E T’, areference to tanks,could bedistinguished.Against these items,a zero was included,and no price wasgiven, which maysuggest thatalthough these itemscould be supplied,none were orderedon this occasion.

The total valueof items listed wasUS$,,, whereas the total amount chargedwas US$,,. Another figure of US$,,was added in between the two totals. It is not clearwhat this additional sum represents, though it couldbe a commission charge of almost a quarter of thevalue of the items ordered.

It is not clear if Banque Paribas’ US$ millionloan was used to finance this contract. However,given that funds raised from oil-backed loans in whichParibas participated, were then subsequently used bythe Government for the purpose of financing armssupplies in and , and given that Gaidamakand Falcone, according to Gaidamak, had becomethe authorised signatories on Paribas accountsrelating to loans provided, the possibility that at leastsome of the US$ million loan could have beenused to finance this arms contract can not be ruledout. Banque Paribas should provide information tothe investigating Judges concerning what, if anything,it knows about these loan arrangements and whatother contracts may have been put together. Theyshould also provide information about the exact rolesof Gaidamak and Falcone in both the negotiation ofloans and their control over subsequent accountstructures.

Has Angola obtained value for money in itsarms supply programme?To produce a definitive answer to such a question clearlyrequires more than a simple comparison of shoppinglists from contracts relating to arms supplied by fromeither ZTS-Osos, or any other key suppliers to Angola.Clearly, the age of the items supplied, together with theircondition are also key factors in determining a product’strue value. For example, some supplies to Angola haveincluded forty-year-old tanks [here we are not referringto arms supplied by ZTS-Osos], which not only clearlydo not offer a decisive tactical advantage, but may evenprove to be a dangerous liability in any modern mobilewarfare situation.

In the past, sources in Angola have talked of theexistence of equipment graveyards, full of tanks andother military hardware located just outside Luanda.

Far from being the victims of war, it seems these itemshad been brought straight to their final resting place bytruck, because they were in such poor condition that it

had not been possible to remove them fromimporting ships under their own power. Thus,effectively useless imports were brought toAngola by a variety of arms dealers, primarilybecause of the commission available to thoseinvolved in the deals.

From additional research in other Africanconflict hot-spots, Global Witness has becomeaware of arms being supplied through over-priced invoices, that in some case indicates thatthe country concerned was obtaining suppliesworth perhaps only one fifth to one quarter oftheir real value. In this example, the vast profitmargin, enabling kick-backs to be generated forall involved in the deals, was the primary motivefor the deals to take place at all.

Russian State interests in ZTS-OsosIn an article published on the nd January ,the Czech Republic based CTK Publicationsreported significant Russian State interests behindZTS-Osos. If true, these connections add

further light to the nexus of interests in Angola and itsoil wealth, and would be consistent with Russia’sapparent willingness to renegotiate US$. billion ofdebt owed by Angola. In addition, such connectionswould suggest that President Putin’s deplorable policy ofpeddling arms to Africa may, in fact, have begun duringthe Yeltsin regime.

According to a journalist at CTK Publications, theSlovak state registry of companies records a namechange for ‘ZTS-Osos Martin’ to ‘Osos Vrutky’, inDecember . This would explain the change in thecompany stamp for the later deal (reproduced above leftand on page ), and supports the notion that thisdocument falls outside of the / period, which theFrench press have dubbed Angolagate. CTK reportedthat this new structure is % owned by Slovakcompanies (which are not named) and employees ofOsos Vrutky, with % being held by the Czech firmMarden. The article also includes comments that wereattributed to Osos-Vrutky General Director, Jan Valenta,who is reported to have stated that ‘about percent ofshares of the Osos Vrutky …company…is (sic) owned bythe Russian Kurganmash and Rosoboronexport armscompanies.’ Valenta reportedly stated that ‘the RussianState weapons export company Rosoboronexport hasabout % of the shares of ZTS-Osos Vrutky,’ with %


The Scandal

–Displaced person, Bié Provinceb “On one side Unita threatened to massacre the


Gaidamak’s businessempireThe French press has described howGaidamak started his business life in Paristhrough the establishment of a translationservice company. Much has since been madeof his extensive wealth, and the speed bywhich it was generated.

Gaidamak is listed as the Chief Executiveof a Luxembourg holding company calledFinegos International SA56 and as Director,together with his son,Alexandre Gaidamak,of another Luxembourg holding company,Pivoine SA.56 The Gaidamak family alsoappear to be connected to a number ofLondon-based companies.These include:Monarch Fiduciary Ltd, Mondiale PropertyLtd and Mondiale Management Ltd.39 Untilrecently, all these London-based companieswere located at 8 Carlos Place. MondialeManagement Ltd is ultimately owned by aJersey-registered holding company,Tuderose.39 The function and ownership ofTuderose is not clear.

A further two companies in London,Sonus Ltd and Europitex Ltd, also appear tobe connected through shared directorshipsand shareholding to the companiesmentioned above.40 In ‘Notes to the FinancialStatements’ of Europitex in 1998, a ‘Mr.A.Gaidamak’ is specifically referred to as the‘ultimate controlling party of the company’.Both Sonus Ltd and Europitex Ltd weredissolved in March and July 2001 respectively,and Alexandre Gaidamak ceased to be aDirector of Mondiale Property Ltd on 24thApril 2001.40 Arkadi Gaidamak became afugitive from an international arrest warrant,issued on 11th January 2001.

Although the status and function of someof the companies that appear to beconnected to Gaidamak either directly, orthrough his son Alexandre, are not clear,

some do appear to be involved in propertyinvestments.Amongst the property portfolio,was one large apartment block in London’sexclusive Mayfair, sold at the end of 2000.Sources have also suggested that Gaidamakhas substantial property interests in theexclusive Kensington area of London.56

Indeed, in court documents pertaining toGaidamak’s law-suit against the French NGOSurvie, his UK address is listed as ‘3 AKensington Garden No 8.’41

Gaidamak in IsraelIn 1998, Gaidamak legally changed his namein Israel to Arye Barlev. In early 2000, the TelAviv newspaper Yedi’ot Aharonot’s Leshabatsupplement, reported that 15% of the sharesof the Israeli public company Africa Israel,which were controlled by businessman LevLeviev had been acquired by Gaidamak.14 Itseems that Gaidamak had been introducedto Leviev in 1999 by Dani Yatom, the formerhead of the Israeli intelligence agency

Mossad.42 According to Ha’aretz, in January2002, Gaidamak has since sold his stake backto Leviev for US$75 million, the sameamount he paid for it.43

In a January 2000 statement to the stockexchange,Africa Israel allegedly stated thatGaidamak ‘owns numerous real-estateproperties in Western Europe and severalother businesses in infrastructure, investmentproperties, and energy.’The statement wenton, ‘Mr Leviev’s decision to sell some of thecompany shares to international businessmanArkardy Gaydamak (sic) was made in viewof his relative advantages, which can bringadded value to the realisation of thecompany’s business aims. Leviev believes thatthe company can reach internationalachievements in energy, real estate andinvestment assets following the partnershipwith Gaidamak.’14 After only a few months,the Angolan Government announced that itwas awarding exclusivity on the sale of thecountry’s diamonds to Leviev’s company. It isnot known what role, if any, Gaidamak mighthave played in delivering control overAngola’s diamond production to Leviev.

Since this first announcement, therelationship between Gaidamak and Levievappears to have grown to other businesssectors, including fertiliser and uraniumproduction in Khazakstan, with possiblefurther ventures into gold production.44 Ofparticular note is the acquisition of thechemical treatment complex of Tselina,known as Kazsabton, which was allegedlyone of the key companies in the productionof nuclear weapons in the Soviet Union.42,44

Given reports that Gaidamak sold his stakein Africa-Israel back to Leviev, it is not knownwhether he continues to retain the apparentLeviev/Gaidamak joint investments inKhazakstan in his portfolio.

Flying high with Arkadi Gaidamak.

Below left: Carlos Place – once the centre ofAlexandre Gaidamak’s web of businessinterests.

Below right: Gaidamak’s advances intoMayfair. His property portfolio nowincludes prestigious London real estate.

© REA

The Scandal

being held by the Russian company Kurganmash.

The latter company manufactures armoured troopcarriers, of the same type as those mentioned in thecontracts of / and later in / (BMP-s andBMP-s). CTK also stressed that Valenta ‘denied thatZTS-Osos Martin, or Osos Vrutky had ever traded inweapons’, although, he said, ‘Osos Vrutky has had alicence for such a trade since .’

CTK were unable to obtain confirmation fromeither of the Russian companies as to their stake inOsos Vrutky, and Kurganmash was unwilling todivulge its beneficial owners. However, officialSlovak Government records show that in May ,.% of ZTS-Osos Martin was sold to the RussianState company Specvnestekhnika Moscow, aprecursor to the Rosvoruzhenye company, which itselfwas one of two precursors of the Russian state armscompany Rosoboronexport, mentioned above as a% shareholder of Osos Vrutky. , According toCTK journalists, another angle is provided by theRussian magazine, Moskopvskye Novosti, which inDecember , reported that the Russian secretservice purchased .% of ZTS-Osos stock in ,through Specvnestekhnika.

If suggestions that there is a significant interestheld by Russian State-owned arms productioncompanies in ZTS-Osos are true, it impliesknowledge, and perhaps approval, of the activities ofthe company and its associates in Angola by high-level Russian Government officials. Russia’s currentadministration should clarify what it knows of theseactivities.

Falcone and Gaidamak work on Angola’sUS$. billion debt to Russia

According to a number of press reports, both Falconeand Gaidamak were involved in a deal to renegotiateAngola’s US$. billion debt to Russia, where Russiawould receive US$. billion, through financingobtained from oil-backed loans.

According to Le Temps, a Geneva-based judicialenquiry into this issue has resulted in the freezing ofapproximately US$ million. Le Temps reports, ‘theenquiry taking place in Geneva has allowed thereconstitution of the pathways followed by [the first]half of the proceeds of this deal; i.e. US$ million.’Le Temps continued, ‘instead of being deposited infavour of the Russian State, in theory the owner ofthis debt, the bulk of this amount was deposited intothe accounts of high ranking officials of the twocountries.’

Le Temps reported comments attributed to a sourceclose to the Angolan Government, who reportedlystated, ‘the accounts of the dignitaries of the regime,some of which are now frozen in Swiss banks, contain‘official money’ that these dignitaries were charged to‘carry’ for the Government.’

Le Temps refers to ‘Vitaly Malkin, a banker whofigured amongst the ten “oligarchs” closest to Yeltsin,who held power of attorney over a UBS account, inthe name of a company called Abalone InvestmentLtd’. The paper continued, ‘this account, numberCO – , was allegedly used as a receptacle forfunds coming from the debt repurchase operation.’

According to Le Temps, ‘Vitaly Malkin wasallegedly a shareholder of Abalone, together with twomain characters involved in the affair [the debt deal],the arms dealer Pierre Falcone, and the Russian

billionaire Arkadi Gaidamak.’ Le Temps’ reference toGaidamak’s business relationship with Pierre Falconein Abalone Investment Ltd is interesting, in light ofhis comments in an interview with Le Parisien, wherehe reportedly stated, ‘Pierre Falcone and myself havenever been associated in any company.’ ADecember Rossiyskiy Kredit Bank – News pressrelease stated, ‘…the newly elected Council of theBank held a session which elected Arkadiy Gaidamak[SIC] Chairman of the Council (President) of theBank. The former chairman of the Council, VitalyMalkin, has become his deputy.’

As a concluding remark, Le Temps comments ‘aperson with detailed knowledge of the investigationsuggests that the Russian debt re-purchase deal byAngola…may have been used to finance the re-election campaign of Boris Yeltsin in .’

CADA, a Brenco subsidiary, is the key toFAA food and medical supplies

In , the Angolan newspaper Angolense, publishedan article about CADA (Companhia Angolana deDistribuição Alimentar), suggesting that thispreviously unheard of company was in fact anoperation conducted by various un-named generals ofthe Angolan Armed Forces (FAA). The article statedthat the contract obtained by CADA was worthUS$ million, and left the company the solesupplier of food to the armed forces over a five-yearperiod.

However, Global Witness can reveal that CADAbelongs within the Falcone’s Brenco group ofcompanies, and is not connected to AngolanGenerals. CADA appears to have assumed control ofall food, medical and uniform supplies to the FAA.

André de Fiori, director of the London branch ofCADA, known as Companhia Angolana deDistribuição Alimentar Limited (CADA Ltd),provided an interesting clarification about thisarrangement in a letter from .

The letter (see opposite page top) is written on Argoletterhead, a company based in São Paulo, Brazil. Mrde Fiori explains that Argo is the Brazilianrepresentative office of the ‘Brenco Group.’ Heprovides further clarification, claiming the company is


villagers, on the other, the troops threatened us with death if we didn’t follow

Yeltsin meeting with dos Santos. Did Yeltsin agree to the restructuring of Angola’sdebt to Russia?

© A

FP

The Scandal

a ‘European based international businessgroup [Brenco Trading Ltd – BTL theholding company is based in London asBrenco France – the administrativeheadquarters – are located in Paris]specialized in the development ofoperations requiring the intensive use offinancial and commercial engineeringin “difficult countries.”’ He explains,‘Brenco has been operating successfullyin several countries such as China,Mainland (sic), Cazakistan (sic), Russia,Bulgaria, Colombia, Mexico andVenezuala (sic).’

Further, de Fiori states that, ‘one ofits [i.e. Brenco’s] off-shore companies,CADA …has recently [early ]signed a supply contract with anAngolan state-owned corporation andwill be the company that will actuallypurchase the goods and having the same re-invoicedto the Angolans. Argo acts as the trading groupcoordinating the procurement and negotiations forthe several items on behalf of CADA.’

De Fiori concludes that CADA will issue‘confirmed letters of credit at sight, based on meansof payment and guarantees provided by Brenco…’

In a th January article linking the‘Kremlingate’ scandal to Angola, the Portuguesedaily Público also commented on CADA. In an effortto determine the role of CADA in Angola, Públicoasked a number of detailed questions of the AngolanPresidency. The paper made considerable effort tosecure answers, but despite several faxes, phone callsand emails, did not receive an answer to thequestions. Público also sent, amongst others,questions to André de Fiori, director of CADA Ltd.With the exception of a comment to the effect thatCADA supplied the Angolan State-ownedprocurement company Simportex, no answers werereceived:

Sources within the international food tradeindustry also provide an interesting insight into theprivileges accorded to CADA’s operations in Angola.One of the key problems encountered by food traders

doing business with Angola is the over-pricing of goods at the Angolan importend of any trade deal; a problem whichis, to an extent, moderated by the presenceof the Swiss inspection company SGS,which provides what is known as a ‘CleanReport of Findings.’ This is a verificationprocess designed to ensure that productssupplied are of sufficient quality andquantity to justify the price being charged.

According to commercial food companysources experienced in doing business withAngola, ‘imports involving CADA are notsubject to such controls.’ On one occasion aCADA/ARGO representative stated, ‘don’tworry about SGS, because we don’t needany Clean Report of Findings.’

Commercial food companies have informedSGS about this practice. Global Witnessurges SGS to make public what it knows

about the operations of CADA in Angola.Companies House documents show that CADA

Ltd in London is located at Queen Anne Street,London W. CADA Ltd was established in , andde Fiori is listed as Director. The company is listedas a subsidiary of a company called Copper FinancialInc, located in Tortola, British Virgin Islands; thelatter having been established by Henry Guderley,who is also listed as Company Secretary of London-based CADA Ltd. Guderley also appears inCompanies House listings as Company Secretary fora number of other Brenco affiliated UK basedcompanies, including: Brenco Ltd; Essante Ltd; InvestTime Ltd; Clearhall Ltd; and Brenco AviationConsulting Ltd.

Searches in Companies House did not reveal eitherthe current or former existence of a company calledBrenco Trading Ltd, registered in the UK, despite deFiori’s reference to this being the name of the holdingcompany for the Brenco Group. However, a BrencoTrading Ltd was listed in Douglas, Isle of Man in. The publication listing Brenco Trading Ltd,indicates that both Clearhall Ltd and Invest Time Ltdare subsidiaries. Both of these companies areregistered at Companies House in London. Another


Below: CADA Ltd’s Companies House filing shows the company’s shareholding, Henry Guderley’s role as Secretary and de Fiori as Director. Notethe shareholder’s address is the same as Brenco Trading Ltd, a shareholder of Essante Ltd (see page ).

them! The situation became unbearable…” –Displaced person, Huambo Provinceb “If

The Scandal

Unita find you cooking, they taste your food and if there is any salt in it they


Deals and connections to othercountriesPress coverage, especially since the arrest of PierreFalcone on 1st December 2000, provides an insight intoother arms deals that appear to be related to Brenco. Inaddition to the fact that Brenco deals in countries rangingfrom Colombia and Mexico, to China and Khazakhstan, asreferred to by Argo’s André de Fiori in his 1998 letter(See CADA, a Brenco subsidiary, is the key to FAA food andMedical Supplies – page 19), Brenco, or some componentof the Brenco/ZTS-Osos operation appears to beconnected to arms and other equipment deals in Burma,Cameroon and Congo-Brazaville.

Brenco’s company, Setraco, takes part indeals with SLORC in BurmaIn 1992, French oil company Total completed itscontract for the Yadana gaspipeline in Burma,reportedly through theassistance of a Brencosubsidiary, or affiliatedcompany, Setraco, whichsupplied 24 Soviet-erahelicopters to SLORC, theBurmese military junta.58 Thehelicopters were supplied,reconditioned in Warsaw,following the failure of earlierefforts to secure helicoptersfrom Vietnam.At that time,the business card of JeanPichon, director of Setraco inRangoon (and formermilitary attaché in France’sBangkok embassy), showednot only the company’sVietnamese offices and anaddress in Geneva, but alsoSetraco’s ‘French liaisonoffice’, located at the sameaddress as Brenco France, then at 56 Avenue Montaigne,Paris.

The official Polish position is that these helicopterswere delivered direct, without the need forintermediaries. However, a Polish diplomat at that timesaid, ‘the Burmese paid us with Total money.’59 Here, thesuggestion is not that Total paid directly for thesehelicopters, but that SLORC used Total’s signature bonuspayments for its Yadana pipeline deal, possibly mixed withfunds derived from SLORC’s involvement in theinternational heroine trade, and that these payments werethen paid through a joint-venture bank account inSingapore.

Thierry Desmarest, CEO of the combined groupTotalFinaElf, should clarify what he knows of arrangementsthat were made to supply helicopters in connection tothe Yadana gas pipeline project.

Deals with CameroonIn early 1994, Cameroon was involved in a sovereigntydispute with neighbouring Nigeria over the oil-bearingBakassi region.According to an AFP report filed in thepublication Jeune Afrique, a letter from Pierre Falcone toEdouard Mfoumou Akame, then the Minister delegate to

the Cameroonian Presidency, shows that ZTS-Ososobtained a deal to supply weapons to Cameroon. 60

According to the publication La Lettre du Continent, aletter from Falcone on 24th March 1994 with a ‘ZTS-Osos’ letterhead provides details of the arms purchase,claimed to be worth US$71,608,700.The deal included:US$19.6 million for IGLA-IE anti-aircraft missiles; US$9.3million for three combat helicopters; US$6.27 million for‘Faktoria’ anti-tank missiles and US$2.29 million for theirlaunchers; US$5.4 million for ‘Métis’ anti-tank missiles andUS$1.9 million for their launchers; US$6.28 million forammunition; US$2.7 million for 10,000 Kalashnikovs.61 Thelist was reportedly later increased through the inclusion ofadditional hardware, including rocket launchers, costing anadditional US$495,000.61 The total value of the itemslisted comes to US$54.24 million, suggesting that otheritems or hefty commissions must have been included inthe total charge.

According to La Lettre duContinent, Falcone sent a second letteron 11th April 1994 to Akame,requesting confirmation of a transferof US$1,513,300 to ZTS-Osos,courtesy of the Moskva Bank.61 In athird letter to Akame (by this stage,Cameroonian Finance Minister),dated 3rd May 1994, Falconereportedly enthused, ‘we aredelighted that you have receivedyour order, and as you know, we areentirely at your disposal should yourequire any logistic help at a laterstage.’The article continues, ‘as a“reminder”, Pierre Falcone remindsthe addressee of “our account”Menatep at the Bank of New York.’61

Note, the Russian bank Menatephad its banking licence stripped inMay 1999,62 and by August 1999, inthe wake of the so-called Bank ofNew York scandal, the bank wasopenly being associated in the pressas having acted as a conduit channel

to launder money from Russia into accounts overseas.63,64

Some 99% of Menatep’s shareholders voted to bankruptthe bank in September 1999.64

Deals with Congo-BrazzavilleAccording to La Lettre du Continent, on 15th June 1995,Martin Mberri, then State Minister for the Republic ofCongo, in charge of development and regional planning,wrote to Arcadi Gaydamak (sic), who he referred to as‘director of the company ZTS-Osos.’65 Mberri expressedhis interest in purchasing some 150 Ural trucks,‘…providing that you quickly submit to us the text of thefinal contract…’65 According to the article, ‘a sale contractwas prepared for the acquisition of 100 Ural 420 trucks,25 Ural 420 water tank trucks, and 25 Ural 420 fuel tanktrucks.’

50% of the sale was to be financed through thedelivery of oil with a ‘guarantee of delivery issued by theRepublic of Congo and endorsed by Elf Congo.’Thearticle concludes, ‘the lawyers of Pierre Falcone andArkadi Gaidamak have protested to the tax office that thiscontract did not come to fruition.’65 Given the lack oftransparency about this issue,TotalFinaElf should clarifywhat, if anything, it knows of any such arrangements.

The Scandal

Brenco Trading Limited is located in Tortola, BritishVirgin Islands, at the same address as CopperFinancial Inc, the holding company of CADA Ltd inLondon – it is not clear how Brenco Trading Ltd inthe Isle of Man is related to the company of the samename in the British Virgin Islands.

Liquidation of Brenco France

As de Fiori already described in his letter,Brenco France played the key administrative functionfor the group. According to sources within the legalprofession in Paris, this seems to be a fact not lost onthose keen to see the current investigations intoAngolagate brought to a hasty conclusion. Accordingto one lawyer, ‘Brenco France was placed under“liquidation judiciare” [or made bankrupt] on thFebruary , and this has resulted in thedisappearance of significant quantities of companydocuments,’ adding another layer of proceduralconfusion to the task of the investigating Judges.Global Witness has visited the offices of BrencoFrance in Paris on several occasions since this date,and the evident lack of activity, including uncollectedpost, would seem to support these comments. GlobalWitness has also checked company records in Franceand Brenco France is listed as being placed under‘Liquidation Judiciaire du //, with the“Liquidateur” listed as SCP Girard Levy, of Paris.’

Does Angolagate reach the

United States?

THE ARREST and incarceration ofPierre Falcone in December raised eyebrows in Arizona high societywithin which, according to thepublication Arizona Republic, Pierre

Falcone and his former Bolivian beauty queen wifeSonia enjoy the reputation of seriously wealthy, part-time resident philanthropists. Arizona Republic has asked anumber of questions about the source of their wealth,referring to the fact that they have been able to ‘…makethe most expensive home purchase [allegedly at US$.million] in Arizona History.’ According to the paper, AlMolina, a Falcone confidante and prominent localjeweller stated, in response to the scandal, ‘I am veryupset about what’s happening right now … Knowing theman, I have a hard time believing he would do anythingunethical.’

Arizona Republic paints a picture of ‘philanthropy andglitz,’ together with friends and associates who seem toknow little about the Falcones. As the paper says, ‘eventhe home ownership seems intriguing. Their residencefor several years is owned by a British Virgin Islandscompany, Gabrielle Investments Ltd, which could not betraced. The recorded owner of their new US$.million estate at the base of Camelback Mountain,SPEP LLC, is a controlling trust with a mailing addressin the Turks & Caicos Islands, British West Indies.’

Sonia de Falcone is President and co-founder/director of Essanté Corporation, a Utah-basedpurveyor of health foods and prophylactics incorporatedin Delaware on th April . The company claims amission: ‘the word Essanté is French. Translated intoEnglish, it means “the essence of total health.” That ismy mission, to bring vibrant health to the world throughwhole-food nutritional therapy.’ It all soundsreasonable enough and, indeed, is an admirable task.Essanté Corporation even enjoys the PR expertise of


accuse you of being on the government side. My sister was beaten severely

Whose billions are in this bankaccount?Global Witness’ investigations have also identified theexistence of a bank account – number 15468991 – heldat the so-called ‘First Virgin Bank’ in the British VirginIslands (BVI).This account held approximately US$1.1billion during 2001, with two high-powered Angolansacting as signatories.56

The true identity of the ‘First Virgin Bank’ remains amystery. Enquiries made to the Inspector of Banks,TrustCompanies and Company Managers in the BVI, solicitedthe response, ‘First Virgin Bank is not licensed under theBanks and Trust Companies Act, 1990, to carry on bankingbusiness within or outside the Virgin Islands’. If this ‘bank’ isnot licensed to operate as a bank, what is it?

Sources have suggested that the most likelyexplanation is that it is an account in the name of ‘FirstVirgin Bank’, held at another legitimate bank in the BVI.Authorities in the BVI should immediately undertake toinvestigate the true nature of this account. Given theunique relationship between the UK and the BVI, therelevant UK authorities should take the necessary steps toensure that the BVI authorities do conduct a thoroughinvestigation. Such a move is essential given the clear needfor international tax payers to assist Angola’sdevelopment.Any failure will leave the BVI dangerouslyexposed once again as a ‘non-compliant’ jurisdiction interms of the OECD’s efforts to clean up off-shore taxhavens.

In addition, whilst the UK’s influence in such matters isbeing discussed, it is essential that the UK and BVIauthorities provide all necessary assistance andinformation pertaining to the ongoing Angolagateinvestigation in France.This is especially important, giventhe myriad of Brenco related companies that are locatedin the BVI.

Essante Ltd’sCompanies Housefiling shows SoniaFalcone as Director,Brenco Trading Ltd asa shareholder, andHenry Guderley asCompany Secretary.Note Henry Guderley isalso CompanySecretary for CADA Ltdand Brenco Ltd.

The Scandal

The Lee Solters Company, a Beverly Hills based PRagency, who’s past and present client list includesFrank Sinatra, Barbara Streisand, Michael Jackson,Bob Hope and The Harlem Globetrotters.

