JPMorgan ‘grossly negligent’ over $875m in Nigerian bank transfers, UK court told

THE Federal Government of Nigeria has claimed that JPMorgan Chase was “grossly negligent” in paying almost $900 million to a company controlled by a former Nigerian minister with a money-laundering conviction despite numerous “red flags” about the transactions.

The Nigerian state is suing the US investment bank for $1.7 billion in London’s High Court claiming the bank breached its duty of care by proceeding with $875 million worth of payments and facilitating misappropriation of funds related to a 2011 oil deal.

JPMorgan denies the civil claim and is defending the lawsuit, which opened on Wednesday.

As reported by the Financial Times of London last week, the case centres around transfers from a Nigerian government account to Malabu Oil & Gas, a Nigerian company controlled by Dan Etete, a former oil minister who was convicted in France in 2007 of money laundering in an unrelated transaction. Nigeria is seeking damages to cover the payments and 10 years of interest.

The payments were linked to the settlement of a long-running dispute over the ownership of the Nigerian OPL 245 oilfield, which had been transferred back and forth between Shell and Malabu.

In 2011, Malabu surrendered its claims after Nigeria’s government agreed to pay it $1 billion so the oilfield could be developed.

Nigeria alleges it is the victim of a “fraudulent and corrupt scheme” through the transfer of the funds and that the payments “were suspected to have flowed” via Malabu “into the accounts of cronies with connections to Nigerian politicians.”

JPMorgan had no involvement in the settlement but provided a depository account for Nigeria’s government to make the payments, the court heard.

Roger Masefield QC, representing Nigeria, told the court JPMorgan had breached its duty by making payments in 2011 and 2013 despite there being “reasonable grounds” to suspect fraud, including that the payments were rejected by a Swiss and a Lebanese bank citing compliance concerns.

“Evidence of fraud was little short of overwhelming,” Masefield claimed, adding that two bank staff had said they were “uncomfortable” and “troubled” by the payments.

In his written submissions Masefield argued it was “abundantly clear that multiple people within (JPMorgan) knew of the red flags and of the risk of fraud, yet the payment was made anyway.”

Rosalind Phelps QC, representing JPMorgan, said in written submissions that no allegations of wrongdoing had been made against bank staff. “Nor is anyone at JPMorgan said to have participated in any fraud,” she said, adding that the bank was not alleged even to have known about any potential fraud when the payments from the government account were made. “Nor has anyone ever been convicted of any crime in connection with the supposed fraud,” she continued.

Phelps said Nigeria’s government was “wholly unrealistic” in arguing that the US bank “should have appreciated that it could not trust the senior government ministers and officials with whom it dealt.”

The US bank “acted appropriately” by filing a number of suspicious activity reports with UK authorities, which she claimed “consented to all of the payments to Malabu”.

The High Court must decide whether there was a fraud and whether JPMorgan was on notice of it as a bank.

A Milan court last year cleared oil companies Shell and Eni and their senior and former executives of any wrongdoing in the 2011 oilfield deal, and Etete of corruption charges. They had all denied wrongdoing. Neither the oil companies nor Etete are parties to the High Court case. The six-week trial continues.