Culled from Wall Street Journal Online: 9/29/04 @
http://online.wsj.com/article_email/0,,SB109641320921730668-IdjgINmlaB3nZ2tbXqIaq6Jm4,00.html

Out of Africa
In Halliburton Nigeria Probe, A Search for Bribes to a Dictator

By RUSSELL GOLD and CHARLES FLEMING Staff Reporters of THE WALL STREET JOURNAL
September 29, 2004; Page A1

Jeffrey Tesler's law office sits in a rundown immigrant neighborhood in north London and has weeds growing out of the roof. His firm has helped sex shops settle zoning problems and young African immigrants get out of scrapes with the police.

It's an unlikely place to find the man at the center of a scandal involving Halliburton Co. and a late Nigerian dictator reputed to have stolen at least $3 billion from his country.

Investigators on three continents suspect the 56-year-old Mr. Tesler may have been the link through which a consortium including a company that is now part of Halliburton funneled money to Nigerian officials in return for multibillion-dollar contracts to build energy facilities in the African country.

Handwritten notes by a former executive involved in the project discuss channeling $40 million through Mr. Tesler to the dictator, Gen. Sani Abacha, a person who has read the notes said yesterday. However, the notes don't say whether Gen. Abacha actually received the money, this person said.

The affair has already caused one head to roll. In June, Halliburton fired Albert J. "Jack" Stanley, the chairman of one of its two business units, after announcing that he took "improper" payments from Mr. Tesler that investigators said totaled $5 million. In the U.S., the Department of Justice and the Securities and Exchange Commission are investigating whether Halliburton violated the U.S. Foreign Corrupt Practices Act, which forbids companies from bribing foreign officials. U.S. and foreign authorities are also investigating Halliburton's three partners in the consortium.

The Nigeria affair has received less attention than the one involving alleged overcharging by Halliburton on U.S. government contracts in Kuwait and Iraq. But it also involves big money and a core business for Halliburton: acting as general contractor for large energy projects in distant parts of the globe. In this case, the project was a plant to super-cool natural gas and turn it into a liquid that could be loaded onto tankers to feed the world's hunger for energy.

As that hunger grows and oil in politically stable parts of the world dries up, energy companies are increasingly looking toward less-stable nations such as Nigeria where corruption is often pervasive. Despite the Foreign Corrupt Practices Act and similar antibribery laws in Europe, the pressure to cut deals is enormous.

BUILDING BLOCKS Key dates for Nigerian liquefied-natural-gas plant: • September 1994: Consortium including M.W. Kellogg submits low bid to build plant.   • March 1995: Consortium hires Jeffrey Tesler as agent.   • December 1995: Consortium is awarded $2 billion contract.   • February 1998: Halliburton acquires M.W. Kellogg's parent, creates Kellogg Brown & Root.   • October 1999: First cargo of chilled natural gas shipped from Nigeria.   • October 2003: French magistrate begins investigating allegations that consortium bribed Nigerian officials.   • June 2004: Halliburton fires Kellogg Brown & Root chairman, saying he received "improper" payments from Mr. Tesler.   • September 2004: Halliburton says its probe uncovers evidence that consortium officials discussed bribing Nigerian officials.   Sources: Nigeria LNG; Halliburton;WSJ research

At the center of the Nigeria imbroglio is a mysterious dealmaker whose work sheds light on the tangled ways energy projects in Africa take shape. Mr. Tesler developed connections with Nigeria's ruling elite in the 1980s, helping them with routine business affairs such as buying homes and investing in Britain. By his own account, Mr. Tesler has visited Nigeria only once for a single day. But he earned a reputation among multinational companies as a man who could make things happen there.

"The big companies found out that this guy can deliver. If you talk to him, it's as good as talking to the president," says Nuhu Ribadu, executive chairman of Nigeria's Economic and Financial Crimes Commission, which is leading the Nigerian investigation. The Nigerian government is trying to recover the billions looted by dictator Gen. Abacha, who died of a heart attack in 1998.

Vice President Dick Cheney was Halliburton's chief executive from 1995 to 2000 and named Mr. Stanley, the recently fired executive, to a top post at the company in 1998. Otherwise Mr. Cheney hasn't been linked to the Nigerian dealings. Halliburton bought the parent of the company involved in the dealings, M.W. Kellogg, in 1998. Mr. Cheney's lawyer didn't respond to requests for comment.

Authorities have yet to prove bribery took place. Mr. Tesler declined to be interviewed but his lawyer in Paris says Mr. Tesler did nothing wrong. The lawyer acknowledges that Mr. Tesler received large sums from the consortium including Kellogg, which became part of Halliburton's Kellogg Brown & Root unit. But he says the money -- $132 million, according to Halliburton -- represented advisory and other legitimate fees. No one in the affair has been charged with any crime.

Mr. Tesler's London office offers no hint of the huge fees he has received over the past decade. The law firm of Kaye Tesler & Co. stands next door to a Somali butcher. A prominent sign in the firm's windows advertises the use of a photocopier and fax machine, available to passers-by for 15 pence. Michael Kaye, who founded the firm with Mr. Tesler in 1975, still works in the office, although he said in a brief telephone interview that the two have ended their partnership.

Mr. Tesler has told French investigators that he helped some 20 or 30 senior Nigerian government and military officials with their London affairs, including a former member of the Nigerian cabinet who purchased a large house in Surrey, according to people familiar with the investigation.