Essanté’s web site helpfully provides ‘corporatebiographies’ of those whose role is to help SoniaFalcone in her mission. Alongside a description andphotograph of the company’s Vice President ofMarketing, Arthur T. Chester, is a blurb and pictureof Henry Guderley, Chief Financial Officer, who isdescribed as ‘certified as a Fellow of the Institute ofChartered Accounts in the UK, with a speciality ininternational business.’ Unfortunately, the site failsto inform the reader of Guderley’s role as CompanySecretary for numerous other companies within theFalcone empire (see below and CADA, a Brenco subsidiary,is the key to FAA food and medical supplies – page ).

Henry Guderley is also the company secretary ofthe London-based Essante Ltd, which is located at Queen Anne Street, London W. Sonia Falcone, ofParadise Valley, Arizona, is listed as the sole directorof the company. The shareholding is more surprising:Sonia Falcone is listed as holder of one ordinaryshare, the other being held by Brenco TradingLimited, of Trident Chambers, PO Box , RoadTown, Tortola, British Virgin Islands; an addressshared by Copper Financial Inc, the listed owner ofCADA Ltd (part of the Brenco network in Angola), ofwhich Guderley is also the Company Secretary.

According to a Swiss-based web site on moneylaundering issues, Geneva’s Chief Prosecutor,Bernard Bertossa, began investigations in January to determine whether Swiss banking facilitieswere held by individuals and companies whose namesfeatured on a list for whom information was beingsought. ‘Sonia Falcone’ is one of the namesreportedly included on the list, though it should benoted that there is no suggestion that she has, or islikely to be, charged with any offence and neither isshe under investigation for any wrongdoing. Othernames on the list reportedly included former FrenchInterior Minister, Charles Pasqua, his son PierrePasqua, and Jean-Charles Marchiani. As of going topress, these investigations continue.

only because she had salt at home that she had bought in Kuito … That was


Above: Queen Ann Street – the London registered address forBrenco Ltd, CADA Ltd, Essante Ltd and other companies.

The ScandalInfluence peddling US style?

In January , the Arizona Republic reported thereturn of a US$, donation to the Bushcampaign by the Essanté Corporation, much ofwhich was allegedly given days after President Bush’selection victory. The paper reports the Falconefamily spokesman, Jason Rose, as saying that ‘…anyinsinuation that the couple was trying to buyinfluence with the new President is unfortunate, falseand wrong.’

In These Times reported that these donations werebroken down into one payment of US$, thatwas made in May , followed by a secondUS$, payment in November . Interestinglyfollowing the May payment, ScottBundgaard, local State Senatorand Bush supporter, arranged forSonia to join a select group to meetwith then candidate Bush, as heflew in to Phoenix Airport.

Sonia Falcone claimed thedonations were to ‘…increase Latinoawareness in the RepublicanParty;’. At the time, she claimedthat Pierre Falcone was notconnected to Essanté and that thedonations were financed fromcorporate profits. In fact, thecompany was incorporated inDelaware on th April with bothSonia and Pierre Falcone listed asdirectors.

Le Figaro reports that amongst the files containedon the Brenco diskettes, found by the investigatingJudges in the apartment of Pierre Falcone’s secretary,were references to payments from Brenco to anumber of coded accounts held variously at UBS inSwitzerland, Bank Leumi in Tel Aviv and BanqueRothschild in Monaco including an account called‘Essante.’

In These Times suggests that the real source ofEssanté’s donations to the Bush Campaign was PierreFalcone himself. According to an unnamed source,‘the Company [Essanté] has come a long way withPierre’s generosity, but after a few years he’d like tosee some profit. It rubs him up the wrong way, butout of love for his wife, he’s done it with a smile onhis face.’

Enron’s influence trading – Is Falcone’sdonation part of a pattern?

Under a barrage of criticism across the global press,it seems abundantly clear that Enron’s US$. millionin political donations (% going to the Republicans)

over the past years bought the company significantinfluence over policy outcomes. Of particular note isthe US$, that the company gave to George WBush over his political career from his start asGovernor of Texas right through to his run for USPresident. Two members of the Bush Cabinet – theCommerce Secretary, Donald Evans, and theAttorney General, John Ashcroft – have had to stand

aside from current investigations because theyreceived close to US$, in politicaldonations from Enron. Enron CEO, ‘KennyBoy’ as President Bush dubbed his close friendKenneth Lay, personally gave BushUS$,.

Vice-President Dick Cheney, facing thethreat of civil litigation to break his silenceover the Enron scandal, also appears to haveclose connections to the company. It seemsthat links between Enron boss Lay and Vice-President Cheney go back to Cheney’s timeas CEO of oil services companyHalliburton, when both were based inHouston, Texas. Once Cheney came backinto Government as Vice-President, he tookcharge of the co-called ‘National EnergyPolicy Development Group,’ which was

responsible for drafting the President’s energy policy

– whose output is represented by a bill currentlybefore Congress.

Cheney held six meetings with Lay and otherEnron executives to discuss America’s emergencyenergy plan: the end result was that, as UK-basedpaper The Observer reports, the plan ‘contains detailed points, all ‘virtually identical to positionsEnron advocated’ – mostly concerned withderegulation and increased capacity…’. TheWashington Post comments that Cheney and other keyBush Administration officials also aggressively lobbiedthe Indian Government on behalf of Enron over thecompany’s attempts to sell its interest in a power plantproject. The company wanted to bring in US$.billion from the sale, just weeks before filing forbankruptcy.


at the very end of February and we decided to leave …” –Displaced person, Bié Provinceb

The whole point of theEnron affair is that itdiscredits the rules of thegame. It exposes theinstitutionalisedcorruption at the heart ofUS politics – a casualexchange of money andpower that Bush hasmade his trademark.

– Julian Borger in ‘Bush,the corporations flag-carrier’,The Guardian,January 200276

Bush and Cheney pursuing America’s interests, but by which means? What do theyknow of Pierre Falcone, and when did they know it?

© A

FP

The Scandal

Angolagate and the Enron scandal – bynature, the same problem?

If anything is clear from the Enron scandal, it is thatthe capacity to buy influence and achieve strategicallybeneficial changes to legislation is not restricted tocountries so far rocked by the Angolagate scandal.Influence peddling is thriving at the centre of the USpolitical system.

Enron also raises further questions about the levelof influence Pierre Falcone, through his donation,was hoping to achieve. It is noticeable that Enronboss, Kenneth Lay’s donation of US$, toBush’s campaign is strikingly similar in size to theUS$, that was donated by the Falcones. IfEnron was able to figure at the forefront of the Bushteam’s political and legislative agenda, what did theFalcones expect from their donation? Following the‘return’ of their donation, the Administration nowhas the capacity for plausible deniability – but whatwould the situation have been, had Newsweek notpointed out problems associated with this donation inthe first place?

It seems likely, however, that Falcone’s potentialinfluence did not end with political donations to theBush campaign alone. In These Times reports that ameeting took place between Falcone and three un-named high-level Phillips Petroleum Corporationexecutives in June , some five months prior toFalcone’s arrest in Paris. Phillips PetroleumCorporation now holds a % stake in Angola’sBlock , allocated in , but for which negotiationswere already well-underway at the time of thecompany’s alleged meeting with Falcone. The articlestates that Phillips refused to comment on themeeting.

Executive Vice President and General CouncilBryan Whitworth responded Global Witness’enquiries in January , stating that he was unableto identify a meeting in Scottsdale in June but thatthere was a meeting in September and a follow-up inWashington in October ‘…to determinewhether or not Phillips wanted to utilize Mr. Falconeas a consultant […] it was concluded that Mr.Falcone should not represent Phillips’. So why wasPierre Falcone chosen as a possible consultant in thefirst place and why did Philips not consider himappropriate for this job after these meetings?

An Arizona-based friend of Pierre Falcone, whoestablished a website in support of his activities,

volunteered that ‘…Pierre derives a great deal ofincome from Exxon Block located within theboundaries of Angola.’ Though it is difficult tointerpret the true meaning of this statement, in lightof apparent meetings between Falcone and Phillips, itis logical to enquire what, if anything, ExxonMobilknows of the activities of Falcone with regard toBlock . Did Exxon meet with Falcone, and did heplay any role in advising, or facilitating, the companyregarding its acquisition of the operatorship of Block? ExxonMobil has declined to respond to enquiries.

In December , shortly after Pierre Falcone’sarrest in Paris, the Sunday Times was of the opinionthat Angolagate led directly back to the UnitedStates. The paper suggested that the Frenchinvestigation into Angolagate had started to look intothe activities of a number of companies involved inAngola, including Vice-President Cheney’s formercompany Halliburton.

The paper also hinted at potential close links

between Falcone and Bush commenting, ‘Falcone wassufficiently friendly with Bush to attempt to arrange ameeting between the presidential candidate andanother of his contacts, José Eduardo dos Santos, theMarxist President of Angola. French news reportsclaimed last week [the last week of December ]that the meeting never took place, and the full extentof Bush’s contacts with Falcone remains unknown.’

It continued, ‘Angola surfaced briefly in theAmerican election campaign when Cheney, whoresigned as Halliburton’s Chief Executive in July[], was accused of using his connections as aformer defence secretary to secure the companycontracts.’ Certainly, Halliburton has doneextremely well in Angola. The paper went on to statethat ‘as Defence Secretary, Cheney had been anoutspoken supporter of UNITA … he now findshimself in the intriguing position of having recentlyheaded a company that pursued contractsaggressively with UNITA’s sworn “enemy.”’ Thisraises questions as to how Halliburton, headed by aknown UNITA supporter, could have engineeredsuch success in Angola?

It is essential that the key individuals andcompanies that appear to have connections to PierreFalcone clarify the nature, if any, of their relationshipwith him. We have seen the implications of majorinfluence-peddling in the case of Enron, wheresignificant private gains for top executives appear tohave been engineered on the back of massive publiclosses and where whole rafts of legislation have beenconstructed to the exclusive benefit of the companywhilst ordinary employees and the investing publichave been hung out to dry. If the impact of influencepeddling can be so severe for US company employees– a domestic audience – imagine its effect on theAngolan population, suffering from decades ofconflict, instability and massive state looting. Allconcerned must clarify what they knew and when didthey know it.

The sections that follow provide detail about theformal questioning, and in some cases the arrest, ofindividuals alleged to be at the core of theAngolagate scandal. The reader should note thatwhat is provided here consists of information that hasbeen published in the international media. We havealso supplemented the various media comments andopinions with additional data obtained throughinvestigations.


I acknowledge that by giving me money,Falcone had in mind to ask me sooner orlater to introduce him to people who couldbe of some use to him. Each time he wasgiving me money, I was aware that I wasincreasingly linked to M. Falcone.

– Jean-Noël Tassez’s 15th December 2000comments about his relationship with PierreFalcone, reported in Le Monde 89

“Now, the crimes are meticulous and they are never left half done! I do not

The Scandal

The searches and arrests begin

ON 29TH NOVEMBER 2000,Financial Brigade Police raided thehome of Jean-Charles Marchiani,now an MEP from Charles Pasqua’sRassemblement pour la France (RPF)

party. Simultaneously, the investigating Judges togetherwith investigators from the General Council of Hautes-de-Seine also searched both Charles Pasqua’s home (nowalso an MEP), and the headquarters of Pasqua’s RPFParty.

According to Liberation, items recovered fromMarchiani’s house, together with information from the Falcone diskettes, then led investigators to Jacques Attali, aformer close advisor to President François Mitterrand andthe first Director of the European Bank forReconstruction and Development (EBRD). The samesources of information also precipitating interest in Jean-Christophe Mitterrand. As a result, both Attali andMitterrand were interviewed by the investigators betweenth November and st December .

On st December , Pierre Falcone was ‘placedunder examination’ by Judges Courroye and Prévost-Desprez. Later the same day he was charged with ‘illegalarms trading, fiscal fraud, misuse of social benefits, abuseof trust and influence peddling,’ and sent to La Santé jailin Paris.,

Arkadi Gaidamak and his internationalarrest warrant

At the same time, Arkadi Gaidamak was also summonedto appear before the Judges, but did not show up.According to the French press, an international warrantfor his arrest was then issued on th December .

On th December , Le Monde published aninterview with Gaidamak, which apparently took place inthe Dorchester Hotel in the Mayfair area of London. Inthe interview Gaidamak stated that the French judiciaryand tax authorities have persecuted him for years. Heclaimed that London had been his main residence for thepast ten years and that despite paying yearly some sixmillion French Francs in taxes to the British authorities,this did not appear to be enough to persuade the Frenchauthorities that he was no-longer resident in France.

Gaidamak provided a litany of complaints against theinvestigating authorities and painted a picture of hispersecution, all the while he insisted that he was innocentof any wrongdoing. As if to back up his claim, he stressedhis tendency to sue for defamation. In conclusion,Gaidamak stated that he would be prepared to meet withJudge Courroye provided, ‘…he ensures I am going to betreated correctly. For the moment,’ he stressed, ‘this is notthe case.’ This interview paints an extraordinary situationwhere the presence of a witness to a legal process stressesthe conditions by which he will agree to be questioned.

Shortly after the interview, sources suggested thatGaidamak left the UK for Israel, where he holds Israelinationality. It seems that since his departure, Gaidamakhas continued to travel internationally, making at least twovisits to Angola and at least one to a country in SouthAmerica, with more recent suggestions that he may haveeven visited the UK, possibly even as recently as lateNovember .

The issue of the international arrest warrant forGaidamak is somewhat confused. As already noted, the

French press stated that an international arrest warrantwas issued on th December . If, in fact, a warrantwas issued on this date, this begs the question as to howGaidamak was able to take part in an interview on the thof December at the Dorchester without action beingtaken by the UK authorities. Global Witness’investigations reveal that in fact warrant number was issued by the Tribunal de GrandeInstance de Paris on th January . Apparently asecond notification was issued ‘with a view to arrest’ and‘with a view to extradite’ Arkadi Gaidamak on the thJanuary . This latter notification was circulated to allInterpol member states.

One key question: Why has Israel not actedon Gaidamak’s arrest warrant?

Extradition agreements aside, there are two possiblereasons for this situation. Either Israel is simply nothonouring its obligations as a member of Interpol, aclearly unacceptable situation, or the serving of the arrestwarrant has been delayed – rather extensively, it wouldseem. Delays often occur due to the fact that internationalarrest warrants are usually served through diplomaticchannels. The current scenario is obviously unworkableand allows for the horse to bolt prior to shutting the stabledoor, and especially in light of the events of thSeptember , such a process seems totally unsuitablefor the task at hand and must be reformed.

Further arrests and charges related toAngolagate

Since the arrest of Falcone on st December , theinvestigating Judges have continued to interview, chargeand arrest other individuals in relation to the Angolagatescandal. The following individuals are discussed in thecontext of allegations that have been reported againstthem, and are listed according to the timing of theirrespective interviews with the Judges. It should beremembered that none of these individuals have beenfound guilty of charges laid against them in a court of law.

A first casualty connected to the affair?

Le Monde raised the prospect that Thierry Imbot, the sonof General Imbot, former Director of the FrenchExternal Intelligence Agency (DGSE), may have becomea casualty of the unravelling Angolagate scandal. Imbot,who had himself been a DGSE officer, died in amysterious fall on th October from the window ofhis apartment. Allegedly, his name was listed on one ofthe diskettes as a Brenco International ‘consultant forChina.’ Le Monde reported that he was allegedly paidUS$, in five instalments between and through an account at Nations Bank of Virginia in theUnited States. The investigating Judges apparentlyrequested a copy of the police report which followed theinvestigation into his death, and which concluded that itwas an accident.


An infernal machine seems to have beenstarted up that risks sparing no one: not theright, not the left, not even the judges.

– Le Figaro quoted in The Times; 16th January200182

know what wars are like elsewhere but here it is no longer enough to just kill!

The Scandal

It is necessary to massacre! Even if you survive, you will always have the

The widening investigation – possiblefunding of the RPF, the party of formerInterior Minister Charles PasquaThe Rassemblement Pour la France, or RPF party,established by Charles Pasqua, has also been dragged intothe enquiry. Both Pasqua and his former deputy at theInterior Ministry, Jean-Charles Marchiani, are currentlyRPF MEPs at the European Parliament, and Pasqua hasdeclared his intention to run for the French Presidency inthe elections.

As already noted, the first hint that investigators wereinterested in the RPF came with the Financial Brigaderaids on the party headquarters and the residences ofboth Pasqua and Marchiani on th November .,

According to Le Figaro, the Judges had a particular interestin financial transactions related to the RPF’s Europeanelection campaign during . In a separate article, LeFigaro reported ‘Judge Courroye, who requested theCommission for the control of election campaignspending to sequestrate documents relating to the RPF’sEuropean election campaign of June , will todayreceive seven boxes of documents. The Magistrate islooking to verify if the arms dealer Pierre Falcone, eitherdirectly, or indirectly financed Charles Pasqua’s party.’

Le Figaro continued, ‘Pasqua, who has already beenquestioned as a witness, has always denied thesesuggestions, like his loyal lieutenant, the former Prefect,Jean-Charles Marchiani.

The mysterious ‘Robert’On th January , at the request of Judge Courroye,the Commission Nationale des Comptes de Campagne(CNCC) froze the RPF election campaign financeaccounts. According to Le Monde, this action was taken,allegedly because of a letter discovered from Falcone toPresident dos Santos, in which the former explained thathis company Brenco, had paid the sum of US$,(out of a total of US$. million) to a certain ‘Robert.’

Just who is this ‘Robert’? One possible answer comesfrom a December article in Le Canard Enchaîné, inwhich it was suggested that Falcone’s personal organiserlists the name ‘Robert’ against various telephone numbersbelonging to Marchiani. According to L’Express, it isreportedly, ‘the famous “Brenco listing” [documents onthe diskettes] which steered investigators in thisdirection.’ L’express continued, ‘the document refers manytimes to this “Robert”. However, the telephone numbersof this mysterious “Robert” lead to the Parisian address ofMarchiani, or to the Var Prefecture [Marchiani waspreviously the Prefect of the Var], or to his mobilephone.’ The paper then provides a possible reason for theJudges’ interest in ‘Robert’, ‘the “listing” indicates twotransfers to “Robert”, one of $ in November and a second of $ at the start of .’ L’expressthen concluded with ‘interrogated in November , onpossible transfers made by Pierre Falcon, the [former]Prefect’s response is absolute: “I have never received anyfunds from Brenco or Falcone.”’

L’Express refers to an early letter from Falcone todos Santos, discovered on one of the diskettes, whichallegedly states under item , entitled ‘Robert’:

‘A political agreement has been reached. We haveadvanced personally , dollars. […] They will beexpecting another or million Francs, that isapproximately to . million dollars. […] We believe thatthis money in its entirety should be used for the campaignfor the European elections. It is therefore very importantto facilitate the release of these funds, because this would


Jean-Christophe Mitterrand

The son of the former French President, Jean-Christophe Mitterrand(also known by his nickname, ‘Papa-m’a-dit’, or ‘Daddy told me’), wasarrested on 21st December 2000, and held in La Santé jail in Paris. Hewas accused of ‘complicity in illegal weapons trading, influence peddlinginvolving a civil servant, abuse of social benefits, and aggravatedinfluence peddling.’86,87

Specifically, it is alleged that Mitterrand received US$1.8 millionfrom Brenco, which was paid into a Swiss bank account between 1993and 1998.86 According to Le Figaro, most of this money was paid in1997 and 1998.88 Mitterrand claims that US$700,000 belonged to himand had not come from Brenco. He is further accused of havingreceived other transfers of money and two watches, which werereportedly valued at 3,000 and 15,000 French Francs.86,89

More detail about these alleged payments comes from Le Monde.The paper suggests that the by now infamous 26 diskettesdemonstrate that four payments were made by Brenco InternationalTrading Ltd into an account belonging to Mitterrand at the BanqueDarrier in Geneva, Switzerland.90

Mitterrand claimed that the payments were for his counsel, enablingPierre Falcone to set up badly needed credit for Angola, which wasraised against future oil production; in other words, this suggests an oilpre-financing, or mortgaging, deal of the sort described earlier anddicussed more extensively later in this report (See International lendingto Angola – page 51). According to Le Monde, Mitterrand stated, ‘I wasnever informed about the selling of military material by M. Falcone tothe Angolan regime.’ Mr Jean-Pierre Versini-Campinchi, Mitterrand’slawyer reportedly stated, ‘on this point, the Judges do not even havethe start of a proof.’90 Following his incarceration, the Swiss authoritiesfroze Mitterrand’s accounts on the 26th December 2000.91

Though Global Witness points to the fact that Mitterrand has notbeen convicted of any offences, published explanations do not seem toadd up.Why was Mitterrand paid during 1997 and 1998 for an oil pre-financing arrangement put together in 1993 and 1994? Were otherservices provided during this latter period that might be related tothese payments, and if so, where and when might Mitterrand havebeen paid for services provided during 1993 and 1994? If suchadditional services were provided, what were they? It is not possible todiscount Mitterrand’s claims, but it is clear at the time of going to pressthat such claims simply raise further questions about his allegedinvolvement in this issue.

On 2nd January 2001, after spending Christmas and the New Yearin jail, Mitterrand was finally offered bail, set at approximatelyUS$700,000.93 Unfortunately, probably due to the freezing of his Swissaccount, he was unable to make the payment and remained in jail93

until the 11th January 2001, when his mother, Danielle Mitterrand, paidthe bail demand. She was quoted at the time, ‘I brought the money topay the ransom.’94

Did he really do what his father told him?©

AFP

The Scandal

memory printed on you.” –Displaced person, Huambo Provinceb “The problem is that

assure the start of an immediate operational real lobbywithin the European Parliament.’,

Marchiani has vigorously denied that he is themysterious ‘Robert’, stating: ‘I was in charge of defendingthe interests and the security of France at the Cabinet ofCharles Pasqua, and also to build up contacts with foreignservices.’ He went on, ‘to me personally, neither Presidentdos Santos, or Pierre Falcone have advanced the amountof US$,.’ He also denied that he had receivedany funds from Brenco.

On the nd May , Marchiani was indicted with‘misuse of company property and trading of favours.’ LeMonde concludes that these charges relate to the twopayments made to ‘Robert.’

The European Parliament should immediatelyinstigate an investigation into the identity of ‘Robert’ touncover the nature of Angola’s ‘…operational real lobbywithin the European Parliament.’ In light of theexcesses of the Enron’s influence peddling, and indeedthat of Angolagate, neither the democratic process, northe people of Angola can afford anything less.

The investigation focuses in on Pasqua

The Judges’ interest in Pasqua consists of a number ofmain areas of focus, which appears to relate to sources offunds for potential political activities. For example,Pasqua’s th November interview with the Judgesfocussed on a million French Francs loan that he took outin early ‘in order to fill a gap in the finances’ of theRPF. According to Le Monde, Pasqua explained that themoney came to him, rather than directly to the Party,because he was ‘more solvent than the RPF.’ He wasquestioned about the structure of the loan arrangement,which he allegedly claimed broke down as follows: ,French Francs directly from his own savings, millionFrench Francs from a Marseilles associate, and . millionFrench Francs from a resident of Gabon.

On the th January , Philippe de Villiers, theformer Vice-President of Pasqua’s RPF party wasinterviewed at his own request by the Judges. Villiersconfirmed that he had left the RPF in July because of‘the lack of transparency in the accounts’ of the party. Afew days earlier he had said, ‘the doubts I had raised in aclimate of general unwillingness to understand, appearnow to be justified.’ It is not clear what information heprovided to the Judges, however on leaving his four hourinterview, he was quoted ‘I can confirm in a very explicitmanner that the Mitterrand-Pasqua affair [Angolagate] isa very serious state affair, with inter-continentalramifications and an unsuspected development.’

According to the Le Monde, ‘The investigators areinterested in a number of beneficiaries of Brenco’slargesse...’ The paper continues, ‘The investigators areintrigued by a transfer of . million French Francs(US$,), which took place on th July , to theAssociation ‘France-Afrique-Orient (AFAO).’ Le Mondeconcluded, ‘They [the investigators] seem to postulate thetheory that these funds, debited from a Brenco account atthe Geneva Bank, la Cantrade Ormond Burrus, were ineffect used to feed the Rassemblement pour la France,presided over by Charles Pasqua.’

In an article about the nd May indictment ofJean-Charles Marchiani, Le Monde reported that Marchiani‘is suspected of having received US$,,’ as it put it,‘on the fringe of operations concluded with the AngolanState by the businessmen Pierre Falcone and ArkadiGaidamak.’ The paper continued, ‘The former Prefect ofthe Var is also suspected of having received a financial


Jacques AttaliFollowing his initialinterview withinvestigating Judgeson 30thNovember 2000,Jacques Attali wasinterviewed for asecond time onthe 7th March2001.96

According toLiberation, ‘JacquesA’ was listed asone of theestimated 300names containedon the 26 Brencodiskettes as havingbeen in receipt ofBrenco’s largesse.97

Pierre Falcone’ssecretary IsabelleDelubac hasallegedly confirmed this to be Jacques Attali.97 According to Liberation,Delubac explained that Attali was ‘an acquaintance’ of Falcone, who‘called often.’97 However, she was not able to explain the comments[contained on the diskettes], ‘Jacques A. 50,000 US de BAI’, and‘BAIACA, 200,000 $’, both of which appear to relate to activities fromJuly 1998.97

In the absence of further clarification, it is impossible to confirm thecorrect meaning of these annotations. However, one might draw theconclusion for the first annotation ‘Jacques A. 50,000 US de BAI’ mightrefer to the acronym for the Angolan bank, Banco Africano deInvestimentos. Interestingly, Pierre Falcone’s Brenco holds 4% of theshares of this bank (See Banco Africano de Investimentos (BAI), page30).98 Reportedly,Attali owns a consultancy company called ACA,which might explain the second annotation.99 BAI has categoricallydenied they have ever paid any funds to Jacques Attali, or to any othercharacters who have been named in the Angolagate scandal.139

However, BAI has failed to provide any comment as to why they havebeen specifically referred to in the context of such payments in Frenchmainstream newspapers.

Attali’s response has been that these monies were payments for hiswork on microcredit projects in Angola. Once again, it is not possibleto discount Attali’s explanations, but prior to their acceptance, heshould be expected to point out the location, quantity and nature ofthe micro-credit schemes he is referring to, and to clarify where thesefunds came from.

Liberation suggests an alternative: ‘the Judges might have insteadconcluded that these payments were for an alleged mediation role byAttali, in an effort to deal with Falcone’s tax problems.’97,99 Liberationcontinued by suggesting that Attali may have introduced Falcone’s taxlawyer,Allain Guilloux, to Hubert Védrine, the French Foreign Minister,and that the purpose of such a meeting was to lobby for Védrine’sintervention to help reduce the tax demands being made on Falcone.99

At the same time, Le Monde reported that Védrine’s staff hadconfirmed the Minister’s meeting with Guilloux.100 Staff were quoted asdeclaring that the subsequent receipt of correspondence anddocumentation from Guilloux had ‘no impact;’101 the need to insist thatthere was ‘no impact’ simply leads the conclusion that, at the very least,Guilloux must have attempted to influence procedure through thesending of documentation. If this is true, did Guilloux undertake thislobby alone, or was this meeting facilitated by Attali? Attali’s lawyer wasquoted by Le Monde as saying that ‘…there is no trace of anyintervention by Védrine in the Falcone tax case, neither a trace of anyintervention by Attali to Védrine.’102

© G

ama Press Photo

The Scandal

compensation for the attribution, in , of the OrdreNational du Merite to Mr Gaidamak, which was agreedby the President of the Republic, Jacques Chirac.’

The award was in recognition of Gaidamak’s role inthe rescue of two French pilots, who were shot downand held hostage in Bosnia. It was officially requestedby the French Ministry of Agriculture, though quitewhat the Ministry of Agriculture should have to do withawards related to hostage release is anyone’s guess. LeFigaro reports that Marchiani presented the case for theaward to Chirac, though Marchiani himself has beenquoted ‘Jacques Chirac decided to distinguishGaidamak.’ According to Le Monde, ‘The presentationof the medal took place on th July , by MrMarchiani himself, two days after the transfer of .million Francs by Brenco to France-Afrique-Orient.’

Le Monde again reported that Marchiani vigorouslydenied all allegations that have been laid against him. Ina later article, Le Monde quoted Mr Pasqua who stressedthat ‘there is no correlation between the payment fromBrenco to France-Afrique-Orient and the giving of theaward.’

Interestingly, the hostages arrived in Paris shortly beforenew President Chirac hosted a post-Dayton peaceconference on Bosnia. According to Le Monde, GeneralGallois, the original hostage negotiator, commented,‘Upon my return to Paris, everything was organised, and Iinformed the authorities that, for the release of thehostages, it would be sufficient for a high-ranking [French]military official to meet with General Ratko Mladic.’ LeMonde stressed that General Gallois deplored the existenceof ‘parallel negotiations’, and that he did ‘not understandwhy Gaidamak and Marchiani intervened after [him], itdid nothing. It only had the effect of slowing down therelease of the hostages.’

Bernard Guillet, Secretary of France-Afrique-Orientand former diplomatic advisor to Pasqua was broughtbefore the Judges and placed formerly under examinationfor ‘abuse of social benefits’ on the th April .

According to AFP, Guillet denied accusations against him,stating that as Secretary of the organisation, he had onlylearned of the payment after it had been made. Guilletwas also questioned about an armour-plated CitroënSaffrane, worth . million French Francs, given toPresident dos Santos in (whilst Pasqua was FrenchInterior Minister), reportedly co-financed by Sofremi andBrenco.

In a later interview with Le Monde, Guillet gives aninteresting insight into one possible reason for Brenco’sdonation to France-Afrique-Orient. When asked thepurpose of the donation, Guillet stated, ‘Mr Falcone, wholike me knows well the United States, believes that lobbyingis necessary. I am aware that in France the judiciary link it,wrongly, to trading favours’; a comment seeminglyendorsing the behaviour demonstrated to such good effectby Enron in Washington and beyond.

On the th May , Pasqua was also formallyplaced under examination by the Judges for ‘abuse ofsocial benefits and influence peddling’ The following day,Pasqua was formally questioned for a second time, on thisoccasion for ‘illegal financing of an election campaign.’

Pasqua reacted: ‘all this is directed at the political actionswhich I am controlling.’ He went on to say, ‘they have nota single element against me. They have strictly nothing. Ido not accept being placed under formal examination, andwe will take the necessary steps in front of the Chamber ofInstruction of the Paris Appeal Court [to end theinvestigation]’.

In early June , Le Parisien reported that

investigations into the affairs of a number of Pasqua’sassociates revealed the existence of secret bank accounts inMonaco, through which hundreds of millions of FrenchFrancs allegedly passed. The accounts are allegedlylocated at the Credit Foncier de Monaco bank, which isrun by Charles Feliciaggi, who is reportedly close toPresident dos Santos. The allegation centres on themovement of funds that originated from both the Angolan‘Ministry of the Armed Forces’ (presumably, thenewspaper meant the Angolan Defence Ministry) andfrom the ‘Presidential Cabinet in Luanda.’ One of thesetransactions was reported to be as high as US$ million,and Le Parisien suggests that these funds were commissionsfrom the sale of arms. Part of these funds were thenredistributed to offshore companies and to establishmentsin France.

Efforts to foil the Judges

Against the backdrop of this ongoing process, the variousprotagonists involved in the case were simultaneouslymaking an extraordinary effort to force a closure ofinvestigations on various technicalities. In one example,accompanied by considerable vilification of theinvestigating authorities, Allain Guilloux’s lawyerattempted to make a case that the Judges should not havehad the legal right to obtain documentation which led tothe Angolagate investigations, because they were in factinvestigating another case. This is an interestingargument, which would make a mockery of legal dueprocess: because the Judges were in fact investigating anon-related case, they were being expected to forget whatthey had discovered!

In the meantime, Jean-Christophe Mitterrand hadembarked on what could be described as a verbal offensiveagainst the Judges. Le Monde quoted him as saying thatJudge Courroye ‘sweats hatred.’ This public outburst hasnot done him any favours, especially given the vigorousdefence of Judge Courroye and his team by his colleaguesin the Judiciary. Jean-Marie Coulon, the First President ofthe Court of Appeal in Paris reacted, ‘you should exposethe professional actions of the Judge and not hispersonality, as this practice damages democracy whichshould be protected.’

In another attempt to undermine the investigation,lawyer Gilles Goldnadel suggested according to a decree on ‘war material, weapons and ammunition’ that itwas ‘illegal to mount a prosecution without the “request ofthe Defence, War, Navy, Air Force, or Finance Minister.”’


when Unita came they burnt all the fields and now there is not enough food

What us? Charles Pasqua and Jean-Charles Marchiani deny an ‘operational reallobby within the European Parliament’ for Angola.

© A

FP

The Scandal

According to Goldnadel, without their authorisation, theJudges should not be permitted to investigate arms tradingwith Angola. The Court of Appeal in Paris decided onth January that the investigation was valid andshould proceed, stating that it would leave the decision onthe arms investigation until rd February .

In the meantime, the French Minister of Defenceissued the required request, and the Judges’ investigationscontinued. The Minister’s request seemed, for a while, tohave ended the possibility of defence teams avoiding armstrading charges on this technicality rather than letting theirclients answer the charges in court. This situation prevaileduntil th June , when the Cour de Cassation in Parisruled that the arms trading charges against Pierre Falcone,Arkadi Gaidamak and Jean-Christophe Mitterrand shouldbe dropped. The court’s argument supported the initialclaims that the Judges should not have pursued their armstrading investigations without prior Ministerialauthorisation.

In late June , Falcone issued a statement throughhis US spokesman, Jason Rose, in which he clarified hisinnocence. Against the arms trading charges, Falconeresponded that, ‘it [the charge of arms trading] is totallyfalse! The accusation is as destructive and unjust as thecharge of witchcraft was in the Middle Ages. Legally,nothing stands up to close scrutiny. What then, am Iaccused of morally? Of making a lot of money? Mostcertainly. And I have!’

As of going to press, all those who have been charged inthe course of the investigation remain charged. BothPasqua and Marchiani retain Parliamentary immunity andso the investigating Judges are not able to impose anyjudicial control or insist on their detention, as has been thecase for other individuals charged in relation to this matter.However it should be stressed that all should presumedinnocent of all charges that have been laid against them,until such time as the charges are proven in a court of law.

Some other interesting links

In addition to the above tangled web of inter-connectedcompanies and individuals, press articles and investigationsraise questions about other companies which are ofconcern, and which demand urgent clarification.

Banco Africano de Investimentos (BAI)

According to the US Government State Department website, BAI was established in and is listed as the onlyinvestment bank in Angola. According to Liberation, thebank was inaugurated on th November inLuanda. For a bank, apparently set up with US$million capital, which increased during to US$million, and with varied business interests from breweryconstruction in Mozambique to diamond intereststhrough Ascorp, this all seems reasonable enough. BAIhas representative offices in Luanda (and other parts ofAngola), Lisbon, and Luxembourg.

A perusal of press reports about BAI reveals someinteresting items. The newspaper, O Independente reports,‘sources at Futungo say the President is worried by therecent developments.’ The paper continues, ‘this is whywith Menatep, a Russian bank, he started the BancoAfricano do Investimentos….’ In a article inLiberation, ostensibly about the supply of weapons toAngola via ZTS-Osos, Liberation reported ‘ArkadiGaidamak …owns % of the capital of the new bank,BAI.’

According to the BAI’s own published ‘statement fromthe President’, the bank lists its shareholders as follows:

Sonangol, UEE 17.5%

Service Group 8.0%

José Carlos Récio 7.5%

Investec Bank, Limited 7.5%

Amer-Com International 6.0%

Caixa Central de Crédito Agrícola Mútuo, CRL 5.0%

Banco Pinto & Sotto Mayor, SA 5.0%

Dabas Management, Limited 5.0%

Central Investimentos –

Sociedade Financeira de Corretagem, SA 4.5%

Others 34%

An observer might be forgiven for wondering whichindividuals, or companies are the key shareholders whomake up the remaining % ‘other’ group. Africa Hojesuggests that a further % is taken up as follows: Soares daCosta and Mota & Companhia, each %, and SousaCintra holding a further %.

However, according to French press reports, links toAngolagate appear to go further than simply thepossibility of some of the scandal’s alleged key playersholding shares in the bank. According to Le Monde,Jacques Attali, the first director of the European Bank forReconstruction and Development, was paid . millionFrench Francs from accounts of both ‘Brenco and BAI’.

Le Monde continued ‘…an Angolan banking establishment[BAI] in which M. Falcone is a shareholder. Interviewedas a witness on st December [] M. Attali assertedthat his company [ACA] received US$, from theBAI.’ Earlier Le Monde commented ‘According to M.Falcone, the former confidant of François Mitterrand waspaid, ‘to study [the set up] of micro credits in Angola.’

In response to Global Witness’ enquiries about shareownership, BAI has confirmed that Falcone’s companyBrenco holds a % stake in the bank. In other words, itis Brenco that holds stake in BAI, not Falcone personally.However, regarding questions concerning any role byGaidamak, BAI states ‘it is not correct that any of thenames that you refer is or has been shareholder of BAI.’

In the context of Brenco, BAI states that Brenco‘subscribed % and paid in USD.. [US$.million] at the nominal price of issued shares through adeposit of that amount in the account in Lisbon of thePromoting Committee for the incorporation of BAI.Since then Brenco has never used BAI for any kind ofbanking transaction and no deposit account has beenopen (sic) by Brenco at BAI. Neither Brenco or any othername that you refer has ever received any credit or anyother support…’

Regarding President dos Santos, BAI states that thereis ‘no official or unofficial connection between BAI andthe President of the Republic of Angola.’ In conclusionthe letter states, ‘There has been no payments by BAI to


for the people … The future, I don’t know about that either, I only think about

Banco Africano de Investimentos (BAI).

The Scandal

any of the people that you refer [presumably, alsoincluding Jacques Attali].’

In th September letter, in response to further questionsfrom Global Witness, Mário Palhares, Executive Presidentof BAI provided the following additional comments:

● We have no comments on the press editorial policy ofany newspaper. We have given you the correctinformation that Brenco was a founding shareholder ofBAI with a % stake. We have no further comments onthis issue.

● Each shareholder of BAI had commercial or investmentactivity in Angola when BAI was incorporated in .In the case of Brenco, as we have already said in ourletter of th August [], it has never used BAI forany kind of banking transaction and no deposit accounthas been open by Brenco at BAI. Therefore we considerthat stake was a strict financial investment.

● Mr Gaidamak has never had any role with BAI, at anytime.

● We make no comments on press allegations. We havegiven you the correct information that BAI has nevermade payments to any of the people that you refer.

● As you say, our answer was ‘precise and helpful’. In theinterest of transparency we have given you preciseinformation all of which is completely reliable and true.Besides, the information referred to is publicinformation and is therefore accessible to the generalpublic.

In conclusion, the letter ends, ‘As a last comment, we see noreason to keep going on this exchange of letters and fromour point of view, we think that our contribution to yourwork should be considered as final.’

Elf Petroleum Angola Ltd – an invisible company from the Elfgroup?

Since the press explosion of Angolagate in December ,much has been made of efforts to protect French interests,as a consequence of the political decisions and actionsundertaken by the various individuals involved in thescandal. Further enquiry reveals, however, that theinvolvement of Elf in Angola is more complicated thanmost observers might have assumed. Angolan registered ElfPetroleum Angola Ltd. is (or at least was) the Elfsubsidiary that held a % stake in the Cabcog concessionin Cabinda’s Block , operated by Chevron.

Elf Petroleum Angola Ltd appears to have beenremoved from all combined [i.e. TotalFinaElf] groupdocuments.

Regardless of the company’s apparent disappearance,there are a number of reasons to suggest that the companydoes exist:

● In contrast to current company publications, ElfPetroleum Angola Ltd is clearly referred to in Elf ’s pastcompany publications as having been established in.

● Elf accounts clearly list Elf Petroleum Angola Ltdas a % owned subsidiary of the parent group. Elf accounts clearly show that Elf Petroleum AngolaLtd was .% owned by the parent company. Whathappened to the .% that seems to have been lostbetween and ?

● As of late November , Chevron continued to reportthat Elf Petroleum Angola Ltd was a partner in BlockZero.

● Elf Petroleum Angola Ltd is clearly referred to, asdistinct from Elf Exploration Angola, in the AngolanMinistry of Petroleum’s publication, ‘Relatório deActividades do Sector ’; GEPE/MINPET May.

● Evidence in Global Witness’ possession indicates that ElfPetroleum Angola Ltd has a Bank account at the rued’Antin branch of Paribas. Attempts were madethrough an unrelated [to Angolagate] civil legal actionto freeze, what sources suggest, were significant fundsheld in this account. This action was not related to anyalleged wrongdoing by Elf, but to attempts to retrieveAngolan State revenue held in the accounts of Elfsubsidiaries, due to the fact that Angola had reneged onfinal payments for a construction project.

Global Witness sought clarification from TotalFinaElf aboutthe activities of Elf Petroleum Angola Ltd on the st August. Global Witness also asked the company its views oncompany transparency relating to payments to nationalgovernments on the th January . As of going to press,the company has failed to respond to either request.

Falcon Oil and ProdevFalcon Oil is a % stakeholderin the Exxon-Mobil operatedBlock . Prodev is a % holderin Elf ’s (now TotalFinaElf ’s)Block . ‘A significantproportion of the estimatedUS$ million in signaturebonus payments to theGovernment for these blocks,together with BP operated Block, were diverted by theGovernment for arms procurement.’ Since then, therehas been considerable press speculation as to what thesecompanies actually are, with suggestions that they are notwell known within ‘big oil’ circles as oil companies.

Following the publication of A Crude Awakening,investigations continued into these companies. Despitenumerous sources in Luanda suggesting that Falcon Oil wasthe West Virginia, United States, based company FalconOil and Gas, the reality is that the Angolan ‘Falcon Oil’ isFalcon Oil Holdings S.A., registered conveniently inPanama. The company operates an office in Paris. We arenot suggesting any wrongdoing by these companies, butthey should be subject to the same transparencyrequirements as other companies.

Other African UnknownsIn an article entitled ‘Roc Oil’s mysterious partners’, AfricaEnergy Intelligence notes the existence of two partners inthe Cabinda South Block, which it refers to as ‘unknown inthe oil exploration field in Africa.’ These companies areForce Petroleum, which holds % in the Block, andLacula Oil, with %.

According to Africa Energy Intelligence, ‘ForcePetroleum is a private firm based in the United Kingdomand its stake in Cabinda South, is thought to be its loneasset.’ The article continues ‘as for Lacula, it is reportedlycontrolled by a Western Major, which is active in Angola.Lacula oil had already been TotalFinaElf ’s partner onCabinda South, with the same % stake, but it has noother assets.’

In view of concerns about the lack of transparency inthe country, Global Witness encourages the companies toreveal their beneficial ownership and to provide detailsabout their activities.


getting food the next day.” –Displaced man, early 2001a “There has been no [food]

Falcon Oil – an unknown in the deepwater oilsector holds % in Exxon-Mobil’s Block .

The Scandal

distribution for a long time. The children are hungry. In order to feed them,


President dos Santos confirms suspicions aboutAngolagate President dos Santos’ outspoken reaction to the Angolagate scandal seems to confirm, more orless, most of the suspicions and charges of the Paris judiciary.As a damage limitation exercise, it ishard to see how the President could have made the situation worse.The Angolan President’smost telling comments came in his address to the incoming French Ambassador on 23rdFebruary 2001. In a quite extraordinary speech, dos Santos accused ‘agents of the French State’ ofpropitiating ‘conditions for mind-poisoning and libellous campaigns affecting the reputation ofAngolan entities and harming the interests of the Angolan Government…’.145

Having stated that he had no intention of interfering in French internal affairs, the Presidentthen did exactly the opposite. He acknowledged the key role of Falcone and his operation, whichhe said had State approval in France. In his own words, ‘…I have a duty to acknowledge thatsome of the people currently the targets of law suits in France made an enormous contributionto the development of friendship and cooperation between Angola and France …’.145 Hecontinued, ‘Mr Pierre Falcone, for example, through his company, supported Angola at a crucialmoment in its history and, thanks to that support, democracy and the rule of law werepreserved, millions of people were saved from impending genocide, and we freed our cities fromthe military sieges and massive and indiscriminate shelling that were causing desolation anddespair.’145

President dos Santos then confirmed the business advantages to France of this arrangementby stating, ‘…that gentleman dealt with sensitive matters which had the consent of the Frenchauthorities and were very useful to Angola.We interpreted his action as a gesture of confidenceand friendship by the French State and, for this reason, my Government took decisions thatpermitted spectacular growth of cooperation with France in the area of oil and economically andfinancially.’145 He further insisted that ZTS-Osos was not a French company and that theequipment acquired through the company did not transit French territory, stressing that thesource of weapons was through, ‘…some countries in Eastern Europe, particularly Russia.’145

President dos Santos also noted that ‘all this deliberate confusion had already happened withMr Tarallo [presumably a reference to statements attributed to former Elf executive André Tarallo,which suggested that Elf had operated a US$60 million annual slush fund through accounts inLiechtenstein that were used to pay bribes to various top officials in certain African countries,including Angola] and I must confess to you, Mr Ambassador, that this situation simply leaves usperplexed.’145

Finally, having implicitly linked the success of French business interests to the activities of PierreFalcone, the President warned of the consequences of inaction to bring current legal proceedingsto a close, as ‘friendship is like a plant which, if not regularly watered and fertilised, dries up. I thinkit is now up to your Government, through practical gestures, to do more for friendship andcooperation between our two peoples.And it is with that sentiment that I welcome you andwish you success in the fulfilment of your mission.’145 In diplomatic terms, not only was this aninteresting view of non-intervention, but the handing of a poisoned chalice to the new FrenchAmbassador.

Angolans connected toAngolagateAmongst the 26 diskettes found inFalcone’s secretary’s apartment in Paris,are details of payments made by Brencoto a number of prominent Angolans.Amongst these individuals, Elísio deFigueiredo seems to have done the best.As already noted, de Figueiredo was thethird Angolan Ambassador based in Paris.His role seems to have been to act asliaison between President dos Santos andFalcone and Gaidamak. Le Monde reports‘it is believed that the Ambassador, Elisiode Figueiredo, was also remunerated: MFalcone might have given him more thanUS$18 million.’The paper continued,‘Isabelle Delubac [Falcone’s secretary]stated to the investigators,“I saw thisperson in the office of Brenco on severaloccasions.”’26

According to Le Monde, Falconereportedly stated ‘I can confirm that wegave cash to M. Elisio de Figueiredo inthe context of the costs and actions thathe had to undertake in his missions.’26

Quite why it was necessary for a privateindividual to cover the costs of anAngolan Government official operating inhis official capacity is not clear. Le Mondecontinued, ‘the businessman also specifiedthat “in the context of these missions,”funds were transferred to other Angolanpersonalities, such as the Interior MinistryVice-Minister, head of secret services, MMeala.’ Falcone was quoted, ‘I want tomake it clear that it was in order tofacilitate things and not to buy people. Inother words, it is not corruption, but it iswithin the operational logic over there inAngola.’26 In light of the Enron scandal,presumably Falcone also felt that theprovision of US$100,000 to the Bushcampaign was ‘…within an operationallogic over there …[in the United States].’

This telling statement, implyingthat public duties are seen as aform of private property by theAngolan ruling elite is a view thatshould certainly be challenged. It isalso interesting to see that Falconeappears to hold the same view asBernard Guillet, Secretary ofFrance-Afrique-Orient, who said ‘MrFalcone, who like me knows well theUnited States, believes that lobbyingis necessary. I am aware that inFrance the judiciary link it, wrongly,to trading favours.’116

Dos Santos extends hisnon-interference inFrench judicial mattersby taking his case toChirac. Dos Santos’April letter toChirac, as published inLe Nouvel Observateur.

Oil Companies

Introduction

GLOBAL WITNESS strongly believesthat international oil companies arecomplicit in the economic abuses ofAngola’s ruling elite and theperpetuation of war because they

choose not to publish the revenues that they pay to theAngolan State, preventing the Angolan people frombeing able to render their Government accountable overthe use of those revenues.

This section reviews the behaviour of oil companiesin this regard. It starts by providing a brief history ofAngola’s oil sector and reviews the major players in theindustry. After reviewing current tax disclosurerequirements in the developed world, the discussion thenfocuses on Global Witness’ dialogue with oil companiesoperating in Angola after the publication of A CrudeAwakening in . This dialogue was aimed at facilitatingvoluntary action by companies to adopt a system of fulltransparency, and to render details of their consolidatedpayments to all national governments publicly available.A series of repeated objections to disclosure of paymentinformation – despite the fact that companies routinelyprovide such information in the developed North – areevaluated and, Global Witness believes, are foundwanting.

Although some of the more progressively-minded oilcompanies recognise their responsibility to provide thisinformation, so far only one company, BP, has publiclyannounced an intention to reveal relevant data (when itsoil production in the country commences). Theannouncement of BP’s intension to ‘do the right thing’brought a battery of veiled threats from Angolan oilcompany, Sonangol. The extraordinary confidentialletter that Sonangol sent to BP is reproduced in thesection ‘Company Responses – BP Amoco’.

The rabid response by Angola’s elite has revealed thelimitations of voluntary initiatives on transparency.Instead, the issue has highlighted the need for aregulatory approach to address the issue by Northernfinancial regulatory authorities, such as the US Securitiesand Exchange Commission or the UK FinancialServices Authority Listing Authority. A section entitled‘Regulating payment disclosure’ analyses this case; asection on ‘Risks of complicity for companies’ points outthe dangers of non-transparency to investors andshareholders.

The IMF Staff-Monitored Programme in Angola isalso reviewed and the integrity of non-disclosure by oilcompanies is questioned given the emerging standards ofwhat constitutes responsible corporate behaviour in anumber of different international fora. Comments(reportedly attributed to economists associated with theOil Diagnostic study) suggest that, in , up to US$.billion in revenues and loans – almost one third ofAngola’s state income of between US$- billion –cannot currently be located. A correspondence from aWorld Bank official states: ‘Successive IMF/WB missionsduring the last few years worked with data supplied bythe authorities and found large unexplained outlaysequivalent to between one-third and one-half of totalreported fiscal revenues. Unfortunately, these problemshave not yet been resolved, and the staff of the IMF is

you have to go to the fields very far away … My head is sore! My arms and


PART TWO: THE COMPLICITY OF OIL COMPANIES

awaiting explanation of the disposition of about US$.billion in fiscal revenues and external loans in .These calculations are solely derived from governmentdata. The information on current payments made by oilcompanies is still scant, since some companies claimconfidentiality clauses and no framework has beenestablished for an ongoing reporting of oil-relatedpayments’.

Figures produced at the end of this section alsoreveal, for the first time, the taxes that each oil companypaid to the Angolan Government in the year andshow an unaccounted black hole containing a differenceof US$ million between revenue data reported by theMinistry of Petroleum and that reaching the Ministry ofFinance. This suggests that the current discrepanciesuncovered by the IMF are part of a pattern of sustainedeconomic abuses that is deliberately benefiting from civilconflict and unaccountable government.

The oil industry in Angola today

Angola is Sub-Saharan Africa’s second largest oilproducer, after Nigeria. The national economy is highlydependent on the oil sector, which accounts forapproximately .% of Government revenues.

Angola’s off-shore is considered a ‘world-class’ area foroil production, with some two thirds of exploration wellsstriking oil, compared to a % success rate for Nigeria’sdeep offshore and a global average of around %.

This has resulted in considerable interest in potentialnew prospecting areas from all of the key global playersin the upstream oil industry. In , analysts were

Whilst Angolan and international elites get richer from oildiscoveries off Angola, one child now dies of preventablediseases and malnutrition every three minutes.

Oil Companies

feet are sore! It is 50 kilometers! You have to make the journey at night,


Development of Angola’s oilindustryAngola’s oil industry began in 1955 with the discovery of oilin the onshore Kwanza valley by Petrofina.The industrybecame more important with the discovery of offshoredeposits in the colonial Angolan enclave of Cabinda in the1960s by the Cabinda Gulf Oil Company (CABCOG), whichbecame a subsidiary of Chevron in 1984.143

During 1978 and 1979, a seismic survey of the continentalshelf off the coast of Angola indicated significant additional oildeposits.This resulted in the creation of 13 ‘blocks’, in additionto the original Cabinda Block 0, that were located in theshallow waters off the coast of mainland Angola. Followingthe auctioning of these blocks, the Government created afurther 17 new blocks numbered 14 to 30, extending outinto deeper waters beyond the initial 14 blocks – these arereferred to as ‘deep water blocks’.155 – See map right

In May 1999, the Government awarded the first three so-called ‘ultra-deep water blocks’: Blocks 31-33, which wereacquired by BP-Amoco, Elf and ExxonMobil respectively. InSeptember 2001, the fourth ultra-deep block, Block 34, wasawarded to Sonangol, with technical assistance provided byNorsk Hydro.146

In theory, each block is finalised through a competitivebidding process and once the block is agreed, a ‘signaturebonus’ is paid by each of the participating companies in theblock.This is a non-recoverable payment that the companiesdeclare they will pay in their bidding statement if their bid issuccessful. Once the bidding process has been finalised an‘Operator’ company is chosen.The Operator is the companythat will be in charge of the development of the block,making the key decisions about investment levels, design ofnecessary equipment and its subsequent deployment toensure that the development of the block takes place asefficiently as possible. Equity partners often contribute toblock development under the direction of the Operator.Theyare effectively co-investors, with the level of their investmentand subsequent share of profits determined by theirstakeholding.143

Key legislationFor a brief discussion of other aspects of Angolan oil relatedlegislation, please refer to Global Witness’ December 1999report, A Crude Awakening. However, the following is worthreiterating here:

Under Angolan Law No 13/78 of 26th August 1978147, itis established that ‘all deposits of liquid and gaseoushydrocarbons which exist underground or on thecontinental shelf within the national territory, up tothe limit of the jurisdictional waters of the People’sRepublic of Angola, or within any territory domainover which Angola exercises sovereignty, asestablished by international conventions, belong tothe Angolan People148, in the form of State property.’

For any discussion of the merits of transparency for theoil sector in Angola, this piece of legislation is of immensesignificance. If, as stated in the above law, ‘liquid and gaseoushydrocarbons’ are natural resources that belong to thepeople of Angola, surely the people of Angola have a right tohave access to data concerning the revenue that is generatedfrom the exploitation of their natural resources? Currently,Angolans do not have access to such information, and arepositively dissuaded from obtaining it.

Contracts for oil blocksUntil 1979 the favoured form of contractual relationship wasthe ‘Joint Venture Agreement’.The majority (as a percentageof total Angolan oil production) of the currently producing oilblocks are joint venture agreements in which each companytakes a percentage of the licence, and each company isrequired to pay development and operational costs accordingto the percentage stake they hold.After the payment of taxesand royalties, the companies then receive the profitsremaining according to their share. In this kind of agreement,Sonangol is required to pay up-front development costs justlike the other participants in the block.143 Currently, the mostimportant producing joint venture block is the Chevron-operated Cabinda Block 0, which pumps approximately 70%of Angola’s oil production.155 The other main productioncentres are Block 3, off the northern coast, Block 1, and Block2, both located off Soyo.143

Since 1979 the favoured form of agreement has been theProduction Sharing Agreement in which foreign oil companiesserve as contractors to Sonangol, and bear the full cost andtherefore risk for exploration and development of fieldswithin the blocks. Given that Sonangol is also effectively anequity partner, its costs are usually borne by the otherstakeholders in the block during this early phase.The costs ofdevelopment and the subsequent running of productionfacilities are covered by a percentage of the oil produced(which can be as high as 50%), which is known as ‘cost oil’.After payment of taxes due to the government, theremainder ‘profit oil’ is divided between the equity partnersand Sonangol according to their equity stakes in the block.143

Angola’s offshore oil blocks.

Oil Companies

through the mata, or the tropa (government army) . . . will get you. Here, these


predicting a potential US$ billion of investment overthe next four years. However, Angola’s oil productionfor remained at approximately , barrels perday (bpd). Analysts forecast this to rise to around, bpd by , as new production comes on-stream, divided among blocks as follows:

Block Production (bpd)

Block 0 500,000

Block 2 50,000

Block 3 95,000

Block 14 95,000

Block 17 100,000

Others 60,000

Total 900,000

N.B.The Economist Intelligence Unit does not specify which blocks fit under ‘others’.

Recently awarded Blocks such as , , and -, aswell as additional fields from the current blocks are notexpected to produce for a number of years.ExxonMobil’s Block is expected to come on-stream in, producing a peak of , bpd. The time framefor first production from the ultra-deep water Blocks - are harder to predict given the immense water depthsand engineering requirements., The next significantincrease in Angolan oil production will start in ,after the Girassol field from TotalFinaElf ’s Block came on-stream in December .,,

Despite the regularity of oil company press releasesover the past year lauding their latest new finds, thegradual expansion of Angola’s oil industry has not allbeen plain sailing. Relations between the Governmentand the companies took a downturn towards the end of, when the Minister of Petroleum José MariaBotelho de Vasconcelos stated that Angola wanted toslow the pace of development to extend the life of theproduction cycle in Angola’s deep water blocks., This

friction was epitomised by ExxonMobil’s argument withSonangol over the development of Block . Minister deVasconcelos accused ExxonMobil of choosing an undulycostly technical option to develop the block and forfailing to consult adequately beforehand., Such amove, he claimed, would have had a negative impact onthe Government’s share of future oil revenue generatedfrom the block., There is clearly an inconsistencyhere between the legitimate interests of the AngolanState to maximise its revenue from its resources and theprofit motive of the oil companies, which seek tomaximise return in the shortest possible time.

According to the Economist Intelligence Unit (EIU)another reason for the slow development of some ofAngola’s new oil fields is a shortage of cash withinSonangol. This is surprising given Sonangol’s recentstring of loans from international banks (See Internationallending to Angola – page ). The EIU points out that someindustry sources suggest this is due to cash diversionfrom Sonangol, without being more specific., If thisis true, it should be of major concern to the IMF.

Signature bonuses and the awarding ofBlocks -

The value of signature bonuses has increaseddramatically for the attribution of ultra-deep blocks. Inthe past, the awarding of contracts was determined onthe basis of a specific company submitting a detailedplan to the Government for the setting up and runningof an oil block, with details of profit-sharing worked outthrough negotiation. Sources in Luanda now indicatethat the key decisions made regarding the awarding ofoil blocks are taken at the highest level, and licenceawards are skewed more towards a political rather than atechnical basis.

In , Sonangol’s then new director Joaquim

Petrogal

Portugal

Block / Share in block (%)

1 Safueiro (10%) A

14 (9%) A

Cabinda C. (20%)

32 (5%)

33 (5%)

Norsk Hydro

Norway


34 (30%)

17 (10%) A

5 (27.5%)

9 (10%)

25 (10%)

Statoil

Norway


17 (13.33%) A

15 (13.33%)

31 (13.33%)

Shell

UK/Netherlands


18 (50%)

21 (10%)

34 (15%)

The top ten oil companies in AngolaThe ten most active oil companies currently operating in Angola are listed below 146,149, in terms of their block ownership and their role within the blocks,either as Operator (green), or as partner (black). Current producing blocks are marked A.

Sonangol

Angola


4 Kiabo (100%) A

5 (30%)

3 (100%)

34 (20%)

0/A, B & C (41%) A

2/80-85 (25%) A

3/85-91 (6.67%) A

14 (20% ) A

Area A (51%) A

Area B (51%) A

19 (20%)

21 (20%)

22 (20%)

24 (20%)

25 (25%)

31 (20%)

32 (20%)

33 (20%)

Cabinda N. (20%)

Cabinda C. (20%)

Cabinda S. (20%)

TotalFinaElf

France/Belgium


3/85-91 (53.34%) A

17 (40%) A

Area A (49%) A

Area B (32.6%) A

3/80 (50%)

19 (30%)

32 (30%)

0/A, B & C (10%) A

1 Safueiro (25%) A

2/80–85 (27.5%) A

14 (20%)

31 (5%)

33 (15%)

ExxonMobil

USA


15 (40%)

20 (50%)

24 (50%)

33 (45%)

17 (20%) A

9 (35%)

21 (20%)

22 (25%)

25 (35%)

31 (25%)

32 (15%)

ChevronTexaco

USA


0/A, B & C (39.2%) A

14 (31%) A

2/80-85 (20%) A

9 (40%)

22 (40%)

Area B (16.4%) A

20 (50%)

Agip

Italy


1 Safueiro (50%) A

25 (40%)

0/A, B & C (9.8%) A

3/85-91 (16%) A

14 (20%) A

3/80 (15%)

15 (20%)

BP-Amoco

UK


5 (27.5%)

18 (50%)

31 (26.67%)

17 (16.67%) A

15 (26.67%)

21 (20%)

Oil Companies

tropa, the Commandos, they are well-behaved. No problems. But the tropa

Duarte da Costa David, appointed by President dosSantos, introduced the concept that companies shouldpay one-off non recoverable signature bonuses, which isa standard practice in other oil producing countries.

According to consultants Wood Mackenzie, thesignature bonus payment of January for Block was US$ million. Based on the data in the table below,the average of all the bonus payments paid between thesigning for Block and Block in January isUS$. million, with a high of US$ million for Block. Blocks and attracted slightly higher bids ofUS$ million and US$ million respectively. Eventaking these higher payments into account, the variouscompanies paid an average US$, per km for theseblocks.

Given the extraordinary interest in Blocks - it wasclear that the bonus payments were likely to be at thehigher end of the spectrum of payments to date.However, sources indicate that the companies massivelyunder-estimated the up-front demands of the Presidency,and rather than paying the estimated US$ million foreach block, they were forced to pay significantly highersums. Wood Mackenzie estimates suggest that US$million, US$ million and US$ million were paidfor Blocks – respectively. A Crude Awakeningreported that the total signature bonus payments forthese three blocks were approximately US$ million(roughly % of the national budget for the year ).In other words, for blocks of roughly comparable size tothose previously mentioned, the companies involved inBlocks - were willing to pay an average US$,per km, which represents an increase of more than tentimes (%) over the average of the previouspayments.

When asked about the size of these signature bonuspayments, the oil companies have generally suggestedthat they are not highly inflated given the area of theblocks available. This is not accurate: the surface area ofBlocks - is roughly comparable to previously signedblocks. Similarly, Wood Mackenzie suggests that Blocks, and may hold reserves with a comparablevolume. So, it appears that the new blocks do not hold% more oil than those paid for previously.

On one level the Angolan Government should becongratulated for extracting the maximum possible


downpayment from the international oil industry forAngola’s resources, especially if this considerablerevenue had been used for constructive development ofthe country. Instead, as A Crude Awakening reported,sources indicate that around US$- million (of thetotal signature bonus payments for blocks to )disappeared into the Presidency for clandestine armspurchases. In the absence of further clarification fromthe companies and the Angolan Government, such highpayments appear as both a lost potential benefit for theAngolan people and possibly a bad deal for thecompanies and their shareholders.

No accountability without transparency

Since the launch of A Crude Awakening in December ,Global Witness has been involved in a dialogue with theoil companies operating in Angola. Its purpose has beento extend the definition of corporate social responsibilityby discussing the rationale for oil companies to publishdata about their payments to the Angolan Government –a concept that will be referred to as ‘full transparency’.

Both the Angolagate scandal and Global Witness’investigations clearly show that a significant proportionof Angolan State income, of which almost % isderived from oil production, is subject tomisappropriation by Angola’s elite and that this processof state looting is intimately tied to the progress of thewar. Against this background, Angolans have nocapacity to hold their government to account for itsactions because lack of information about governmentincome prevents any adequate scrutiny of currentpractices. As basic information about governmentincome is not available, how is it possible for ordinarypeople to demand accountability of Governmentexpenditure? The almost complete lack of press freedomsimply compounds the problem.

Companies operating in Angola that are notexercising full transparency make themselves complicitin both the continued funding of a virtually privatisedwar and in the wholesale robbery of the state on a scaleequivalent to that perpetrated by President Abacha inNigeria and President Mobutu in former Zaire. This isnot to say that these companies are directly involved in theprocess of state looting, or in paying bribes, though somecertainly are. However, given that it is revenue from oilthat generates the vast majority of the State’s income,which, in turn, is misappropriated, oil companies cannotabsolve themselves from this direct causal relationshipwithout full disclosure of payments. Global Witnessstrongly believes that adopting a system of transparencyby revealing the revenue created by the oil industry inAngola will create transparency for the bulk ofgovernment revenue by default, thus enabling ordinaryAngolan citizens to begin the process of calling theirgovernment to account for its utilization of state assets.The lack of full transparency by companies alsoundermines the spirit of Law No /, which statesthat Angolan oil belongs to the Angolan people.

Global Witness calls on companies to publish all dataon tax and other payments that are made to nationalgovernments – as is already routinely published inEurope, North America and Australasia. Although thefocus of this report is on Angola, companies shouldpublish such payments for all their countries ofoperation.

Table of Estimated Angolan Deep Water Oil BlockSignature Bonus Payments

Bonus

Licence Date Area Bonus per net area

Km2 US$ million US$/Km2

Block 17 Jan 1993 5,030 6 1,193

Block 16 Jan 1993 4,912 13 2,647

Block 15 Sep 1994 4,172 35 8,389

Block 14 Mar 1995 4,094 15 3,664

Block 20 Oct 1996 5,000 10 2,000

Block 18 Oct 1996 5,000 9 1,800

Block 22 Jan 1998 5,480 16 2,920

Block 19 Feb 1998 4,850 10 2,062

Block 21 Jan 1999 6,180 45 7,282

Block 24 Jan 1999 4,778 70 14,650

Block 25 Mar 1999 4,852 60 12,366

Block 31 Jun 1999 5,349 400 74,780

Block 32 Jun 1999 4,317 250 57,911

Block 33 Jun 1999 5,996 350 58,372

Total 1,289

Source: Reproduced from Wood Mackenzie ad hoc report – Bonus paymentfigures are estimates, and total figures paid may include other payments, such asfor ‘social projects’.

Oil Companies

[there, en route] will stop you and take your food … They don’t kill you, but

Company dialogue

THE DIALOGUE that followed thelaunch of A Crude Awakening inDecember consisted of one-to-one meetings between GlobalWitness and many of the key oil

companies concerned. It also included a multi-stakeholder meeting that was hosted by the UKForeign & Commonwealth Office during October in London, at which the issue of fulltransparency was a central issue on the agenda.

Some companies involved in this dialogueresponded favourably to the principle of fulltransparency, both for Angola and on a worldwidebasis. However, a number of objections andmisunderstandings that have been aired duringvarious meetings also need to be addressed. These arediscussed below.

. Corporate confidentiality

Companies have suggested that calls for transparencydemand that oil companies and their subsidiaries topublish confidential corporate information. It haseven been proposed that Global Witness is calling oncompanies to publish data on the bidding process foran oil block whilst it is still underway.

This is false. Global Witness is not interested in thebidding process for oil blocks whilst underway – this isclearly confidential information. An interest couldpotentially develop if such a bidding process involvesthe payment of bribes, or payments in kind, or if theprocess of block acquisition is undertaken outside ofan open bidding process. In normal conditions, thetime for public disclosure should be after the biddingprocess has been completed and the operator and itspartners have been chosen.

Furthermore, it is hard to understand why basicdata about tax payments and signature bonusesshould be deemed confidential, when it is clear thatcompanies already provide such data in theircountries of origin. It is clear that companies areoperating double standards: corporate transparencyseems to be a necessary concept for the developedNorth, but an entirely different matter for thedeveloping South. Global Witness is calling oncompanies to be transparent throughout theiroperations, worldwide.

. International oil companies are majorplayers

Companies have suggested that their payments to theAngolan Government do not make up the majority ofits income from oil. Instead, it has been suggestedthat the majority of revenue comes from Sonangol’spartnership arrangements in block development.Thus, if the aim is to determine a reasonable estimateof government income, asking oil companies for theirpayment data would only provide a small amount ofthe necessary information.

There are several reasons why this objection doesnot stand up to analysis.

Firstly, the majority of Government income forthe next decade of production will increasingly bederived from oil company tax payments. During thisperiod, the main bulk of the Angolan State’s income


Current practices on tax paymentdeclaration

UK registered companiesIn the UK, companies file their end-of-year accounts at the UKRegistrar of Companies (at Companies House), according to UKStandard Accounting Principles.These Principles generally complywith International Accounting Standards. Declarations of taxpayments are listed as ‘UK tax payments’, both broken down andnet, and ‘overseas taxation’, which is not broken down.161

Clearly, if a UK-registered company only worked overseas inAngola, all taxes recorded overseas would refer to Angola.This isthe case with some subsidiary oil companies that have been set upas part of an oil company’s overall Angolan operations; for example,BP’s subsidiary in Angola, is BP Exploration (Angola) Ltd, which is aUK registered company. However, from the point of view of anAngolan citizen, such a scenario is confusing: before being able toobtain data on oil company payments, it would first be necessary toknow the name and place of registration of the appropriatesubsidiary companies, and it would require payment data to becollected from numerous international locations.This task is furthercomplicated by the fact that parent companies often deploy a largenumber of subsidiary companies, which may be operational only fora short period of time.

Even worse, if a UK-registered company has operations in anumber of different countries, the ‘overseas’ tax payment dataincluded in annual accounts are an amalgamation of separateinformation for all locations.Therefore, examination of the annualaccounts of such companies would not reveal tax payment data forAngola. In principle, an interested citizen could then consult acompany directly to obtain payment data for a single jurisdictionbut, of course, in the case of Angola, oil companies do not give outsuch information.

Non-UK registered companiesIn the US, Europe and other developed jurisdictions, tax paymentdata for companies operating in those countries are easily availableas one can go to the equivalent of UK Companies House anddirectly request such information. However, such information is notavailable in Angola and other less-regulated states.This lack ofinformation is compounded by the problem that better regulatedjurisdictions fail to apply the same level of reporting to their homeand overseas operations.

Given that all key information is already available to oilcompanies, though not readily accessible, Global Witnessrecommends the following measures as part of its policy of ‘fulltransparency’:

Parent companies should provide a breakdown of taxes andother payments made to national governments for all countries ofoperation – for example, data should be provided in the parentcompany’s consolidated annual reports in addition to informationalready available in those of subsidiaries. Data should be listed astotal net payments to national authorities for each country ofoperation and should appear in both the annual returns toregulatory authorities and the annual reports of parent andsubsidiary companies.

Data should be provided locally in the national language of eachcountry of operation, as well as in the home language of thecompany.

Parent companies should publish the names and locations ofregistration of each subsidiary company and specify their countriesof operation.

It should be pointed out that publishing these data involvesnegligible cost for the companies concerned, given that they alreadyhave such information to hand for internal accounting purposes.

Oil Companies

from oil will be generated by company tax paymentsrather than by partnership arrangements withSonangol. Global Witness has reached this conclusionfrom the analysis of BP-Statoil Alliance’s forecastdata for Block . (For further details, see Elephant’s tailor elephant – right.)

The value of such tax contributions has beenaugmented by massive signature bonuses from oilcompanies. In July , BP-Amoco, TotalFinaElf,ExxonMobil and their equity partners paid roughlyUS$ million in signature bonuses for Blocks -,generating approximately % of total Governmentincome for that year. Although these are one-offpayments, in recent years there has been an ‘oil blockauction bonanza’ that has resulted in regular cashbonus payments to the Angolan State. Block agreed in , has continued this trend with a bonusof US$ million being paid.

Any discussion of the significance of paymentsmade by the companies is incomplete without alsoconsidering the fact that the majority of Sonangol’sown share of production is used to service Angola’sdebt. Lack of transparency makes it almostimpossible to be precise, but sources suggest that thenext three to four years of the Government’s share ofoil production has already been mortgaged to providefor previous loans (See International lending to Angola –page ). Therefore, the bulk of deployablegovernment income (i.e. income available aftersubtracting the amount needed to service debt) willcontinue to be derived from taxes and ad hoc bonuspayments from oil companies.

This objection also begs the question of why, if companypayments are apparently unimportant, companies are colludingwith the Angolan Government not to publish them clearly andtransparently.


Elephant’s tail or elephant – thereality of oil companiescontributions to the AngolanState incomeOil companies provide revenue to the government bymeans of their tax payments, bonuses and awards, andfrom oil revenue generated by Sonangol’s oil share salesand Sonangol’s concessions. Some oil companies however,have argued that their tax payments make a minimalcontribution to Government income compared toSonangol’s profit sharing arrangements. One company usedthe analogy that payments made by international oilcompanies are the elephant’s tail rather than the elephantitself. However, far from being ‘minority contributors’,Global Witness can reveal that, over the medium term, oilcompanies are the main direct contributors to AngolanState income.

The following analysis is based on 1997 calculations byEnvironmental Resources Management, commissioned bythe BP-Statoil Alliance for Block 17, a deep-water blockwhich has started production in December 2001.156 In thenear future, the majority of Angola’s income will start to bederived from such young oil blocks (see The Oil Industry inAngola Today – page 33). Although the original oilproduction forecasted for Block 17 was inflated, therelative contributions of company tax and Sonangol’s profitsharing are maintained.

The BP-Statoil Alliance data show that oil company taxpayments constitute approximately 68% of Governmentincome during the first nine years of production. Relativeparity between tax payments and Sonangol’s share ofproduction is only achieved in year 10 and overall, theaverage percentage of Angolan Government income beinggenerated through taxes from the oil companies for theestimated life of the field is forecast to be 43.74%.

As Angola’s oil production is scheduled to move awayfrom Joint Ventures to Production Sharing Arrangementssuch as that in Block 17, the majority of Governmentincome will start to be generated from a similar paymentschedule. In other words, over the next 5-15 years (andprobably longer as more and more blocks are contractedto new operators and come on-stream),Angola will beentering a phase when over 60% of Government incomewill be generated from tax payments from companies.

In themedium term, it appears that oil companies arethe elephant rather than its tail.

0

500

1000

1500

2000

2500

3000

3500

2001

2003

2005

2007

2009

2011

2013

2015

2017

2019

2021

2023

mill

ions

US

$

Company Tax Payments to Government

Sonangol Profit Share

Total Government Revenue

Gas flaring – Angola’s offshore.

© Jeff Barbee / Panos Pictures

Oil Company tax payments against Sonangolprofit share Source: BP-Statoil Alliance data estimates for Block 17

they beat you … and make you carry things for them.” –Displaced man, early 2001a

Oil Companies

. The role of the International Monetary Fund (IMF)

Companies have suggested that the best way forward would be through thepublication of data generated from the ‘Oil Diagnostic’ study within IMF’sStaff Monitored Programme.

Although important, Global Witness believes that the IMF process isinsufficient. There are a number of problems with this approach as ananswer to the lack of oil revenue data available for public scrutiny in Angola.It pre-supposes that the IMF Oil Diagnostic work was thorough (whichmostly depends on the quality of information that was made available to theKPMG team) and that it will be made publicly available (depending onwhether the Government will permit an adequate public airing of thefindings). Furthermore, any IMF operation in Angola is not a replacementfor full transparency by oil companies in all countries of operation, as theOil Diagnostic is specific only to Angola. (For a more detailed discussion, see TheIMF in Angola – right)

. Confidentiality agreements

Companies have signed confidentiality clauses in their Product SharingAgreements with Sonangol and are therefore reluctant to publish paymentdata.

This is of concern since it adds another layer of controls over theprovision of data to the Angolan public, and provides the companies with areason to avoid improving transparency. By acceding to a demand for aconfidentiality agreement preventing the publishing of basic payments to thestate, companies are in effect aiding and abetting the continuation of theGovernment unaccountability.

Does the confidentiality clause cover tax payments to the Government?Commercial legal opinion questions whether confidentiality clauses shouldprohibit companies from disclosing tax payments to the AngolanGovernment. The Product Sharing Agreement is a partnership agreementbetween the contractor (i.e. an oil company) and Sonangol, implying thatsecrecy only applies to the two companies involved and not to the revenuegenerated or to tax payable to the Government. This suggests thatcompanies should be free to publish details of revenue generated from aparticular block and resulting tax payments they make to the AngolanGovernment. In addition, BP has shown that the amalgamation of dataacross a number of blocks provides an answer to concerns aboutconfidentiality with respect to payments to Sonangol.

Publish what you pay!

Given the very high level of investment, management skill, technical ability,financial weight and experience required to develop and operate successfullyin the deep and ultra-deep water oil blocks in Angola, it is clear that thereare only a few companies which possess the overall capability to do the job.These are essentially the oil supermajors – ExxonMobil, ChevronTexaco,TotalFinaElf, BP-Amoco and Royal Dutch/Shell – and some of the industrymajors like Norsk Hydro and Statoil, although most of the latter wouldprobably require a partnership with others given the financial burden ofblock development.

As a result, there are only a few real players in the oil market, and GlobalWitness believes that they should formulate a common approach to this issueof transparency and ensure that any confidentiality clauses signed would notinclude confidentiality over basic payments to the State. It is unlikely that acommon agreement to publish what is paid would result in oil blocks beingreassigned to other takers.

At any rate, it is clear that a lot of data already leaks from the system. Forexample, the consultants Wood Mackenzie appear to have considerableaccess to such data, which is commercially available. Such leaks do notremove any obligation reasonably expected of the companies: it is clearlyunacceptable to expect ordinary Angolans to have to pay large sums to anoverseas consultancy to get data on their own resources. The benefits ofconfidentiality are further questioned by the fact that Sonangol publiclystated the size of the signature bonuses for Blocks - during a oilconference that was held in London.

“When this attack happened I was down by the river washing. On my return I


The IMF in AngolaIn early April 2000, the Angolan Governmentand the IMF initiated a programme in Angola toreduce inflation, improve transparency in thepublic sector operations and to beginimplementation of critical structural reforms –called the Staff Monitored Programme (SMP).The IMF and its partner, the World Bank,consider the SMP to be a necessary first steptowards securing international financial supportwithin an economic recovery programme.164 Inother words, it is recognised implicitly thatfollowing the SMP, the IMF could enter intonegotiations for a financial programme in thecountry.The SMP includes an exercise known asan ‘Oil Diagnostic’.This is not a full audit of oilrevenues nor is it a retrospective study that willexamine past allegations of misappropriation ofState funds. Instead, the study is only set toexamine whether the amount of revenuesgenerated by oil companies during 2001 is thesame as the amount deposited in the NationalBank of Angola.165 This accounting exercise willbe used to train Angolan officials.

The Oil Diagnostic is of major importance asit is potentially a powerful tool to achievetransparency in the oil sector. However, therewere numerous problems in the way theprocess was established, which werecompounded by numerous delays in theprovision of information to the IMF and WorldBank.166

The initial agreement to carry out the OilDiagnostic was reached in April 2000, although itonly came into practice after November 2000when the Angolan Government announced thatit had awarded a US$1.6 million contract toKPMG, an international accounting andconsulting firm. KPMG’s mission had twostages: 165

Stage I was to involve an initial assessment ofcurrent situation. KPMG was to assemble andassess relevant information for the most recentyear in a database, including current estimates ofproven and probable oil reserves, current andexpected volume of petroleum production, totalvolume of exports and their value, and thedivision of the oil receipts from sales amongoperating companies, Sonangol and theGovernment. For this, available final versions ofprivate audits of the accounts of oil companiesand public entities such as Sonangol and theNational Bank of Angola were requested.Particular attention was to be paid to theoperation of the financing facilities, such as the‘Cabinda Trust’ and the ‘Soyo Palanca Trust’,government-to-government export creditfacilities, as well as the cross-debt situationbetween relevant entities such as Sonangol, theNational bank and the Ministry of Finance.

On the basis of the information gathered,the consultants were to provide a 5-yearprojection of expected revenues of petroleumoperations and institute a monitoring system tocompare projections with actual revenuesreceived. KPMG were to train up their Angolancounterparts in procedures used and give anaccount of any variations noted.

met some people who told me that Unita was there so I went and hid in the


A comprehensive final report was to beprepared 18 months after the commencementof the project. Recommendations to improveinstitutional regulatory arrangements andtransparency in petroleum-related financialtransactions were to be made to theGovernment and copied to the World Bank andthe IMF.

Stage II of the IMF Diagnostic coveredmaintenance and monitoring of revenues.Thisstage was estimated to involve 15% of theoverall effort and last for an additional 12months during which KPMG’s auditors were toensure that the monitoring system and databaseare maintained, and to complete the training oftheir Angolan counterparts.

If fully and thoroughly implemented and ifappropriate reports are made publicly available,the Oil Diagnostic study would certainlygenerate greater transparency and accountabilityin the management of the oil revenue in Angola.However, it has a number of serious limitations.Human Rights Watch provided a detailedcritique.167 Relevant objections include:

The Government of Angola lacks a clearcommitment to render the KPMG reportspublic, although one of the key objectives of thediagnostic is transparency. 167 Sonangol’s recentthreats to oil companies regarding their potentialdisclosure of tax revenues clearly illustrate theGovernment’s disregard for transparency (SeeCompany responses – page 41).

The Angolan Government must make a firmcommitment to release all Oil Diagnosticreports to the public as soon as they areavailable and to ensure that they aredisseminated within the country in Portuguese.Given the serious nature of therecommendations likely to be made in KPMG’s

final report, it is essential that the AngolanGovernment should publish it in full, and shouldreport on the implementation of thoserecommendations to the Angolan public.

The IMF and the World Bank must insist thatthe Government publishes these reports as anexplicit condition for subsequent cooperation.Recently, the IMF has told Global Witness thatthey have demanded publication of regularinformation on oil revenue flows as a conditionfor further assistance.166 This stance must bemaintained if the process is to have anycredibility.

The Oil Diagnostic lacks any retrospectiveanalysis on revenue data prior to the start of theexercise, despite allegations from Global Witnessand others of covert pre-financing for armsdeals. KPMG is expected to examine data goingback to approximately 1998 as a basis forcomparison with current production andrevenues, but it is not clear whether these datawill be included in the quarterly monitoringreports. Pre-2000 data should be included in thefirst Diagnostic report, especially consideringthat large cash payments from signature bonuseswere made available to – and appear to havebeen diverted from – the State during 1998 and1999.

The terms of reference of the Diagnosticalso lack provision for detailed and publicaccounting in response to discrepanciesidentified by KPMG.The Government only needsto provide ‘sufficient explanation’ for missingfunds; KPMG’s ability to account for thesediscrepancies is therefore completely dependenton the quality of information with which it isprovided.Although in some cases, discrepanciesmay be due to fluctuations in oil prices; in othercases, they may be due to cash diversion for

clandestine arms purchases or due to covertloan repayments funnelled through Sonangol.

The Diagnostic’s terms of reference explicitlystate that it is not an investigation into the useor misuse of oil revenues by individuals withinthe Government. It is critically important,therefore, that the Government should provide– and the multilateral lending institutions insiston receiving – the most thorough, verifiable, andpublic explanation of all discrepancies.

Provisions for capacity building are limitedand ineffectual.The Government is expected toassume direct monitoring after KPMG’s finalreport. Reports suggest that significant structuralproblems exist in the separation of functionsamong the Central Bank, the Ministry of Financeand Sonangol.166,168 Indeed the Governmentitself recognises that Sonangol, for example,operates in an old fashioned way, reminiscentfrom Angola’s recent socialist past, in which ‘ thegovernment interferes with the management ofstate companies, requesting Sonangol to processpayments to state institutions or individuals,without gaining from it. […] These orders donot come from the Treasury, their nature is notdefined […] and there is no information flowwith either the Treasury or the National bank to,at least, allow for their registration’.169 Thus, theWorld Bank and the IMF should continue tosupervise directly the progress of the Diagnosticuntil the Government adequately demonstratesits ability to publicly report on these matters.

So far, the Diagnostic is not on track.Theprocess has witnessed a number of apparentlyavoidable delays; for example, KPMG did notreceive the first report from the Government,expected in April 2001.The IMF sent a missionin July 2001 to review the SMP’s implementationover the previous six months.168 Due to the lackof substantial progress, the IMF was forced toextend discussions into October; eventually, aset of indicative macroeconomic targets and aseries of transparency measures to be takenduring the remainder of 2001 were agreed withthe Angolan Government.168 These included thecommitment that the Government wouldpublish data on oil and other revenues and hirean independent international company toimplement international accounting standards inSonangol.168 However, the IMF’s visit in Octoberdid not take place and the Government statedthat the IMF’s requirements are difficult to meetdue to lack of institutional capacity.169 Finally, inFebruary 2001, the IMF declared the SMPflawed. IMF engagement in Angola is nowreduced to Article IV regular consultations,althought the Oil Diagnostic process seems notto have been abandoned.234

Another key point is that, regardless of thelack of capacity of any retrospective analysis, it isimperative that the Diagnostic fully investigatescurrent discrepancies in revenue flows in orderto shed light on the myriad of off-shorecompanies and structures deployed for Statelooting.

Global Witness believes that any futurediscussion concerning IMF or World Banksupport to Angola would need to fully addressthe points raised above.

Oil Companies

Without accountability of government revenue, what future for Angola’s vast army of internallydisplaced children?

Oil Companies

Campaign progress todate

DESPITE THE objections outlinedabove, various oil companies havebegun to accept the need forgreater transparency of paymentsmade to national governments.

However, the degree of acceptance of fulltransparency across all the key companies and theconcrete actions that companies intend to take arenot uniformly clear. For this reason, in January ,Global Witness wrote to the Chief Executive Officers(CEOs) of all the oil companies currently operatingin Angola. The letter raised the issue of corporatecomplicity in state looting and indirect funding of thewar in Angola, and concluded:

‘We felt it appropriate to write to all the CEOs of the oilcompanies currently operating in Angola to determine theirpersonal views about transparency of oil company payments tonational governments. The key question here is whether oilcompanies wish to remain part of the problem, or whether theyhave the imagination to become part of the solution, withimmense benefits for the countries concerned, a likelyconsiderable reduction in company overheads, considerablepotential kudos and the chance to make a serious impact oncleaning up international corruption – the chance [throughcooperative action], in fact, to level the playing field, which weknow is a major complaint of some companies.’

Company responses

Some of the oil companies responded positively.These responses varied, but showed that the issue offull company transparency is of concern. Othercompanies made no response at all. Still othersexpressed interest in the topic but declined to puttheir opinions in writing.

BP-Amoco

In a letter to Global Witness dated February ,BP-Amoco Group Managing Director Richard Olverstated, in addition to maintaining a regular dialoguewith both the World Bank and IMF over Angola, thatthe company would publish the following informationannually on their operations in the country:

. Total net production by block.

. Aggregate payments by BP to Sonangol in respectof its Production Sharing Agreement terms.

. Total taxes and levies paid by BP to the AngolanGovernment.

In addition, BP clarified that their recent signaturebonus payment of US$,, for Angola Block, of which BP holds .%, could be found in BPExploration (Angola) Ltd’s annual report toCompanies House. This latter disclosure does notrelate to any change of policy by BP, as the companywas required to provide this data under UKcompanies reporting requirements.

BP stated that there is a need to aggregate the datafrom the various blocks where they have a holding,either as operator or as an equity partner to avoidcontravening specific details of their confidentialityagreement with Sonangol. It is not yet clear how they

intend to publish such aggregated data, as althoughBP holds an interest in several blocks in the Angolanoffshore, only Block is currently operating.

BP’s announcement received an extraordinaryresponse from Sonangol, which the latter copied to allthe other oil companies operating in Angola as animplied threat should they too publish what they pay.Sonangol’s letter, written in an immoderate style,accuses BP of already publishing unspecifiedconfidential data, and threatens to invoke Article of their Production Sharing Agreement, which statesthat ‘without prejudice to the provisions of the general law ofany contractual clause, Sonangol may proceed to the terminationof this agreement if contractor … discloses confidentialinformation related to Petroleum Operations without havingpreviously obtained the necessary authorization thereto’.

An unofficial translation of Sonangol’s letter isincluded below:

Dear Sir,It was with great surprise, and some disbelief, that we found

out through the press that your company has been disclosinginformation about oil-related activities in Angola, some ofwhich have a strict confidential character.

According to the media, your company promised to continueto supply further such information in a letter dated //and signed by Mr. Richard Oliver [Sic], thereby seriouslyviolating the conditions of legal contracts signed with Sonangol.

As a result, we are making enquiries to confirm the veracityof information that has been published which, if confirmed, isa sufficient reason to apply measures established in Article ofthe PSA [Production Sharing Agreement] i.e. contracttermination.

We are aware that some oil companies have recently beenunder pressure by organised groups that use available means in


mata. My wife was there inside the village. She saw Unita put my father,

In our actions and dealings with others,we will… promise only what we expect todeliver, only make commitments we intendto keep, not knowingly mislead others andnot participate in or condone corrupt orunacceptable business practices.

– Ethical conduct commitment of BP-Amoco

Oil Companies

an orchestrated campaign against some Angolan institutions bycalling for ‘pseudo-transparency’ of legitimate governmentactions.

As the national authority that awards concessions, Sonangolis fully aware that its economic link with your company shouldnot be mixed with other relationships that seriously violateexisting contracts in order to attract bogus credibility.

Given this situation, we highly recommend that yourcompany scrupulously respects the agreements that it has signedwith Sonangol, as well as Angolan legislation relating toconfidentiality of information.

May we recall that there are specific channels, which shouldbe respected, to release any type of authorised information.

Given the seriousness of this situation, if the provision ofinformation by your company is confirmed and we observemoral or material damage thereof, we reserve the right to takeappropriate action. The same is valid if you repeat suchpractices in the future.

Finally, and in the hope of maintaining the good relationsthat we have always had with the oil companies that operate inAngola, we strongly discourage all our partners from similarattitudes in the future.

In closing, please accept our best wishes,[Signed] The President of the Administrative CouncilManuel Vicente

Sonangol’s rabid reaction shows beyond doubt thatthe Angolan Government has little or no realintention of allowing greater public scrutiny overnatural resource revenue. Further, it also placesSonangol in a position fundamentally incontradiction to the spirit of the IMF’s OilDiagnostic.

If Government actions are ‘legitimate’, why doesSonangol object to transparency? Why is the fulltransparency that ‘certain organised groups’ likeGlobal Witness have demanded only ‘pseudo-transparency’? The letter also reveals an unfortunateand telling confusion in Mr. Vicente’s mind betweenSonangol – a company – and the AngolanGovernment’s currentadministration. Further,Sonangol’s threats themselvesare questionable because it isunlikely that the confidentialityclause in the companies’Production SharingAgreement covers payments tothe Government.

The Sonangol letter revealsthat the oil companiesoperating in Angola are insomething of a difficultposition. They either faceserious reputational oroperational risks: either theypublish and risk retaliation byvested interests or they facecharges of complicity withstate looting and Governmentmismanagement of revenue.

The threat of suchretaliation is a clear argumentfor Northern Governments,and their financial regulators,to legally oblige companies topublish what they pay to allnational governments. Such alegal obligation would take the

decision to disclose information out of the hands ofcompanies and prevent the threat of non-compliancewith secrecy provisions. Mandated paymentdisclosure would also level the playing field betweencompetitors, preventing more principled andtransparent companies from being undercut by theirless scrupulous competitors (See Regulating paymentdisclosure – page ).

Global Witness considers BP’s development amajor contribution to transparency in Angola;however, its declaration would have been moreeffective as part of a broader coalition because, if oneintends to reach an approximation of the revenuefrom the oil sector in Angola, every major player hasto disclose its payments and clearly, there is lessdanger of retaliation if companies show a unitedfront. Nevertheless, BP has clearly shown that theissue of full transparency for company payments tonational governments is now on the agenda ofcorporate social responsibility, moving the debate intothe domain of corporate accountability. In so doing,the company has set a new international standard towhich all companies must adhere, including BP itself.

Statoil

Statoil’s President and CEO, Olav Fjell, wrote toGlobal Witness on February pointing outthe company’s reporting obligations in terms ofexisting Norwegian law. Statoil appears to have anumber of Norwegian subsidiary companies thathave interests in various oil block interests in Angola.These are:

● ‘Statoil Angola AS’, holding the company interestin Angola’s Block .

● ‘Statoil Angola Block AS’, which holds theBlock interest.

● ‘Statoil Angola Block AS’, which holds theBlock interest.


grandfather, sister-in-law and four children into a house and set fire to it. …

Shot-up Kuito, Angola.

Oil Companies

Under Norwegian company law, each of thesecompanies is obliged to file details of their tax andsignature bonus payments in each of the separatecompany’s annual reports and accounts. Thesereports are filed at the ‘Brønnøysund Register ofAnnual Company Accounts’, Havnegata , Brønnøysund, Norway. All these documents are amatter of public record.

Statoil also confirmed that the companyanticipates that Block (operated by TotalFinaElf)will commence production from the ‘Girassol’ field in (in fact, operations commenced in December) and that the annual accounts of Statoil AngolaBlock AS will then show tax payments to theGovernment of Angola in the appropriate end-of-year filing.

In addition, Statoil has filed end of year accountsfor , and the report for ‘Statoil Angola AS’ showsa signature bonus payment for Block (.% ofwhich is hold by Statoil) of NOK,, underNote (US$,,).

Statoil appears keen to suggest that the level oftransparency about their payments to the AngolanGovernment is as high as that required in Norway forNorwegian operations. It is true that in Norway it isas easy to find data about payments to the AngolanGovernment as it is concerning payments to theGovernment of Norway. This certainly means thatthe company operates to a far higher level oftransparency than the majority. However,transparency about company payments to Angola inNorway is not the same as making data available toAngolans in Angola.

Royal Dutch/Shell

On February , a spokeswoman for the RoyalDutch/Shell Group in response to calls for fulltransparency stated, ‘we’re considering a response. Asan overall principle, we are committed to opennessand transparency.’

Global Witness subsequently received a letter

from then-chairman Sir Mark Moody-Stuart datedth February , in which he stated that,‘wherever possible, such disclosures [publication ofpayments by companies to national governments –Global Witness addition] ought to be made.’ He alsopointed out, as a general observation, that to gain acomplete picture it would be necessary to combinethe declaration of such payments by the companieswith the publication of data obtained through an ‘oilmonitoring programme’, such as that provided byKPMG in Angola.

TotalFinaElf

Although TotalFinaElf have not responded to GlobalWitness’ letter, they appeared keen to jump on thebandwagon of BP’s announcement. Global Witnessfielded numerous press enquiries in which it wasassumed that TotalFinaElf had matched BP’sstatement on transparency in Angola. According toReuters, on February , and seemingly inresponse to Global Witness’ press release about BP’sletter, TotalFinaElf announced that it had turnedover ‘precise technical and financial information’ forthe IMF’s Oil Diagnostic study. TotalFinaElf ’sspokesperson was further quoted as saying, ‘weoperate in Angola like we operate everywhere else inthe world. We are careful not to break any local,French or international laws’. He then added, ‘we are

an oil company. We are not political. We havenothing to hide about what we are doing in Angola’.

Cooperation with the IMF team in Angola is thebare minimum that would be expected of any of thecompanies operating in Angola. If not, the companywould be actively under-mining a majorintergovernmental institution. Such moves, however,do not constitute public transparency. The claim thatthe company is not ‘political’ suggests that it views theidea of publishing data about payments to theAngolan Government as a political statement. This isa misnomer, because such a concept could equallyapply to the fact that a company chooses not topublish payment data.

If, as the company spokesperson claims, thecompany ‘has nothing to hide about what we aredoing in Angola’, why don’t they publish?

BHP Petroleum

BHP wrote to Global Witness on March .

The company stated that it does not currentlyproduce oil in Angola and thus was unable to publishdata about payments made to the AngolanGovernment. In a subsequent letter on May toclarify its position on future revenues, the companystated that it would reconsider the issue ofinformation disclosure subject to the ‘constraints ofany confidentiality clauses that may be in place atthat time. In the meantime we will continue tocooperate with the KPMG study of the AngolanPetroleum sector.’

Global Witness urges BHP to reconsider itsposition on full transparency and to join an emergingconsensus on the need for payment disclosure beforeit starts producing in the country. It should alsopublish data relating to signature bonuses that havealready been paid.


They took everything from the village, all the goats, cows and clothes.They

TotalFinaElf – will they become transparent?

Oil Companies

took many young boys and girls to carry all the thing they had taken.” –Displaced

PetrobrasThe Petrobras Internacional subsidiary in Angolasent Global Witness a letter dated May . Thecompany stated that it has a ‘long-standing policy forall of its activities…to conduct business in an ethicaland accountable fashion’. However, regarding theissue of tax and royalties, the letter continued bystating ‘we can assure [sic] the company has beenperforming all of its commitments following strictlythe provisions of the contracts signed with thegovernments of the host countries’.

Petrobras has taken a positive line on transparency– at least for transparency concerning the payments itmakes to social funds, and taxes that are paid to bothlocal and federal Brazilian authorities. Theirwebsite provides some data under the heading:‘Income tax on overseas fin. & services’, though it isnot clear what this heading covers. At best it couldrepresent taxes paid in all countries of operation,simply added together. Global Witness holds thecompany to its principle of ethical and accountablebehaviour and requests that it practices fulltransparency for all countries of operation. Othercompanies should take note of Petrobras’ website taxpayment data presentation format, as it issignificantly better – from the perspective of publicaccess – than company registration filings.

Other companies – Are they avoiding theissue?

At the time of going to press, several major oilcompanies, including ExxonMobil, ChevronTexacoand TotalFinaElf have all failed to respond to GlobalWitness’ letter and have not published any pressstatements concerning this issue. This is of majorconcern, especially given the dominant role in terms

of oil production of ChevronTexaco andTotalFinaElf ’s operations.

At the same time, there seems to exist a culture ofhypocrisy because these companies seem keen toimply that their behaviour is beyond reproach. Exxonmakes the claim that, ‘Exxon’s commitment in everycountry and community in which we operate is toconduct its business in accordance with only thehighest ethical standards and integrity.’ Similarly,Chevron asserts that, ‘we will conduct our business ina socially responsible and ethical manner … We willrespect the law, support universal human rights andimprove the quality of life in the communities wherewe work.’

Interestingly, an examination of TotalFinaElf ’sweb site did not reveal any comments relating to thecompany’s position on corporate social responsibilityand ethical behaviour. Sources indicate that, in fact,the company has produced a ten-page document thatdetails the company’s ethical policies. However, itseems that TotalFinaElf is not keen to advertise itsexistence. Sources indicate that this documentrepresents a statement of intent by the companyrather than an actual policy. Any real commitment bythe company is untested whilst these statementsremain publicly unavailable and unaudited.

Calls for full transparency, of course, equally applyto Sonangol. However, the company’s violentobjection to BP’s policy of transparency about itspayments to the Angolan Government means thatGlobal Witness does not anticipate any rapid changesfrom the company regarding transparency.

Although Sonangol has undermined the spirit ofthe IMF’s Staff Monitored Programme, the IMFmust continue to press the company and demand fulltransparency as a condition of moving forward withany further multilateral assistance to Angola.


Company social programmesAny visitor to Angola soon comes across one of the various oilcompany social projects. Such goodwill projects vary but includeschools, medical facilities, building reconstruction and the like.Although it is hard to condemn such initiatives, they sit ill alongsidethe policy of complicity with mismanagement and wholesaleplundering of Angola’s oil revenues by the ruling elite. Suchcorporate philanthropy coming from the same companies thatchoose to disempower civil society by not being transparent abouttheir payments to governments seems to be salving a guiltyconscience rather than responsible global citizenship.

There are also concerns over the management of such projectsand questions over whether they are covert kickbacks to the rulingelite. 160,190 Global Witness is not currently focusing on oil companysocial programmes, but believes that all social programmes must beindependently audited both for the purpose of the project and forits value for money. Results should be made freely available in therelevant country.

Such concern is intensified with a mooted US$40 million jointSonangol/international oil company development programmewhich companies were keen to stress during 2001. If thisprogramme was conducted well, according to the above principles,it could be a good initiative but whatever its merits, the oilcompanies should take note that goodwill projects are not areplacement for company transparency about payments to theAngolan Government.

How is Sonangol’s lack of transparency consistent with its selfimage as a ‘driving force in the development of Angola’?

Oil Companies


man, early 2001a “On the 7th March 2000, FAA came in the village and took

Corporate social responsibility –Genuine sentiment or mere PR?Corporate Social Responsibility is generally taken ‘as theconcept that an enterprise is accountable for its impactson all relevant stakeholders’. 191 Stakeholders aretraditionally seen as those directly impacted by businessoperations. However, this delineation of responsibility isarbitrary and limited and Global Witness believes that,where the natural resource sector is involved, the conceptof Corporate Social Responsibility (CSR) should alsoinclude the people who ultimately own those resources –i.e. the general population of the country.This relationshipis stated explicitly in Angolan Law No 13/78, where it isestablished that ‘all deposits of liquid and gaseoushydrocarbons … belong to the Angolan People, in theform of State property.’ By not publishing what they pay,every non-transparent oil company operating in Angola isin violation of the real principles of CSR as civil societyand the general population are being deliberatelyexcluded from the dialogue over the governance of theirresources in Angola.Thus, Global Witness argues that thedefinition of corporate responsibility must be bound upwith the operation of transparent and accountablebusiness practices.

There is a gradual recognition of this wider definitionof CSR, which must encompass measures to holdcorporations accountable for their actions.A number ofdifferent international fora have now established, or areestablishing, transparency of corporate payment tonational governments as part of their wider practices.Indeed, several oil supermajors in Angola have alreadysubscribed to these general principles by virtue of beingsignatories to certain voluntary codes of corporate goodbehaviour, as described below.

Global Reporting InitiativeThe Global Reporting Initiative (GRI) was established in1997 by the Coalition for Environmentally ResponsiblyEconomies (CERES) together with UNEP to develop‘globally applicable guidelines for reporting on theeconomic, environmental and social performance’ and tomake ‘sustainability reporting as routine and credible asfinancial reporting in terms of comparability, rigour, andverifiability.’192 In part, the GRI is an exercise in qualitycontrol – there are around 2000 companies worldwide192that report on various aspects of their economic, socialand environmental performance but, for the majority,information is currently ‘inconsistent, incomplete andunverified.’192

The economic indicators that the GRI espousesinclude a detailed breakdown of profits, return on capitalemployed and dividends by geographic region.193

Specifically, under section 6.51, the guidelines recommendthat participating companies publish, ‘taxes paid to alltaxing authorities.’193

Shell,Texaco,194 TotalFinaElf, and Halliburton (an oilservices company) have committed themselves toreviewing the Sustainability Reporting Guidelines and areconsidering publishing a full sustainability report.195

Although these companies have, in theory, made an effortto provide a constructive input in the revision of theseguidelines, whether their current commitment implies thatthey will start reporting on ‘taxes to all taxing authorities’,needs to be clarified urgently.

OECD Guidelines for MultinationalEnterprises and Principles of CorporateGovernanceThe revised OECD Guidelines for MultinationalEnterprises in 2000 and its 1999 Principles of CorporateGovernance both recognise the importance of disclosure.Section IV of the Principles on ‘disclosure andtransparency’ notes that a ‘strong disclosure regime is apivotal feature of market-based monitoring of companiesand is central to shareholders’ ability to exercise theirvoting rights … disclosure can be a powerful tool forinfluencing the behaviour of companies and for protectinginvestors’.196 Post-Enron, can any corporate entity notafford to make such declarations standard businesspractice?

The suggested disclosure regime involves companiesensuring that timely and accurate disclosure is made on allmaterial matters regarding the corporation, including thefinancial situation, performance, ownership andgovernance of the company and that such ‘informationshould be prepared, audited and disclosed in accordancewith high quality standards of accounting, financial andnon-financial disclosure and audit.’197 More specifically, thePrinciples note that, ‘it is important that transactions to anentire group be disclosed.Arguably, failures in governancecan often be linked to the failure to disclose the ‘wholepicture’, particularly where off-balance sheet items areused to provide guarantees or similar commitments’.198

Article III(1) of the Guidelines states that informationshould also be disclosed along ‘business lines andgeographical areas’.

Taking these provisions together, it is hard to see howhigh quality standards of accounting, and recognition ofstakeholder rights does not include details of taxpayments to national authorities.This report emphasisesthe need to consider the ‘whole picture’ of corporategovernance in Angola. Global Witness therefore urges theOECD, to take immediate action to address this oversightin disclosure.

UN Global CompactThe Global Compact, an initiative of UN SecretaryGeneral Kofi Annan is a process is intended to ‘develop acommon understanding on how the private sector cancontribute to building peace and security in zones ofconflict.’199 The Compact held an inaugural dialogue inMarch 2001199 and participants outlined that fulltransparency was a key issue to redress deliberate andinadvertent funding of economic agendas that mayunderpin local or regional conflicts. Specific proposals arenow forthcoming after the Compact’s second meeting inOctober 2001: a policy of full transparency in conflictzones must now be implemented.

The EU Green Paper on CorporateResponsibilityThe European Commission has recently submitted aGreen Paper Promoting a European framework forCorporate Social Responsibility.200 The paper launches thedebate on how the European Union can promotecorporate social responsibility at both the European andinternational level, and invites public authorities,enterprises, social partners, NGOs and other stakeholdersto submit their views. Like the Global Compact process, itis imperative that the EU Member States understand theneed to foster corporate transparency and accountabilityrather than simply encouraging voluntary philanthropy bycorporations. Unlike, the Global Compact, the EUauthorities can, and must, directly legislate on the issue.

Oil Companies

16 or 17 people … We were behind the group and I heard shooting so we hid


There seems little excuse for Member State governmentsnot to pursue the line of mandatory disclosure ofaggregated payments to host governments in nationalbusiness regulations given the paper’s avowed intention of‘developing a European framework, in partnership withthe main corporate social responsibility actors, aiming atpromoting transparency, coherence and best practice inCSR practises’201 and its recognition that ‘codes ofconduct are not an alternative to national, EU andinternational laws and binding rules ... [that] ensureminimum standards applicable to all’.202

Indeed, there is already a legislative precedent in theCotonou Agreement on aid between the EU and theGroup of African, Caribbean and Pacific States whichnotes that the fight against corruption is a fundamentalelement of future development assistance and makesexplicit reference to corruption as a major developmentalproblem. Specifically, Article 9(3) states that goodgovernance is the ‘transparent and accountablemanagement of human, natural, economic and financialresources for the purposes of equitable and sustainabledevelopment. It entails clear decision-making proceduresat the level of public authorities, transparent andaccountable institutions, the primacy of law in themanagement and distribution of resources and capacitybuilding for elaborating and implementing measuresaiming in particular at preventing and combatingcorruption. Good governance … constitute[s] afundamental element of this Agreement’. In the interestsof joined-up government, there seems little purpose indevelopment assistance being determined on this basis,whilst oversights of the operations of multinationalcompanies registered within Europe can effectivelyundermine the same objectives.

The World Business Council for SustainableDevelopment (WBCSD)WBCSD is a coalition of some 150 internationalcompanies, which have a shared interest in the principles

of sustainable development.203 WBCSD group has focusedon a number of key corporate social responsibility issues,which include, amongst others, values and governance,regulations and controls, accountability and disclosure,human rights and social impact. It is clear that fulltransparency, certainly in the Angolan context, is an issuerelated to such concepts.WBCSD may provide idealconditions to be used as a forum for discussion on howfull transparency can be taken forward as the groupincludes the following oil companies with a presence inAngola: BHP, Norsk Hydro, Shell International, Statoil andTexaco.

Ethical Investment and transparencyEthical investment funds have become importantinvestment vehicles – not least because they havegenerally shown levels of growth in excess of long-termstock market averages. Furthermore, the very existence ofan ‘ethical sector’ has helped catalyse development ofinvestment criteria in the wider fund managementindustry, which have come to learn that strong andprincipled management is good for bottom-line growthand which are understandably keen to avoid beinglabelled as ‘non-ethical’ investors.

Many investment funds hold large shares in oilcompanies and as the definition of what constitutesacceptable corporate social behaviour changes and fundmanagers take a growing interest in including fulltransparency as a bottom-line criterion for investmentdecisions, there is an increasing risk of divestment and fallin share prices.

Similarly, oil companies listed on investment indicesthat have been set up to recognise and reward leadershipin social responsibility issues – such as the Dow JonesSustainability Group Index (BP,Texaco, Norsk Hydro andShell) and the FTSE4GOOD Index (BP and Shell) – mayfind their places under threat if they are not transparentabout their payments to the Angolan State.

Accountable to whom? Oil companies’ failure to publish what they pay demonstrates their contempt for ordinary Angolan citizens.

Oil Companies

in the long grass of a field we were passing … not so far away from where we

● Incorporate all the major and super-major players inthe resource sector – it is improbable that (and wouldbe very telling if) a major company would delist froman international exchange to avoid transparency.

It is Global Witness’ understanding that such a move iswithin the legal remit of major financial regulators. Mostsecurities exchanges have a public interest disclosurepower that is separate from their requirement that risksto investors be clearly disclosed. Legal language relatedto public interest disclosure is generally interpreted quitestrictly ‘to be limited by the purposes of the statutes atissue’ but Global Witness believes that the general historyof securities regulation shows that disclosure ofcorporate financial data has clearly been used to affect achange in the way that corporations are managed andheld accountable for their actions. The SecuritiesExchange Act that created the Securities and ExchangeCommission (SEC), for example, specifies in sections ,, and that registration, reporting and disclosurerequirements for securities are subject to conditions,rules and regulations that the Commission prescribes ‘asnecessary or appropriate in the public interest or for theprotection of investors’.

As Felix Frankfurter, President Roosevelt’s appointeeto steer the Securities Act through the USCongress, famously wrote in Fortune Magazine thatAugust, ‘The Securities Act is strong insofar as publicityis potent; it is weak insofar as publicity is not enough …The existence of bonuses, excessive commissions andsalaries, of preferential lists and the like, may all be opensecrets among the knowing, but the knowing are few.There is a shrinking quality to such transactions; to forcethe knowledge of them into the open is largely torestrain their happening. Many practices safely pursuedin private lose their justification in public. Thus, socialstandards newly defined gradually establish themselvesas new business habits’. It is clear from such statementsthat the SEC’s should act to require revenue disclosureby natural resource companies for all countries ofoperation.

Global Witness strongly believes that regulations torequire disclosure of payments to all nationalgovernments are an immediate and effective step formajor national securities exchanges to fostertransparency and accountability amongst the globalresource extraction industry. Further, such regulation is aboon for the industry itself.


Regulatingpaymentdisclosure

THERE IS AN urgentneed for oil companies toadopt a policy of fulltransparency in Angola,yet Sonangol’s threats to

BP show the dangers of defying the statusquo and challenging the interests of theruling elite.

Over and above the need for collectiveaction by the oil companies as aconsolidated block, Global Witnessbelieves there is now a clear case forNorthern Governments, and theirfinancial regulators like the US Securitiesand Exchange Commission (SEC) or the UK FinancialServices Authority – Listing Authority, to step in andlegally oblige companies to disclose payments to allnational governments in consolidated and subsidiaryaccounts. A legal obligation for companies to publishwhat they pay to all national governments solves anumber of inter-related problems that have so farthwarted voluntary attempts at transparency.

Mandated payment disclosure would:

● Level the playing field between competitors,preventing more principled and transparentcompanies from being undercut by their lessscrupulous competitors.

● Eliminate concerns about confidentiality clausesgagging companies publishing payment data. Suchcontracts contain a ‘get-out’ clause exemptinginformation that must be disclosed due to regulatoryrequirements from confidentiality. For example,Article () of the Deep Water Production SharingAgreement states that ‘either Party may, without suchapproval, disclose such information … c) to the extentrequired by any applicable law, regulation or rule(including, without limitation, any regulation or ruleof any regulatory agency, securities commission orsecurities exchange on which the securities of suchParty or of any of such Party’s affiliates are listed).’

● Address the problem of non-transparency in allcountries of operation. Non-transparency will be agrowing problem as natural resource operationsbecome increasingly located in less developedcountries where civil society and governmenttransparency are proportionately weaker.

● Depoliticise the issue of payment disclosure inauthoritarian regimes and allow companies greaterfreedom of responsible behaviour. Publishing what ispaid to such regimes is likely to have a knock-oneffect of encouraging greater transparency and fiscalgovernance by default.

● Eliminate a major international double standardbetween levels of transparency in the North andSouth.

● Involve negligible associated costs. Companiesalready know what they pay for internal accountingpurposes.

Luanda’s Boa Vista residents were forcibly relocated at gunpoint in to make way forredevelopment. Their civil and human rights were breached for whose benefit?

Oil Companies

were, and it was like someone had just slaughtered goats, blood everywhere


Risks of complicityDirect involvement or indirect complicitywith a corrupt, neo-authoritarian regimecarries a number of associated credit risksfor investors including:

Reputational risk: Companies complicitwith a corrupt, neo-authoritarian regime andthe disempowerment of nascent civil societyobviously risk their reputations and ‘goodname’. As the transparency agenda entersethical and mainstream investment decisions,so non-transparent companies can expect tobe dropped from progressive investmentindices such as Dow Jones SustainabilityGroup and the FTSE4GOOD indices as wellby social screens associated with ethicalfunds (See Corporate Social Responsibility –page 45).

Non-transparency as directinvestment risk:There is a clearrecognition amongst the investmentcommunity, especially in the light of theEnron scandal, that good corporategovernance and the management andaccounting systems in place in a sociallyresponsible company confer a direct benefiton corporate financial performance.Conversely, if companies are not transparentabout their payments to nationalgovernments, actively seek to avoidinspection of their financial dealings, and runoff-the-books accounts, what hope is therethat corporate governance and managementstructures are effective and/or accountable?

The ‘Suharto effect’: As PresidentSuharto’s regime in Indonesia showed,apparently unassailable neo-authoritariangovernments tend to fall apart very quickly.In cases where there has been considerablesuppression of human rights and freedom ofexpression – as in Angola today – there isusually a period of reckoning once the nextgovernment takes power.Any future AngolanGovernment is likely to look long and hardat those seen to be complicit with thecurrent regime; investors in such companiescould end up paying the bill.

Direct litigation and liabilities fromcorrupt activities: Global Witnessbelieves that information is emerging thatmay facilitate pursuit of individuals andcompanies under national legislationcriminalizing bribery of foreign public officialsdue to the 1997 OECD Convention onCombating Bribery of Public Officials inInternational Business Transactions.

Credit denial: Global Witness’investigations in Angola show that banks andExport Credit Agencies have failed to checkwhether funds provided have been used asintended.This carries the implicit risk ofmisappropriation of funds and debt default.As such institutions increasingly demandtransparency and non-bribery statementsfrom recipients of funding, so credit lines tonon-transparent companies may be denied.

The truth about taxpayments to theAngolan Government in – another case ofmissing funds?

DESPITE THE RESISTANCEfrom companies and the AngolanGovernment in rendering publicinformation on revenue disclosure,Global Witness is pleased to reveal

this information for the first time for the year . Itis hoped that this information will encourage greaterfinancial responsibility within the Government andgreater scrutiny from without. Of course, informalinformation provision is no substitute for open andtransparent accounting: Global Witness now invitesall parties to open their books and come clean.

Companies that are not transparent are complicitin state looting because they actively prevent civilsociety from calling their Government to account –the ‘complicityometer’ that follows gives an idea ofthe extent that oil companies are actively hiding theirpayments. The larger the company’s contribution tostate revenue, the highest its degree of responsibilitytowards the Angolan people, the more urgent it isthat the company becomes fully transparent. Thispicture will change significantly as new Blocks such as and come on stream, with companies such asExxonMobil and BP winning a place amongst themost complicit producers. Of course, if BP keeps itspromise of rendering public its payments to theAngolan Government, the company will not be guiltyof complicity in the dispossession of ordinaryAngolan citizens.

Disturbingly, between the Ministry of Petroleumand the Ministry of Finance some US$ millionhas unaccountably gone missing. The Ministry ofPetroleum reports that US$. billion

(,,,. Kz) in tax was paid to the AngolanState, whereas the Ministry of Finance reports thatUS$. billion (,,, Kz) was receivedduring the same period of time. Although part of thisdiscrepancy may be due to different exchange ratesused in calculations, Global Witness urges theAngolan Government to immediately clarify thishighly unusual situation. The message is clear: oilrevenues are haemorrhaging from the formal stateand confused lines of control and bureaucraticdisorganisation reign. Figures reportedly emergingfrom economists associated with the Oil Diagnosticstudy suggest that, if anything, this accounting blackhole may have increased to US$. billion in .

Oil Companies


and all the people lay dead, right there in the middle of the road. FAA had just

Complicity-O-Meter

Tax paid by oil companies to AngolanGovernment in 2000 Here, the term complicity is defined as lack of oil company transparencyregarding their payments to the Angolan Government for oil productionactivities. Heights of barrels (not to scale) relate to recorded paymentsfor producing oil companies for 2000. Please note, this information wasnot produced by the oil companies concerned, but from AngolanGovernment internal documents.

Those companies that are soon to commence pumping oil, but whichchoose to remain non-transparent about payments to the Government,will join the Complicity-O-Meter.

US$ millions% of total tax paid

Total tax paid: US$ 3,801 million

Others18

0.5%

Texaco18

0.5%

Braspetro19

0.5%

TotalFinaElf3699.7%

Notes Galpenergia owns Petrogal. Petrobras owns Braspetro. Since 2000,Texaco has been taken over by Chevron – the new combined group is called ChevronTexaco.

Petrogal13

0.3%

Agip3098.1%

Sonangol1,37036.0%

Chevron1,68544.3%

Oil Companies

The complicity of oilcompanies – conclusion

WHILST GLOBAL WITNESSrecognises the difficulties thatcompanies face whenconsidering changing theirexisting reporting systems, it is

clear that those operating in Angola have a specialresponsibility to the Angolan people, whose resourcesthey are exploiting. This goes much further thanproviding social programmes to foster corporategoodwill and must include changes to reportingpractices to include publishing all payments made tothe Angolan Government.

BP’s actions have demonstrated corporateacceptance of the principle that good corporategovernance requires full transparency of payments bycompanies to national governments. Othercompanies, like Statoil, already provide a high degreeof transparency of their payments to the AngolanGovernment by setting up each block development asa separate company, meaning the overseas taxpayments are fairly specific.

Despite the clear-cut need for full transparency,and the fact that the definition of good corporategovernance is rapidly changing to require suchtransparency, it is hard to understand the incredibleresistance in some quarters. Do such companies havesomething to hide?

Companies that avoid this issue are not onlycomplicit in the wholesale robbery of a state –apparently amounting to almost a third of all staterevenues in – but will be demonstrably applyinghypocritical double standards over claims of corporatesocial responsibility and ethical behaviour and exposethemselves to considerable reputational risk. Non-cooperating companies not only risk their own goodname and those of their investors, they also serve toundermine confidence in the entire industry toaddress complicity in state looting and the politicaland environmental disasters of the past. They alsodemonstrate their contempt for the desperate plight ofthe ordinary people of Angola.Compare the missing US$. billionin with the US$ million thatthe UN had to scrape together forfood aid for Angola’s one millioninternally-displaced people.

Global Witness is pleased to revealextent of oil company payments tothe Angolan Government for the year. ChevronTexaco andTotalFinaElf top the list of hiddencontributions: these two companiesare also notable for refusing to engagein discussions on transparency. Thedata also show a black hole in theformal state oil accounts: someUS$ million disappeared betweenthe amounts reported by the Ministryof Petroleum and the Ministry ofFinance.

Global Witness has seen strongresistance to change before – perhapsmost notably from the international

diamond trade. However, once the diamond traderecognised that past practices were unacceptable andwould not be tolerated any longer, it became in theirbusiness interest to change. The principle of goodcorporate governance is now changing to require fulltransparency of payments by companies to nationalgovernments.

Under the threat of retaliation by Sonangol,unilateral, voluntary approaches such as that taken byBP have been shown to be problematic – although BPmay still publish. It is clear that the more responsibleoil companies are being put in a difficult position ofeither reneging on commitments already made in anumber of Corporate Social Responsibility fora oralienating their national business partners. It seemsthat individual oil companies cannot go it alonewithout the threat of being undercut by lessscrupulous competitors. Therefore, Global Witnessurges all the oil companies working in the country toadopt a policy of full transparency as a group.

In this context, the simplest and most effectivesolution to this problem is for major financialregulators such as the Securities and ExchangeCommission to impose mandatory disclosure ofaggregated payments to all jurisdictions in whichmajor natural resource sector companies operate.Global Witness calls upon Northern governments,where most of these companies are based, toimplement appropriate changes to their disclosurerules as a matter of urgency.

If the oil companies in Angola genuinely wish tobe considered true ‘global citizens’ and are anxious toavoid the charge of directly funding the progressiveimpoverishment of a nation, then there is an urgentneed to change current practices. Global Witness iskeen to work constructively with those who genuinelywish to see improvements in Angola.


‘If we lose a tank, we pick up the phone and order another one. If UNITA loses one, it is moredifficult.’ – Angolan general, January

When a corporation is convicted of repeatedfelonies that harm or endanger the lives of humanbeings or destroy the environment, the corporationshould be put to death, its corporate existence ended,and its assets taken and sold at public auction.

– Eliot Spitzer,Attorney General of New York State, 1998

turned and open fired on the people, just like that.” –Displaced woman, early 2001a

© C

hris Sattlberger / Panos Pictures

The Financing

Introduction –international lending toAngola

GLOBAL WITNESS published detailsof a string of major internationalloans to Angola up to December in A Crude Awakening. The informationtherein was provided to give an

indication of the extent to which Angola’s future oilwealth, and hence, the country’s development capacity,has been mortgaged. The report challenged theGovernment’s policy of obtaining short-term loans athigh interest rates, when the vast majority of this incomeappeared to do little or nothing for the development ofthe country or for the provision of much-neededdomestic services. An almost complete lack oftransparency about such loans means that theinformation about their size or purpose is very difficultto obtain internationally, and almost impossible to obtainin Angola. This creates an extraordinary set ofcircumstances, whereby the banks providing credit have,in effect, established an entire set of parallel financingfor the State that has been totally free of any scrutiny bythe people of Angola, whilst the basis of these loans isoil, which is meant to belong to the ‘people’.

Two years later, the situation vis-à-vis unaccountableloans in Angola has deteriorated significantly, with someUS$. billion in ‘new’ loans agreed from September to October . This shows the AngolanGovernment’s startling disregard for its agreement withthe IMF to restrict new borrowing to US$ million (seeNew lending since December – page ) and mayconsiderably exceed the amount known by the IMF.Similarly, other loans before the end of have been

recently uncovered and details of these should be addedto those reported in A Crude Awakening (See Loans agreedprior to December – page ), providing additionalevidence about the deteriorating indebtedness of thecountry.

This section attempts to explain the complex structureof loan procurement in Angola based on direct loans tothe Angolan Government, structured loan arrangements,loans facilitated by oil trading companies and loansspecifically tied to the financing of capital expenditureprovided by international bilateral export financingagencies. The role of the Soyo-Palanca and the CabindaTrusts which act as international guarantors bymortgaging Angola’s future oil income is also discussed.

Global Witness challenges the ethics behind thepolicy of oil-backed lending to countries with stronghistories of non-accountability and corruption such asAngola and calls on all the financial entities involved toimprove the transparency conditions by which such loansare arranged and disbursed. An example of inter-bankcooperation that could be used as a model for futureoversight and controls of loan arrangements is theWolfsberg Principles (see The Wolfsberg Principles – Anti-money laundering guidelines for private banking – page ).

Finally, the problem of international moneylaundering through offshore tax havens is detailed underthe heading ‘Shutting Down the Dictator’sLaundromats’ to complete the discussion of how theinternational financial system must increase cooperationand transparency in its efforts to fight fraud andembezzlement.


“…FAA would come to the village and look for cows.When they knew where

We are in the business of making loans tothe Angolans. It is true, we cannot be surewhere the money goes, and so yes, I supposeyou can make the case that we are indirectlyfunding the war.

– Admission by anonymous banking official207

PART THREE: THE FINANCING

Banco Nacional deAngola (BNA).

The Financing

The credit tap remainswide open…

IN RECENT YEARS, Angola has beenable to obtain short-term loans from avariety of sources. These loans have variedin scale and purpose and include thefollowing types:

● Direct loans from individual banks toGovernment For example, loans provided by Banque Paribas(now called BNP-Paribas following its merger withBNP in June ), where loan facilities werecontrolled by Pierre Falcone and ArkadiGaidamak.

● Structured loans arranged on the LondonmarketFor example, the US$ million loan put togetherby Standard Chartered Bank in February .

● Loans specifically tied to the financing ofcapital expenditure, such as thoseprovided by international bilateral exportfinancing agencies For example,the US Ex-Im Bank US$ millionloan provided in July , which supported thesale of equipment and services provided by anumber of US companies that includedHalliburton and Brown & Root.

Each of these different loans provides capital overand above that generated from tax and otherpayments from the oil companies derived from oilextraction; nevertheless, as discussed below, themajority are raised on the back of future oilextraction. However, because of the AngolanGovernment’s poor international credit status, suchloans are only provided by financial institutions atrelatively high rates, making them a poor deal for theAngolan people. On average, oil-backed loans arearranged at around two to three percentage pointsabove LIBOR – the benchmark London InterbankRate on the London market. This results in future oilproduction being mortgaged at a significantly higherrate than the preferential loans that are obtainablethrough an IMF programme. Further, loans arrangedthrough the IMF would not have to be backed up byup-front sales of oil.

Direct loans to the Angolan Governmentfrom individual banks

Direct loans – such as those from Paribas – are oftenarranged under a high degree of secrecy, preventingany form of public scrutiny in Angola. Lack oftransparency makes it impossible to know the totalnumber and scale of the loans that have been madeavailable by Paribas but evidence suggests thatbetween and , the bank providedapproximately US$. billion to the AngolanGovernment (owed by the Banco National de Angola– BNA)., This figure does not include a US$million ‘revolving credit’ facility that was valid until. Global Witness has been unable to confirm ifthis figure accounts for all the loans provided, which

means that the real amount loaned may besignificantly greater. Some sources have suggestedthat the total debt of the Angolan Government toParibas may be as high as US$ billion.

Arcadi Gaidamak has claimed that he and PierreFalcone (See Another ZTS-Osos contract with Angola –Gaidamak comes on board? – page ) were made Angolancitizens through the provision of diplomatic passportsand subsequently controlled credit facilities derivedfrom oil-backed loans. This presents anextraordinary set of circumstances in which a parallelbudget of the Angolan State is being controlled extra-territorially by unaccountable and unelectedforeigners. It seems hard to avoid the conclusion thatunaccountable oil-backed loans have formed a keypart of the off-budget financing of the AngolanGovernment war effort which, in turn, may havebeen subject to significant misappropriation duringthe military procurement process.

Global Witness is not suggesting that Paribasdirectly facilitated the kick-back process from thearms trade, or that the bank was necessarily aware ofthe end-use of the revenues provided. However,Global Witness does question whether the bankprovided adequate transparency about the provisionand use of these loans to enable scrutiny by thepeople of Angola.

BNP-Paribas should explain why and how creditfrom loans arranged in the name of Sonangol wereput at the disposal of individuals who were notdirectly connected to the company. If Gaidamak’sclaims are true, to what extent were officials at thehighest levels of Paribas aware of this highly unusualsituation? What checks and balances were put inplace to ensure appropriate management of thesefunds and to whom, and on what basis, were theydisbursed? In particular, the bank should explain therole of the oil trading company Glencore and anyAngolan or international officials in this process.

Indeed, when the bank embarked on its process ofloaning hundreds of millions of dollars in loans in, the Government was looking like a potentialloser of the war and a victorious UNITA may haverefused to honour such credit. Why did Paribas makeloans under such risky circumstances? BNP-Paribasshould explain what, if any, political backing existedbehind the decision to make these initial loans andwhich entities were prepared to bankroll any losses.

Global Witness calls on BNP-Paribas toimmediately make public full details of all loanarrangements to Angola. This information shouldinclude details about the purpose and intendedrecipients of the loans as well as personnelresponsible for disbursement. The bank should alsoclarify the size of all outstanding arrangements,providing dates of maturity.

Structured loans on the London market

This type of loan involves a bank that acts as leadarranger (or syndication agent) which is thenresponsible for bringing together other participatingbanks and for organising the loan deal. The role oflead arranger carries significant financial benefits: thebank receives a percentage of the total amount that islent as a commission for organising the syndicate.This payment is surplus to any interest that the bankreceives on the money lent. The participating banksare organised in groups according to the percentage


they were they would return and take the cows. Sometimes they would kill

The Financing

they lend. This creates a hierarchy within the variousplayers, referred to in descending order ofimportance as lead arranger (syndication agent), co-arranger(s) and participants (arrangers).

The role of the Cabinda and Soyo-Palanca Trusts inguaranteeing loans

From a bank’s perspective, structured loans have theadvantage of sharing the risk amongst theparticipating banks. However, simply being able toshare the risk is not sufficient for the loan to go ahead– the banks need to feel secure that they will berepaid. In the case of Angola, the banks puttingtogether structured loans have abundant security fortheir lending, thanks to both the Cabinda and theSoyo-Palanca Trusts.,

These oil trusts are effectively a set of offshoreaccounts that have rights over a significant proportionof the oil generated from the Angolan Government’sshare of production. The Cabinda Trust, which isrun by Lloyds Bank in London, has access to oil (andhence revenue from selling the oil) from Cabinda’sBlock concession. Any repayments tied to the Trusthave priority over all other obligations from theGovernment’s share of production from the Block.The Soyo-Palanca Trust mainly relies on Block /and Block , though it can utilise oil from Block if itis not first earmarked for the Cabinda Trust.

The advantage of this set-up to the lending banksis that it provides them with reliable informationabout whether or not Angola has sufficient availableoil production to service its debts and meetrepayment requirements., A ‘Credit Committee’,which decides whether to execute the loan, normallyrequests information about the intended use of themonies being provided; the standard AngolanGovernment or Sonangol response is that the moneyis needed for development or reconstruction. It isinteresting that the lending banks request suchinformation but it is apparently very rare that there isany follow-up to determine whether the money wasspent in the way described. The amount ofinformation that the banks require to make the loanalso contrasts oddly with the non-transparency oftheir own disbursement procedures.

Loans agreed prior to December

Recent investigations have also uncovered at leastanother two loans finalised in October thatshould be added to the list compiled in A CrudeAwakening. The first involved a loan for ‘creditfacilities’ of US$ million, which was provided byNissho Iwai Corporation to Sonangol. Nissho Iwaialso provided a facility of US$ million in .

The second loan involved a credit of US$ millionto Sonangol provided by a syndicate headed byEuropean private banking specialist MeesPierson.

According to a financial database, a total ofUS$. billion was lent to Angola between February and December . Apart from US$million that was lent to the Banco National de Angolaon th December , the remainder was providedto Sonangol.

people it just depended on luck, sometimes they killed the whole families and


New lending since December 1999Global Witness can reveal that since A CrudeAwakening, the Angolan Government appear to haveobtained about US$3.55 billion in loans arrangedbetween September 2000 and October 2001.Thevarious loans, and their implications for the country’slevel of indebtedness, are discussed below:

1st September 2000: US$500 million facility arranged byBNP-Paribas, Société Générale and Natexis Bank.208 The loan wasprovided to Sonangol and listed as being for ‘trade finance.’206

Press reports suggested that this loan placed the AngolanGovernment in breach of its agreement with the IMF tosignificantly restrict the level of new borrowing through short-term structured loans during 2000.208,209 The IMF reported thatthis loan raised the country’s debt to US$8.27 billion through toSeptember 2000, up from the agreed US$8.1 billion under theIMF programme.208 IMF officials stated that, ‘The disbursement ofa US$500 million oil-guaranteed bank loan in September2000…led to the non-observance of the Programme ceiling onnon-concessional debt.’208

This pattern of non-observance of IMF limits has dramaticallyaccelerated in 2001.Although the IMF and the Governmentagreed a US$269 million ceiling on new borrowing (pegged to aset of assumptions about oil prices and other variables), GlobalWitness has uncovered a series of loans to the country worthmore than US$3 billion.An unclear fraction of this money isdestined for refinancing services, but nonetheless the IMF limitappears to have been exceeded by almost five times, or US$1.1billion, and likely by considerably more.

13th February 2001: US$455 million facility arranged byStandard Chartered Bank for Sonangol.210

The purpose of the loan is listed as either ‘working capital’ oras ‘trade finance.’206 The co-arrangers of this loan consisted of:African Export-Import bank; BHF Bank; BNP-Paribas; BankBrussels Lambert; Bayerische Hypo und Vereinsbank; BayerischeLandesbank Girozentrale; Citibank; Commerzbank; CreditAgricole-Indosuez; Credit Lyonais; Fortis Bank; ING Barings; KBCBank; Natexis Banques Populaires; Royal Bank of Scotland; andSociété Générale.211

Standard Chartered stated the purpose of this facility was to‘prepay an existing oil receivables backed facility, which is due toexpire during 2001.’212 Sources suggested that the existing facilitywas a loan of US$575 million negotiated in 1999 with Swiss bankUBS.206 Standard Chartered went on to say that the ‘the balance[of the new loan] will be used to fund projects in connectionwith the national reconstruction plan of Angola.’210

There is some confusion over the amount of new money inthis loan; the publication Trade Finance quoted a StandardChartered spokesman as saying that ‘this is a deal that has beenaround for a number of years and is essentially a re-financing of aprevious facility’213, which implies minimal new money. However,the journal went on the report that, ‘it is understood that aroundUS$250 million of the loan is new money.’213 This assertion isfurther supported by the fact that, according to African Energy,UBS’ previous 1999 loan of US$575 million loan was to berepaid over four years, but that the rise in oil prices may havemeant a more rapid payback phase and its possible completionby July 2001.Thus, ‘Angola had been paying this loan off foraround 22 of 26 months by the time [that] it secured the newStandard Chartered loan.This would suggest relatively little of theUBS loan was left unpaid, and in need of refinancing … thiswould therefore mean the new-money portion of the newStandard Chartered loan would be relatively large – likely well inexcess of the IMF’s US$269 million figure.’214

It has also been suggested that the issue of re-financing, ‘wassimply a ploy to cloud the waters and avoid immediate

The Financing

other times they would just catch someone and ask for information about


accusations of breaching IMF guidelines.’214 African Energy makes aserious allegation which, if true, may imply that the structure ofthe loan has not only clouded the Angolan Government’scooperation with IMF, but may also aid misappropriation of stateassets (which is precisely the reason for the IMF’s objection tothis kind of loan arrangement). If the UBS loan has not been paidoff to the extent suggested, the money that should have beenused by Sonangol to clear this debt could have beenmisappropriated. Regardless of the true purpose of this loan,neither the terms ‘working capital’, or ‘trade finance’ under whichthe loan is described in banking databases seem to provide anadequate explanation as to whether this loan was a refinancingpackage or not.

8th March 2001: US$455 million facility arranged byCommerzbank for Sonangol.215

In Standard Chartered’s press statements regarding their roleas lead arranger for the February US$455 million loan, the bankappears to have forgotten to mention that they also participatedin an additional US$455 million loan less than one month later.This additional loan appears on banking databases also as‘working capital’, but the database makes it clear that this loan isnot a refinancing package.215 If available information is correct,then the Standard Chartered loan left the Angolan Governmentwith the potential, at best, to only borrow a further US$19million during 2001 before additional borrowing exceeded itsagreed IMF limit.Thus, the Commerzbank loan appears to haveover-reached this limit by approximately US$436 million.Thisshould be of major concern to the IMF.

On this occasion, the lead arranger role was swapped fromStandard Chartered to the German Bank, Commerzbank. Otherparticipating banks included:African Export-Import Bank, BahrainIntl Bank, Bayerische Landesbank, Credit Agricole-Indosuez, FortisBank, KBC Bank, Royal Bank of Scotland Plc, Standard CharteredBank, BNP Paribas, BayerHypo Vereinsbank, Citibank, CreditLyonais, ING Bank, Natexis Banques Populaires, Société Généraleand Commerzbank AG.215

12th April 2001: A complex loan arrangement for US$441.2million provided by un-named Brazilian banks to the AngolanGovernment.The loan is constructed of three different loans ofUS$175.9 million, US$160.3 million and US$105 million.216,217 Thedeal, which was signed in Brasília in February 2001 involves theshipment of 20,000 barrels of oil per day to Brazil at US$28 perbarrel. According to the radio station Voice Of America, 80% ofthe loan is to be used to repay Angola’s debt to Brazil, with theremaining 20% being used to purchase Brazilian external debtbonds.216

Luanda-based economist José Cerqueira commented toReuters that, ‘this kind of operation is profitable for the bankers,but the Angolan people will lose.’217

Assuming the breakdown of the loan is correct, then someUS$352.8 million (80% of US$441 million) could be seen asrefinancing an existing debt to Brazil.This suggests that US$88.2million (or the remaining 20%) is new money.Thus, this loanamounts to US$524.2 excess of the IMF’s borrowing limit.Thisshould be of major concern to the IMF and the internationalcommunity, especially given that the loan appears to be forfinancial speculation on the Brazilian debt market, rather than forthe reconstruction of Angola.

16th July 2001: US$600 million facility arranged for Sonangolby BNP-Paribas, Glencore Finance Ltd, Natexis BanquesPopulaires, Société Générale as lead arrangers.218

Also acting as arrangers were Commerzbank, CreditAgricole-Indosuez, Fortis Bank, Hypo Vereinsbank, KBC Bank.Citibank acted as Co-arranger. Other banks involved in this loanincluded BHF Bank Aktiengschft, Royal Bank of Scotland PLC,ABB Export bank, BMC Bank Corporation, Landesbank Rheinland

Pfalz, DG Bank AG,WestLB,ABC International Bank PLC, CSFB,Moscow Narodny Bank.218 It has been alleged that this loan wasarranged for Sonangol without previous consultation of theFinance Ministry, and without further notification of the either theFinance Ministry or the National Bank of Angola.207

The banking database lists this loan as being provided for‘corporate purposes’ although the purpose of this loan is opaque,there is no evidence to suggest that it was destined forrefinancing purposes.Thus, the amount in excess from the IMFborrowing limit for 2001 has now been raised to US$1.1 billion,or by approximately five times the limit established by the IMF forAngola.

25th October 2001: US$500 million facility arranged forSonangol by BNP-Paribas, Natexis Banques Populaires, SociéteGénerale as lead arrangers, with Glencore Finance Ltd this timeplaying the role of arranger.219

The loan purpose is given as debt repayment.219 Morespecifically, the banking database refers to the use of this facility asfor refinancing a US$500 million credit provided in 2000,presumably the 1st September 2000 loan arranged by the samebanks, as discussed above.

Given the plethora of banker claims that each new loan is forrefinancing existing loan structures, it is difficult not to come tothe conclusion that the eventual repayment of these facilitiesmight be extremely problematic. For example, one mightpresume that the September 2000 loan would have been puttogether according to a strict repayment schedule. If this is true,what has happened to the funds that should have already beendeployed according to that schedule?

Final week October 2001, agreement for US$600 millionloan for Sonangol, provided by the Arab Banking Corporation.206

Banking sources indicated that this loan also involvedGlencore, though the specific role of the company or itssubsidiaries is unclear.206 It is also not clear what if any otherbanks have taken part in this loan. Sources indicated that thebank’s supervisory board allegedly raised concerns about thisloan, but nevertheless went ahead.206

The cost of war – , disabled from landmines and counting...

The Financing

The case for banking transparency

There is a demonstrable lack of transparency overthe loans made to the Angolan Government.Symptomatic of this opacity is the way thatsyndicates have arranged loans of more than thirteentimes the agreed ceiling on new borrowing agreedwith the IMF. Loans are often attached to a statedpurpose during the syndication process but it remainsunclear, what, if any, measures are taken by leadarrangers or credit committees to check that moniesare appropriately disbursed. At the minimum, newcredit of US$.billion has been loaned to thecountry in , significantly exceeding the IMF limitof US$ million. Thus, oil-backed loans are clearlyanother unaccountable source of income for theAngolan Government.

Global Witness challenges the ethics behind thispolicy of oil-backed lending to countries with stronghistories of resource misallocation. Although bankscan be sure of the return of their capital with highinterest rates because such loans are serviced by ashare of oil-production, they risk renderingthemselves complicit with misappropriation of statefunds if provisions to check loan disbursement andassure fiscal transparency are not implemented. Atbest, the provision of recent loans could be said tohave undermined the work of multilateral institutionslike the IMF; at worst, it may be that these provide awhole set of parallel financing, outside of publicscrutiny, for the operations of the shadow state andprovide lucrative opportunities for cash diversion.

Further, there appears to be a certain amount of‘creative ambiguity’ in the provision of such creditfacilities, for example, Standard Chartered’s US$million loan, ostensibly to restructure existing debts,may contain over US$ million in new money. It isnot possible to know if this is true unless Sonangol,the banks and/or the Angolan Government providesappropriate information.

Such information is not being made routinelyavailable to Angolan civil society in whose name suchdebts are arranged. Thus, like oil revenues, ordinaryAngolans cannot know whether such loans areappropriate and are, therefore, unable to hold theirGovernment to account over disbursement of creditfacilities.

The case for full transparency in internationallending to Angola is as important as that for oilcompanies operating inside the country. Banksshould:

● Publish full details of loans provided, includingdetails of the amount lent, the recipients, theinterest rate charged, the expiry date and thepurpose of the loan;

● Clarify what measures they take to verify thatactual expenditure corresponds with that stated onbank documentation and during negotiation;

● Insist that such expenditure is verifiable as acondition of providing the loan;

● Publish regular updates detailing the resourcesheld by the Trusts, and the demands being madeupon them. This concerns banks such as LloydsBank in London, which runs the Cabinda Trust.

where the cows were and then let them go. One day 5-6 FAA came to take the


The Wolfsberg Principles –Anti-money launderingguidelines for privatebankingOn 30th October 2000, 11 leading internationalbanks – ABN-Amro bank, Barclays Bank, BancoSantander Central Hispano,SA, ChaseManhattan Private Bank, Citibank, Credit SuisseGroup, Deutsche Bank AG, HSBC, JP MorganInc, Société Générale, and UBS AG – togetherwith anti-corruption NGO TransparencyInternational announced they had agreed to avoluntary set of global anti-money launderingprinciples.223

The Wolfsberg Principles seek to deny theuse of the banking services for ‘criminalpurposes’ as each bank will ‘endeavour to acceptonly those clients whose source of wealth andfunds can be reasonably established to belegitimate.’223

Global Witness would like to congratulatethe various banks involved, together withTransparency International, for taking such aninitiative; taking the precedent that thesePrinciples have set for inter-bank cooperation,Global Witness would be very grateful to hearfrom any of the Wolfsberg signatories, to discusshow to move forward with full transparency foroil-backed loans.At the minimum,Wolfsbergsignatories should not collaborate with or takepart in any loans that are not fully-transparent asto their disbursement and subsequentexpenditure or that do not impose the samestandards on their agents or recipients.

Carrying the burden of debt. Angola’s youth sacraficed toa privatised war.

© C

rispin Hughes / Panos Pictures

The Financing

Oil trading companies

Oil trading companies active in Angola, such asGlencore, Vitol, Addax, Attock Oil and Nissho Iwaiand individual traders, like the former ‘fugitivefinancier’ Marc Rich, have also played a key role inproviding unaccountable revenues to the AngolanState. A Crude Awakening published some details of thedeals that have been put together by these companies.

Sources suggest that Marc Rich, either separatelyor with Glencore, the oil-trading operation that heclaims he left in , was personally involved inarranging a US$ billion loan to the AngolanGovernment in July , in return for his purchaseof every barrel of oil not already allocated toprevious oil-backed loans, from the Government’sshare of oil production.

Mr. Rich has enjoyed a controversial career as acommodities trader, including fleeing the US toSwitzerland in on counts of tax evasion ofover US$ million and running illegal oil deals withIran during the hostage crisis at the US embassy inTehran in November ., His subsequentpardon by the outgoing President Clinton inFebruary is currently under investigation due toallegations that it was linked to over US$ million inpolitical or ‘philanthropic’ contributions to theDemocratic Party causes. Other allegations includecollusion with Abacha’s regime in Nigeria andsanctions busting for the Apartheid regime in SouthAfrica.

Rich’s deal is alleged to run for three years,which means that it should have expired in July .The deal appears to have been routed throughSonangol and the Presidency and may be yet anotherunaudited, unaccountable loan to the shadow state.

Although Mr. Rich no longer claims to beassociated with Glencore, the deal does appear tocorrespond roughly in value to the supposed totalUS$ million in loans provided by Glencore overthe previous year (December – US$ million;mid-February – US$ million; July –US$ million). Inaccuracies in reporting aside, ifthe US$ million derived via Glencore is the sameas that suggested as coming from Marc Rich, it ispossible that he is still involved in the operations ofGlencore, which both parties have denied.Alternatively, if the loans are separate, estimates forthe total value of oil-backed loans negotiated withAngola should be scaled up by US$ billion.

Disbursement of Glencore’s February and Julylending (some US$ million) also involvedParibas. Given that the original arrangement toraise oil-backed loans from , put together byPierre Falcone and Arakdi Gaidamak, involved bothGlencore and Paribas, a reasonable suspicion existsthat these loans could also be part of an oil financing-for-arms arrangement.

It is very difficult to determine the reality of thissituation because of the lack of transparencysurrounding these oil-based credit arrangements.Thus, there is an urgent need for the internationalcommunity to insist on full transparency for oiltrading operations.

The role of International bilateralexport credit financing agencies (ECAs)

Bilateral export financing agencies operate to reducethe risk for national companies wishing to invest

overseas. Financing, either in terms of direct loans toparticipating companies or as a form of creditinsurance to mitigate the risk of project paymentdefault, is normally provided in return for thecontractors obtaining required equipment or some ofthe necessary workforce from the country that isproviding the underwriting insurance. In effect, thismeans that export financing is national taxpayersubsidisation of project abroad to boost nationalbusinesses.

Oil companies are often required to make massiveinvestments in infrastructure before any oil isproduced, so risk is mitigated by setting up securefinancing arrangements with a number of ECAs.Agencies with significant portfolios in Sub-SaharanAfrica include (in decreasing order of importance):

COFACE France

Export-Import Bank (Ex-Im Bank) United States

Mediocredito Centrale SpA Italy

Export Credit Guarantee Department (ECGD) UK

Kreditanstalt für Wiederaufbau Germany

Credit Guarantee Insurance South Africa

SACE Italy

Nederlandsche Credietverzekering Maatschappij The Netherlands

Korea Export Insurance Corporation South Korea

The main agencies currently providing governmentrisk insurance for Angola include the US Ex-ImBank, France’s COFACE, Italy’s SACE, and SouthKorea’s Korea Export Insurance Corporation.

Investment provided by bilateral ECAs is growingand current international lending exceeds thatprovided by the World Bank, IMF and all othermultilateral agencies combined. However, unlike themultilateral lending institutions, most export creditagencies are not required to consider the social andenvironmental impacts of the projects they support.Global Witness was informed by one agency in that the only major factor affecting their decision toauthorise a loan was the likelihood of it beingrepaid.

This makes for an interesting scenario in theAngolan context: national taxpayers are financiallycontributing to oil field development through exportfinancing arrangements in conjunction withcompanies which then collude with the ‘shadow state’to prevent transparency. Thus, taxpayers in the Northare indirectly helping to fund the disempowerment of


cows. I was in the church and they came in and started shooting.They did not

What could the missing billions do for Kuito and other Angolan cities?

For example, an agency could impose a loancondition insisting that all players participating in theagreement are required to practice full transparency.In the case of Angola, given that many of these loansare obtained for the purpose of financing Sonangol’sfield development programmes, this would mean thatSonangol would need to be fully transparent aboutthe payments it makes to the Angolan Government,as well as publishing all current oil-backed loans, atthe risk of not receiving bilateral export financing.

There are obvious difficulties for any individualexport credit financing agency to proceed unilaterallywith such a move for transparency. As one pointedout, ‘we can see the benefits of doing this, but please

The Financing

Southern civil society. Further, while state assets aremisappropriated, international taxpayers will berequired to finance the redevelopment of Angolathrough multilateral and bilateral assistanceprogrammes. Although on the one hand, there is aperceived benefit of job creation to the nationaleconomies of the countries of active export financingagencies, on the other hand, taxpayers in the Northare unwittingly subsidising and underwriting thedisempowerment of civil society and the subversionof the democratic process in a developing country.

The solution must be to include transparencycriteria as a condition of all future export creditfinancing agreements in all countries of operation.

kill anyone, it was just luck” –Displaced woman, early 2001a


Shutting Down the Dictators’LaundromatsBy Jonathan Winer, former Deputy Assistant Secretary of State for

International Law Enforcement, US State Department

The covert financial networks of the world and theinfrastructure of money laundering to bank secrecyhavens in mini-states like Liechtenstein, the GrandCaymans, or the Virgin Islands may, at last, be in theprocess of exposure.The Organisation for EconomicCooperation and Development (OECD) in Paris, theFinancial Action Task Force (FATF), based at the OECD,and the Financial Stability Forum of the G8 countries havefinally begun to take action to pressure mini-states whohave rented out their sovereignty to provide anonymitythrough their financial services sector to the world’s drug-lords, criminals, arms dealers, and dictators as well as theircorrupt paymasters and facilitators in the North.

For the past two decades, access to the world’sfinancial system has become a critical element in theft ofnational wealth from some of the poorest countries ofthe world, just as it has provided a mechanism for thehiding of illegal (and criminal) political slush funds in someof the world’s most developed democracies.The basicmechanisms for this covert infrastructure could be any ofthe following:

● Anonymous company formation with local agents, tocreate a business whose ownership could not betraced;

● Anonymous trusts with local agents in anothercountry, to create an anonymous owner for theanonymous business, and thus another layer ofprotection;

● Use of ‘brass plate’ banks from non-regulatedjurisdictions promising bank secrecy,

● Opening of ‘correspondent’ accounts in regulatedbanks by the ‘brass plates’ to move the money aroundthe world.

In a globalised economy, mini-states offering bank secrecyhave become the method of choice for handling theproceeds of corruption of the world’s worstgovernments. Presidents and despots such as Nigeria’sAbacha, Zaire’s Mobutu, Gabon’s Bongo, those close toAngolan president dos Santos and Russian PresidentYeltsin, Germany’s Christian Democratic Union underHelmut Kohl, the French oil company Elf-Aquitaine, andPeru’s intelligence chief Montesinos, each used the sameset of jurisdictions and mechanisms to launder, as

applicable, the proceeds of bribes, weapons deals, slush funds,hush funds, and funds stolen from the state. Indeed, everysingle one of these corruption cases moved through the tinyEuropean principality of Liechtenstein, described at aninternational forum on financial crime at CambridgeUniversity as ‘a financial brothel in which every criminal in theworld finds a bed.’

Under the existing system, kleptocratic dictators such asNigeria’s President Abacha could recruit agents in the BritishVirgin Islands (BVI) or the Bahamas to open up ananonymous international company for him. He could thenestablish an anonymous trust in a more respectablejurisdiction like the Isle of Man that would own the BVI orBahamian company.The BVI company could open an accountthrough the Internet at a bank in Latvia, Liechtenstein orVanuatu, and that bank in turn could do business for the BVIcompany at major banks in New York, London, Hamburg,Paris, and Zurich, through ‘correspondent’ accounts.

The problem is not merely that smaller states havelicensed themselves to corrupt dictators and criminals, butthat illicit banks and funds have had the same access to theworld’s financial markets as legitimate ones. Each of the abovescandals has a common theme of disappearing moneycoupled with the inability of governments, regulators, lawenforcement agencies and prestigious internationalorganisations to trace it when something went radicallywrong.As governments analysed the problem, they began to

© D

avid Orr / Panos Pictures

don’t push us into this alone, without achieving thesame criteria for the other agencies. If it was possibleto get the other national agencies to move ahead withthis, we would gladly do it.’

Without a commitment to transparency by ECAs,an obviously perverse situation results: theinternational community through the IMF iseffectively pushing for transparency in Angola, whilemany of the same states are individually underminingsuch efforts. Worse, they are doing this with revenuesfrom national taxpayers, who are predominantlyunaware of this situation and, in the end, may berequired to subsidise picking up the pieces from theeconomic mismanagement of and capital flight from

corrupt neo-authoritarian government regimes,which they have unwittingly sponsored.

Global Witness strongly urges that nationalgovernments insist that their export financingagencies practice full transparency, and that fulltransparency of funding partners and recipientsbecomes a pre-requisite for funding. Global Witness isnot calling on these agencies to stop providing loansto finance oil development projects in Angola, but inthe absence of transparency criteria becoming a pre-requisite for future loan provision, it could be saidthat these agencies are themselves complicit inmismanagement and misappropriation of state assetsand the disempowerment of civil society.

The Financing


realise there were a number of factors leading to theworldwide problem of dirty money, including:

● Fragmented supervision, within countries by sector, andamong countries, by national jurisdiction;

● Secrecy laws that impede the sharing of informationamong countries and between regulators and lawenforcement authorities;

● Inadequate attention to electronic payments in existinganti-money laundering supervision and enforcement,including ‘know your customer’ rules focusing mostly oncurrency, even as the world’s financial services businessesrapidly continue their move into E-money;

● The lack of international standards governing keymechanisms used in transnational financial transactions,such as exempt companies, shell companies, internationalbusiness companies, offshore trusts, offshore insuranceand reinsurance companies, offshore fund vehicles,including, but not limited to, hedge funds;

● Inadequate due diligence by company formation agents,attorneys, and financial institutions in the process ofincorporating and licensing of new financial institutionsand shell companies and trusts owned by their affiliates.

Over the 1990s, these mechanisms were exposed in a seriesof investigations which began with attempts in the Philippinesto recover the billions stolen by Ferdinand Marcos, andincluded efforts by Swiss Prosecutor Carla del Ponte to tracehundreds of millions in drug money taken by Raul Salinas,brother of the then-President of Mexico, Carlos Salinas.TheG-7 decided to take action when asset recovery effortsagainst the Suhartos in Indonesia, Mobutu in Zaire andAbacha in Nigeria revealed that they used the samejurisdictions as Colombian cocaine traffickers and Islamicterrorists.

Huge losses in tax revenues, scandals involving politicalleaders ranging from countries in transition like Mexico andRussia, to some of the most important figures in modernEuropean political history, such as former German ChancellorHelmut Kohl, and fears of global financial instability, motivatedthe world’s most industrialised nations to create a blacklist of‘non-cooperative’ jurisdictions in 2000.The list contained aWho’s Who of the world’s most notorious money-launderingjurisdictions, including countries such as Israel and Russia thathad been previously thought untouchable for politicalreasons.There were no immediate sanctions placed on thoselisted; however, the G-7 countries directed their financialinstitutions to look more closely at all transactions comingout of those countries.This provided an incentive for somejurisdictions, including Antigua, Bahamas, Caymans,Liechtenstein and the Philippines, to soften bank secrecy laws.

At the same time, bankers from regulated jurisdictionssuch as the US, Canada, Japan, Switzerland, and the EU began

to question how tiny countries in the South Pacific such asNauru, Niue and Vanuatu with a population of only 20,000 orso could have banks moving billions of dollars in assets a year.These essentially unregulated jurisdictions seemed to be littlemore than financial laundromats offering systems for hidingfunds, rather than any legitimate services.Accordingly, toreduce the threat to their own reputations, and at substantialcost to their shareholders, banks such as Citibank in the USand UBS in Switzerland refused to do business in 1999 and2000 with banks in such unregulated jurisdictions.

While the first steps have been undertaken in creating a‘name and shame’ process to isolate jurisdictions that arehiding dirty money, many essential elements of a globalsystem for preventing corrupt leaders from stealing theirnation’s wealth still need to be put into place.These include:

● Having the world’s most important financial markets shutdown access to the financial institutions of ‘mini-states’who refuse to cooperate in investigations involving foreigncorruption cases.They should face sanctions from theirgovernments if they fail to do so;

● Enacting laws permitting the seizure of the proceeds offoreign corruption and making them money-launderingoffences in countries like the US-, which treat domesticcorruption as a crime but have no laws to combat foreigncorruption;

● Continuing the drive to limit bank secrecy, ensuring it isalways lifted in cases involving allegations of crime,corruption, or theft;

● Broadening the sharing of law enforcement andregulatory information among countries engaged ininvestigating financial crime as a requirement of fullparticipation in making use of the global financial servicesinfrastructure, such as the world’s payments systems;

● Sanctioning financial institutions that have facilitatedmoney laundering and financial crime, with substantialfines, or closure.The US took this approach to theJapanese bank Sumimoto in the late 1990s, requiring thebank to leave the country after some of its officialsprepared fraudulent bank documents in an effort to hidefinancial losses from regulators;

● Making it illegal to accept money whose origin cannot beexplained by legitimate economic activity. No banksaccepting funds from Nigeria’s Abacha family, Mexico’sCarlos Salinas, or Zaire’s Mobutu, could have been underany illusions that they were earned legitimately;

● Repatriating the proceeds of corruption to the publictreasury of the looted state, with the condition that thefunds be spent in a fashion that is transparent anddemocratically determined, ideally on basic social servicessuch as education and health care.

Conclusion

ORDINARYANGOLANS havebeen stripped oftheir rights anddispossessed by over

four decades of civil war. The conflictitself has been deliberately exploited toprovide for highly-organised economicabuses involving the full-scaleappropriation and laundering of stateassets through parallel budgets, over-priced arms deals and deliberateindebtedness through mortgaging offuture oil production. This system ofprivate gains and public losses issustained by blaming the war for theresultant failures of the State. Topmilitary and Government authoritiesappear to make money from themilitary procurement process itself and nearly everyitem that is consumed in the war against UNITAserves to enrich Angola’s ruling elite and theirnetwork of brokers, bagmen and influence-peddlers.

This over-riding ‘operational logic’ of bribery andkickbacks in the Angolan shadow-state is partly thecreation of a Northern foreign policy that hasremained firmly focussed ‘two miles down’ on thedeep-water oil fields. At best, Northern Governmentshave sought to appease the ruling elite to avoidharming national business interests. At worst, Franceand others have treated Angola as a ‘judicial no-man’s land which, in the name of mutual politicalinterests, was to stay for eternity a land ofunpunished crimes’. As a result, the ‘Presidents’men’ have taken Angola to the cleaners – a third ofthe state budget for appears to be missing, andmay perhaps be located in offshore laundromats.

Of the oil companies operating in Angola, onlyBP has made a public stand over transparency; Shell,Norsk Hydro and Statoil have agreed with theconcept and indicated a willingness to move forwardon the issue; Chevron-Texaco, TotalFinaElf andExxonMobil – the largest (and soon to be largest) oilextractors in Angola – have, so far, remained indenial.

Civil society is entitled to be provided withadequate information to be able to call theirgovernment to account over the management of‘their’ resources. Although peace has, unsurprisingly,been the main priority of Angola’s nascent civilsociety, it has shown an increasing acknowledgementof the need for good governance and transparency toachieve a lasting solution to the war. In ,Angolan NGOs triggered a debate at the level of theNational Assembly to demand full disclosure of thestate budget. Although in itself a substantial work offiction, the full budget was published for the first timein . Access to quarterly state expenditure anddemands for more spending in health and educationand less on defence and security may be next on theagenda. Others have started a process to ensure thatstate institutions function in a transparent manneraccording to Angolan law.

Calls for transparency have most recently emergedfrom Archbishop D. Zacarias Kamuenho, head of

the Angolan Catholic Church and winner of theSakharov prize for his work to promote human rightsand peace in Angola. During the prize awardceremony at the European Parliament last December,Archbishop Kamuenho highlighted the role of theextractives industries in perpetuating the war andstressed the pressing need to ‘bring about thetransparency [that]… would stimulate theimplementation of social investments to the benefitcitizens quality of life’. The death of UNITA bossJonas Savimbi only adds to this pressure. It isbecoming increasingly unrealistic to blame the warfor all the failures of the Angolan State.

Although the ultimate challenge of rendering theGovernment accountable will rely heavily on civilsociety’s role in Angola, without access to informationthey can only do so much. By refusing to publishwhat they pay to the Government, oil companiescreate a necessary condition for the operation of themachinery of state looting because withoutinformation about the basic state income, it isimpossible for ordinary Angola citizens to detectwhen they are being short-changed and call theirGovernment to account over the mismanagement ofrents from their resources. Non-disclosure ofpayments would be considered legally and morallyunacceptable in peacetime and demonstrates anapparent contempt for the desperate plight of theordinary people of Angola. Transparency is seen as anecessary precondition for acceptable businesspractices in the Northern hemisphere, so why not theSouth?

It is obvious that the techniques of state lootingdetailed here are readily exportable to wherever thepredatory nature of international oil and financialbusinesses interact with weak civil society andunaccountable neo-authoritarian governments. Arecent Oxfam America report on ‘ExtractiveIndustries and the Poor’ identifies a clear statisticalrelationship between states with dependency onprimary extractive industries and unaccountable stateinstitutions that are linked to poverty. This ‘Paradoxof Plenty’ comes about because resource-richgovernments tend to use low tax rates and patronageto dampen democratic pressures and spend anunusually high fraction of their income on internal


Public losses, private gains! The ninth month of protest against corruption and impunity outsideAngonave – an Angolan public company; May , Luanda.

security. In addition, the political structures thataccrete around a ‘bonanza’ economy generally fail tobring about social and cultural changes that lead tolong-term investment in social development. Statesthat are dependent on oil and mineral wealth alsoface a much higher chance of civil war and conflict.

The charge of industry complicity extends to allother countries – such as Azerbaijan, Chad,Cambodia, Democratic Republic of Congo,Equatorial Guinea, Gabon, Kazakhstan, Sudan,Nigeria to name but a few – where natural resourcesprovides a significant source of state income, wherecorruption associated with state income is of concern,and where such companies are not fully transparentabout their payments. The risks of complicity withunaccountable governments are not all one-way: asThe Economist noted, ‘firms doing business in countrieswith unpleasant governments … [are] endangeringthe most priceless of assets, their good name.’

This issue cannot be addressed ‘voluntarily’. BP’sexperience with Sonangol shows that, even if an oilcompany wants to be transparent, it may bethreatened with having its concessions terminatedand re-assigned to less scrupulous competitors.Despite high-sounding principles, adherence to thebottom line of profits without principles has, so far,ensured that standards of disclosure andtransparency in Angola remain those of the lowestcommon denominator. Oil companies actingcollectively could break this deadlock – and send apowerful message about global good governance –but, so far, the industry has lacked the collectiveimagination to address this problem.

Thus, there is an obvious necessity for a parallelregulatory approach to address the failure ofvoluntary initiative on transparency and to setminimum standards of financial disclosure amongst

multinational companies for all their countries ofoperation. Global Witness believes that the majornational securities regulators have both the powerand the right to effect immediate change tocompanies’ reporting and disclosure standards to thisend. Northern export credit agencies should imposetransparency criteria on all their partner investors.The IMF, World Bank, and International FinanceCorporation – on the back of genuine improvementsin the transparency of their own operations – shoulddevelop and institutionalise a model of transparencyand revenue management that could be exported intodifferent national situations. This could, for example,help to avoid the legacy of delays that has dogged theIMF’s Oil Diagnostic.

Similarly, the anti-money laundering work thataccompanied new ‘War on Terror’ has shown whatcan be done when the collective will is engaged totackle the problem: this effort should now be used toaddress the one of the causes of global poverty totrack and repatriate the assets stolen from amongstthe poorest people in the world by the richest.Compare, for example, the US$. billion to overUS$. billion in unaccountable oil-related revenuesand loans for the last year, and the US$ millionunaccounted for the year before that, with thestruggle by the UN to raise the US$ million that isneeded to feed the one million internally-displacedpeople dependent of food aid in Angola.

National governments and their allied economicactors can no longer absolve themselves fromresponsibility for the dispossession and doublestandards of the world resource extraction industry.The international community will either have to liveup to the challenge of endorsing and achievingtransparency in the sector or it will have to pick upthe pieces.


Dispossessed and left at the mercy of donor assistance. Without transparency of resource revenue, ordinary Angolans do not stand a chance.

a Testimony to international humanitarian NGO working in Angola; 2001 b Angola: Behind the facade of ‘normalization’ – Manipulation, violence, and abandoned populations, Medecins Sans Frontieres; November 2000


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Afrique; th January ‘Cameroun: Achat d’armes à ZTS-Osos’, La Lettre du Continent #; th

January ‘Bank Menatep licence stripped’, The St Petersburg Times; st May ‘Bank in laundering enquiry courted Russians zealously’, The New York Times;

th August ‘Menatep shareholders vote to bankrupt bank’, The St Petersburg Times; th

September ‘Congo-B: Quand Martin Mberri écrivait à ZTS-Osos’, La Lettre du Continent;

#, th January President’s message, Essanté web site:

http://www.essante.com/about/pres_message.cgi ; printed th August The Lee Solters Company, About Us – company web site,

http://www.solterspr.com/about.html; printed th August Corporate Biographies, Essanté web site:

http://www.essante.com/about/bios.html; printed th August Company accounts for Essante Ltd, Companies House, London; ‘Falcone firm gave $, to GOP’, Arizona Republic; th January ‘As Enron scandal spreads, US starts to question cash for influence culture’,

The Guardian; th January ‘Greed is the Creed’, The Observer; th January ‘Enron spotlight falls on Cheney’, The Observer; th January ‘Power Politics’, FT-Com; th January ‘Enron Executives who dumped stock were heavy donors to Bush’, The Center

for Public Integrity; January ‘Bush, the corporations’ flag-carrier – Enron’s collapse exposes the folly of

his cash-for-influence policy’, The Guardian; th January ‘White House aided Enron in dispute’, The Washington Post; th January http://www.pierrejfalcone.com/ Email contact with friend of Falcones, Anon.; th January ‘France’s scandal trail leads to US’, The Sunday Times; st December ‘Une nouvelle mise en examen dans une enquête sur un traffic d’armes’, Le

Monde; th December

Le Figaro commenting on expanding investigations, quoted in The Times;th January

Specifically in French, the charges were: ‘Commerce illicite d’armes, fraudefiscale, abus de biens sociaux, abus de confiance at traffic d’influence.’ – LeMonde; th December

‘De Londres, Arcadi Gaydamak défie les juges français’, Le Monde; thDecember

‘Thiery Imbot, a new mystery in the Affair Falcone’, Le Monde; th January

‘L’héritage explosif de l’ère Mitterrand’, Liberation; rd –th December

‘Jean-Christophe Mitterrand: Le dossier s’alourdit’, Le Figaro; th December: In French: ‘Complicité de traffic d’armes, traffic d’influence par unepersonne investie d’une mission de service public, recel d’abus de bienssociaux, recel d’abus de confiance et traffic d’influence aggravé.’

‘Les Coûteux conseils d’un fils de president, Le Figaro; - December ‘Pierre Falcone’s self-mmotivated extravagance towards Jean-Christophe

Mitterrand and Jean-Nöel Tassez’, Le Monde; th January ‘Trafic d’armes en Afrique: Jean-Christophe Mitterrand écroué’, Le Monde;

rd December ‘Jean-Christophe Mitterrand prêt à payer le prix de sa liberté’, Liberation; th

January Comments from Le Monde Editorial; nd December , quoted in

‘Former Aide: Mitterrand case’ disaster for France’, Reuters; rd December

‘Mitterrand gets bail but can’t pay’, BBC News homepage –http://www.bbc.co.uk ; nd January

‘A free Mitterrand opens the hostilities’, Liberation; th January Sulitzer et le marchand d’armes, Le Parisien; th December ‘Jacques Attali est mis en examen dans l’affaire Falcone’, Le Monde; th

March ‘Jacques Attali mis en examen dans l’affaire Falcone. L’ex-conseiller de

Mitterrand aurait reçu des virements’, Liberation; th March Banking industry source, Anon.; ‘Behind Attali, the Judges track Védrine’, Liberation; th –th March ‘Perquisition au Quai d’Orsay dans l’affaire Falcone’, Le Monde; th March

Ibid – Quai d’Orsay staff quoted in French: ‘aucune consequence.’ Ibid – Lawyer of Attali statement in French: ‘…pas de trace d’une

intervention de M. Védrine dans le dossier fiscale de M. Falcone et pas detrace d’une intervention de M. Attali auprès de M. Védrine.’

‘le préfet Marchiani entendu sur des ventes d’armes’, Le Parisien; stDecember

‘Pasqua rattrapé par l’affaire Falcone’, Le Parisien; th December ‘Mitterrand-Falcone: la Semaine decisive’, Le Figaro; th January ‘Trafic d’armes vers l’Angola: les comptes de la liste de M. Pasqua aux

européennes places sous sequester’, Le Monde; /th January ‘L’Angola soupçonné d’avoir verse , dollars au parti de Charlie’, Le

Canard Enchaîné, th December Ibid, actual quote in French: ‘Un accord politique a été passé. Nous avons

avancé à titre personnel , dollars. […] Ils attendraient encore ou millions de francs, soit environs à , million de dollars. […] Nous croyonssavoir que cet argent devrait, dans sa totalité, être utilise pour la campagnepour les elections au Parlement européen. Il serait donc très important defaciliter le déblocage de ces fonds, car cela nous assurerait le début d’un vrailobby immédiatement opérationnel auprès le Parlement européen’.

‘Un “accord politique” entre le RPF et l’Angola?’ Le Monde; th January

‘Villiers prêt à charger Pasqua’, Le Figaro; th January ‘Villiers Charge Pasqua’, Le Figaro; th January – actual quote in

French: ‘Je peux confirmer de manière très explicite que l’affaire Mitterrand-Pasqua est une affaire grave, une affaire d’Etat avec des ramificationsintercontinentales et des développements insoupçonnables.’

‘Bernard Guillet, conseiller de M. Pasqua, mis en examen dans l’affaireFalcone’, Le Monde; th April

‘Angolagate: Marchiani mis en examen’, Le Figaro; rd May Ibid: mandate of interrogation of Bernard Guillet in French: ‘recel d’abus

de biens sociaux.’ ‘French arms scandal closes in around ex-Interior Minister’, AFP; th April

‘Charles Pasqua’s diplomat comes out of the dark and clarifies the Falcone

affair’, Le Monde; th April ‘Charles Pasqua mis en examen dans l’affaire du traffic d’armes vers

l’Angola’, AFP; th May – actual charges in French, ‘recel d’abus debiens sociaux’ et ‘traffic d’influence.’

‘M. Pasqua mis en examen une deuxième fois par les juges de l’affaireFalcone’, Le Monde; th May

‘Monaco, le compte secret et les ventes d’armes’, Le Parisien; th June Comments attributed to Jean-Christophe Mitterrand concerning Judge

Courroye in French: ‘Sue la Haine’, in ‘Vives protestations des magistratesaprès les attaques des Mitterrand’,Le Monde; /th January

Reaction from Jean-Marie Coulon to Mitterrand’s comments in French:‘Les actes du juge impartial doivent être exposés et non sa personalité, rouagede la démocratie, qui, elle, doit être protégée’, in ‘Vives protestations desmagistrates après les attaques des Mitterrand’, Le Monde; /th January

‘Angolagate: le parquet requiert l’annulation du “trafic d’armes,”’ Le Monde;/th January

‘La cour de cassation anule les porsuites pour traffic d’armes dans l’affaireFalcone’, Le Monde; th June

Dennis Wagner, Arizona Republic; th June http://www.interieur.gouv.fr/histoire/minist/pasqua.htm Le Figaro, Page ; th January ‘De à , M. Falcone s’est impose en partenaire privilégié de la

Sofremi’, Le Monde; th January ‘Branle-bas de combat judiciaire en “Françafrique”’, Le Figaro; nd

December Exchange rate: French Francs:US$’s – http://wwwoanda.com; US$,

st June . ‘The Sofremi has never been involved in a deal for the sale of Russian

weapons’, Le Monde; th January ‘Le Patron de la Sofremi accuse’, Le Figaro; th January Country commercial guides FY: Angola – Chapter : Trade and

Project financing ; State Department web site: http://www.state.gov ‘Tipatouillages franco-russes pour armer l’Angola’, Liberation; th

December ‘BAI terá novo Presidente’, Agora; nd April Information on Breweries, Skol International web site:

http://www.skolinternational.com ‘Non official translation of ‘Who conspired against Santos?’, O Independente;

th December Annual accounts, BAI; , page ‘Angola: BAI aposta em África’, África Hoje; st March Letter from Mário Palhares, Chairman of the Board, BAI, to Global

Witness; th August Letter from Mário Palhares, Executive President, BAI, to Global Witness;

th September ‘Quinze Ans de Présence d’Elf en Angola ’, Elf Exploration Angola;

July Documents from department: Affaires Juridiques, Paribas; st August A Crude Awakening, Global Witness; th December ;

www.globalwitness.org ‘Roc Oil’s mysterious partners’, Africa Energy intelligence; st October . Address by President José Eduardo dos Santos on receiving credentials of

new French Ambassador, Press Release & official translation, AngolanEmbassy, London; rd February

African Energy; Issue , October Article of the petroleum Law No. /; th August Italics: Global Witness emphasis www.eia.doe.gov; Africa Energy Intelligence, st October ‘IMF Projection for ; Government of Angola – Memoranda of

Economic and Financial Policies’, February ‘% success rate in deep off-shore’, Africa Energy Intelligence; th May ‘EIU Country Report Angola’, EIU; st Quarter Africa Energy & Mining No ; th October

‘EIU Country Report Angola – At a glance -’, EIU; th November

Pers. Comm., Oil Industry sources, Anon..; ‘Block Begins Production’, O Pensador Newsletters, Angolan Embassy in

Washington, DC; th December (www.angola.org) ‘Sonangol bares its teeth’, Africa Energy Intelligence; nd November ‘Big oil gets slapped in the face in Angola’, Marek Inc – News Features;

nd November (www.marekinc.com) Wood Mackenzie – Ad hoc consultation; October Global Witness’ investigations; - Company tax consultant, Anon.; March BP-Statoil Alliance staff data fromEnvironmental Resources Management

(ERM) Social Impact Report; commissioned by BP in late ‘Angola shares Block pie’, Upstream; th June ‘Staff Report for the Article IV Consultation and Discussions on a

Staff-Monitored Program’, IMF African Department; th of June ‘Terms of reference Financial Diagnosis and Monitoring of State

Petroleum Reserves’; th of February (www.angola.org/reports/oildiagnostic.html)

Source close to the Oil Diagnostic; August . ‘The Oil Diagnostic in Angola: an Update’, Human Rights Watch; March

‘Angola – Preliminary Conclusions of the IMF Mission’, IMF; th August

(www.imf.org) Unofficial translation from Grupo de Acompanhamento da Implementação do

Programa Monitorado, Luanda th August, Global Witness letter to Oil Company CEO’s; th January Letter to Global Witness from BP-Amoco Plc; th February Angola Model Production Sharing Agreement for Deep Water Blocks;

Article , p. ; February Letter to Global Witness from Statoil AS; th February Conversion based on mean exchange rate: NOK:US$ for ;

www.oanda.com Reuters (London); th February Letter to Global Witness from Shell (London); th February Letter to Global Witness from BHP; th March Letter to Global Witness from BHP; st May Letter to Global Witness from Petrobras; th May Petrobras website:

http://www.petrobras.com.br/ingles/financas/acionist/finaci.htm ‘Exxon in Angola’, Exxon Exploration; th March Chevron website: www.chevron.com TotalFinaElf website: www.totalfinaelf.com Pers Comm., Banking & Investment industry sources, Anon.; Angola Model Production Sharing Agreement for Deep Water Blocks;

Article . p. ; February See, for example, Williams,C..’ SEC and Corporate Social

Transparency’, Harvard Law Review : - The use of ‘appropriate in the public interest’ is often taken as encouraging

a wider interpretation that information that is just ‘necessary’ for the publicinterest. Williams,C., ‘SEC and Corporate Social Transparency’, HarvardLaw Review : -

Frankfurter,F., ‘The Federal Securities Act II’, Fortune Magazine; August Average exchange rate for for the formal market ( USD= .

Kz); Banco Nacional de Angola Pers. Comm., Various development workers, Anon.; - See ‘What is Corporate Social Responsibility (CSR)?’

http://europa.eu.int/comm/employment_social/soc-dial/csr/csr_whatiscsr.htm

About the GRI. http://www.globalreporting.org/aboutGRI/index.htm ‘Sustainability Reporting Guidelines on Economic, Environmental and

Social Performance’- Part C Report Content, see Economic Indicators Nos..-., and . p., Global reporting Initiative;http://www.globalreporting.org/guidelines;; June .

Given that Chevron has taken over Texaco, Chevron’s position is not clear– will it follow the same policy as Texaco?

News update: www.globalreporting.org/news/marchupdate ‘Principles of Corporate Governance’, p., OECD; April

(www.oecd.org/pdf/M/M.pdf) Ibid. Item IV(B). p.. Ibid. Item IV(A). p.. ‘Global Compact Issues Dialogue – The Role of Private Sector in Zones of

Conflict’, Global Compact; st /nd March See: http://europa.eu.int/comm/employment_social/soc-

dial/csr/greenpaper.htm ‘EU Green Paper Promoting a European framework for Corporate Social

Responsibility’, paragraph . Ibid. Paragraph . http://www.wbcsd.ch Starting a new chapter; http://www.tradefinancemagazine.com/ Pers. comm. Arkadi Gaidamak; December Banking industry sources; - Global Witness’ investigations; - ‘Angola’s Government has re-financed a $ million oil-backed loan…’,

Reuters; th March ‘Angola secures loan from foreign banks’, Financial Times; th March ‘Sonangol – US$ million crude oil contract prepayment facility’,

Standard Chartered Bank Press Release; th March Bankers’ database printout detailing Standard Chartered’s US$ million

loan syndication; th February In other words, an existing oil-backed loan. ‘StanChart structure for Sonangol proves popular’, Trade Finance; May ‘Bank loan may breach IMF limits’, African Energy; April Bankers’ database printout detailing Commerzbank US$ million loan

syndication; th March . Voice of America, Portuguese language service; th April ‘Angola has agreed loans worth $ million…’, Reuters; th April Bankers’ database printout detailing BNP-Paribas (and others). US$

million loan; th July . Bankers’ database printout detailing BNP-Paribas (and others). US$

million loan; th October . Financings; th October (http://www.the-lawyer.co.uk/) Financings; th October (http://www.the-lawyer.co.uk) Banking database, listing recent structured loans arranged on the London

market, against the Cabinda and Soyo-Palanca Trusts; March ‘Leading international banks establish anti-money laundering principles’,

Transparency International Press Release; th October(http://www.transparency.de)

If Marc Rich left Glencore in , then he was still involved with thecompany when Falcone and Gaidamak were arranging oil-backed loans fromParibas in .

‘Clinton Pardons: Cast of Characters’, BBC News; February (www.news.bbc.co.uk)

‘The Marc Rich Case: A Primer’, Time.com..(www.time.com/time/nation/article/,,,.html)

Source, except for South Korea:http://www.edf.org/programs/international/ECA/Africa.htm

Meeting between Global Witness and bilateral Export Credit Agency staff;September

Comments from Le Monde Editorial; nd December , quoted byReuters; rd December

‘Extractive Sectors and the Poor’, Oxfam America; October . The UNDPusually measures this discrepancy by subtracting a country’s ranked HumanDevelopment Index from its ranked GDP. Angola’s rank GDP is some places above its rank HDI making it one of the worst managed countries inthe world.

‘Greed and Grievance in Civil War’, World Bank Development ResearchGroup Policy Research Working Paper ; May

‘Business in difficult places: risky returns’, The Economist; th May Fuelling the war: Diamonds and oil, BBC News, th Jan .

http://news.bbc.co.uk/hi/english/special_report////angola/newsid_/.stm

Pers. comm., oil journalist; February


Global Witness’ previous publicationsalso available on our website: http://www.globalwitness.org

“Branching Out – Zimbabwe’s Resource Colonialism inDemocratic Republic of Congo”

published February 2002

“Can Controls Work? – A Review of the Angolan DiamondControl System”

published December 2001

“Taylor-made—The Pivotal Role of Liberia’s Forests and Flagof Convenience in Regional Conflict”

published September 2001

“The Credibility Gap — and the Need to Bridge ItIncreasing the pace of forestry reform”

published May 2001

“Review of the Sierra Leone Diamond Certification System andProposals and Recommendations for the Kimberley Process for

a Fully Integrated Certification System (FICS)”published April 2001

“Conflict Diamonds — Possibilities for the Identification,Certification and Control of Diamonds”

published June 2000

“Chainsaws Speak Louder Than Words”published May 2000

“Timber Takeaway — Japanese Over-comsumption — theForgotten Campaign”

published March 2000

“The Untouchables — Forest crimes and the concessionaires—can Cambodia afford to keep them?”


“A Crude Awakening — The Role of the Oil and BankingIndustries in Angola’s Civil War and the Plundering of State

Assets”published December 1999

“Made in Vietnam — Cut in CambodiaHow the garden furniture trade is destroying rainforests”

published April 1999

“Crackdown or Pause — A Chance for Forestry Reform inCambodia?”


“A Rough Trade — The Role of Companies and Governmentsin the Angolan Conflict”


“Going Places — Cambodia’s Future on the Move”published March 1998

“Just Deserts for Cambodia — Deforestation & the Co-PrimeMinisters’ Legacy to the Country”

published June 1997

“A Tug of War — the Struggle to Protect Cambodia’s Forests”published March 1997

“Cambodia,Where Money Grows on Trees — Continuing Abuses of Cambodia’s Forest Policy”

published October 1996

“RGC Forest Policy & Practice — the Case for PositiveConditionality”

published May 1996

“Corruption,War & Forest Policy — the Unsustainable Exploitation of Cambodia’s Forests”


“Thai-Khmer Rouge Links & the Illegal Trade in Cambodia’sTimber”

published July 1995

“Forests, Famine & War — the Key to Cambodia’s Future”published March 1995

Global Witness is a British based non-governmentalorganisation which focuses on the links betweenenvironmental and human rights abuses, especiallythe impacts of natural resource exploitation uponcountries and their people. Using pioneeringinvestigative techniques Global Witness compilesinformation and evidence to be used in lobbyingand to raise awareness. Global Witness’ informationis used to brief governments, inter-governmentalorganisations, NGOs and the media. GlobalWitness has no political affiliation.

Acknowledgements

Information contained in this report is anamalgamation of press coverage as well as dataobtained through extensive investigations,carried out throughout 2000 and 2001. GlobalWitness would like to acknowledge the support,information and advice of many Angolans andcitizens of other nationality who providedinformation, often at great personal risk.Thisdocument would not have been possiblewithout them – a big thanks!

Thanks is also due to President dos Santos forconfirming key aspects of ‘Angolagate’ throughhis welcoming speech to the incoming FrenchAmbassador in 2001.

As ever, nothing would have been possiblewithout the support of Global Witness’dedicated team of volunteers and staff.

Design by The Plumbers.

Photos © Global Witness except whereindicated.

Printed on 100% unbleached recycled paper.

ISBN 1 903304 06 7

Global Witness LtdP O Box 6042, London N19 5WP, United Kingdomtelephone: + 44 (0)20 7272 6731 fax: + 44 (0)20 7272 9425e-mail: [email protected]://www.globalwitness.org/

Global Witness LtdP O Box 6042, London N19 5WP,United Kingdom

telephone: + 44 (0)20 7272 6731fax: + 44 (0)20 7272 9425e-mail: [email protected]://www.globalwitness.org/

ISBN 1 903304 06 7

Freedom of the press,Angolan style. Pages -of Folho ’s attempt todiscuss the launch ofGlobal Witness’December report,A Crude Awakening.