Mr. Tesler's relationship with M.W. Kellogg began in the mid-1980s when he unsuccessfully tried to broker the sale of Kellogg's minority interest in a Nigerian fertilizer plant to the Nigerian government. By 1994, Kellogg's interest had turned to a long-delayed proposal to build a natural-gas complex on the Nigerian coast. Kellogg and three other firms formed a consortium bidding to become the complex's general contractor.

Each of the four firms held a 25% stake in the consortium and veto power over its decisions. Kellogg engineers and financial officials held many top positions. Two of the partners, Technip SA of France and JGC Corp. of Japan, have said Kellogg managed the consortium. The fourth member, the Snamprogetti unit of Italy's ENI SpA, declined to comment other than to say it has been contacted by the SEC.

Halliburton says it was an equal partnership, with none of the four having more power than the others. The consortium was competing against a group led by U.S. construction giant Bechtel Group Inc.

The Nigerian state oil company teamed up with Royal Dutch/Shell Group to form a company called Nigeria LNG Ltd. (LNG stands for liquefied natural gas.) Nigeria LNG put the contract up for bidding. The bids were opened in Lagos on Sept. 12, 1994, and the Kellogg consortium's was for about $2 billion -- 5% lower than Bechtel's, according to a briefing paper sent to Nigeria LNG's full board by a board committee examining the bids.

It looked as if the Kellogg consortium had the inside track to land the deal. But negotiations on a final contract failed to get rolling. Nigeria's oil minister had a falling-out with the dictator, Gen. Abacha, and was replaced on March 20, 1995, by Dan Etete.

Consulting Contract

Two days later, Mr. Tesler signed a contract to serve as a consultant to the Kellogg consortium. The six-page contract, signed by an M.W. Kellogg executive on behalf of the consortium, called on Mr. Tesler to obtain government permits, maintain good relations with government officials and provide advice on sales strategy. Mr. Tesler agreed in the contract not to bribe any government officials, a standard proviso.

Halliburton says Mr. Tesler had already been working behind the scenes to convince Nigerian officials that the plant was a good idea. The contract was a reward for that work and an incentive to keep up the prodding, says James Doty, an outside lawyer conducting an internal investigation at Halliburton. "He was investing sweat equity and he wanted a contract," says Mr. Doty. The two sides agreed on a fee of $60 million, payable to Mr. Tesler only after the Kellogg consortium began to get paid.

But Mr. Etete, the new oil minister, was a tough customer. He immediately began to use his influence over the natural-gas complex for personal gain, according to Michael Weston, a Shell technical adviser to the project. Mr. Etete "asked at every meeting for something," including plane tickets for his son to travel to the U.S. and payments for a medical treatment abroad, says Mr. Weston, adding that Shell turned down the requests.

What happened next is unclear. Investigators in Nigeria and France suspect that Mr. Tesler promised to funnel big sums to Nigerian officials if they sealed the deal with the Kellogg consortium. Investigators base these suspicions, among other things, on the known corruption of Gen. Abacha's government, the huge windfall that Mr. Tesler could expect if a deal was done and a collection of notes turned up last month by the Halliburton internal investigation. The notes indicated that officials of the consortium discussed a scheme to bribe Nigerian officials.

The notes were taken by Wojciech Chodan, an executive at Kellogg and later a consultant for Kellogg Brown & Root. Among some 450 pages of scribbled jottings, there is a reference to a November 1994 meeting between Mr. Tesler and Mr. Chodan at which they discussed channeling $40 million of Mr. Tesler's first $60 million to Gen. Abacha, says a person who has read the notes. This person says the notes don't say how or when the money would be delivered. Mr. Chodan declined to be interviewed.

None of this is proof that bribes were given. Mr. Tesler's Paris-based lawyer, Thierry Marembert, says Mr. Tesler didn't use any money from the consortium for bribes. The lawyer says most of the money is still sitting in Swiss bank accounts.

What is known is that less than nine months after Mr. Tesler signed on with the Kellogg consortium, Nigeria LNG decided to award it the $2 billion contract to build two units to turn the gaseous fuel into liquid. The project quickly became a success. Surging demand for the liquefied gas prompted Nigeria LNG to begin building a third unit in 1999, a fourth and fifth in 2002 and a sixth in July of this year.

Mr. Tesler shared in the good fortune. Nigeria LNG hired the consortium to build each extension. And in 1999 and 2001, the consortium rehired Mr. Tesler to continue his work. By this time Kellogg was part of Halliburton. Mr. Tesler was paid a total of $132.3 million from 1996 through earlier this year, according to Halliburton, with more than half of it coming from the 1999 and 2001 contracts.

In a letter to Nigerian police earlier this year that was seen by The Wall Street Journal, French investigators wrote that the payments "are likely to constitute a criminal infraction of misuse of corporate funds." The letter, which sought Nigerian cooperation in the French investigation, says Mr. Tesler's commissions "appear completely unjustified" by the work he performed. French authorities don't have jurisdiction over Halliburton in this case but are sharing information with U.S. authorities.

Mr. Tesler's lawyer says that he earned the money by assisting with "public relations and local development issues" in Nigeria and advising consortium executives on such topics as how to appease local officials and prevent civil unrest over the project.

In 1997 or 1998, Nigeria LNG's then-chairman, Mohammadu Dikko Yusufu, visited London. Mr. Yusufu called Mr. Tesler and said he was short of funds, according to people familiar with Mr. Tesler's statements to investigators. These people say Mr. Tesler told the investigators that he gave Mr. Yusufu a $70,000 "loan" that was never repaid.

The connection between Mr. Tesler and the Nigerian project might have remained a secret had it not been for a seemingly unconnected investigation in France into the consortium's French member, Technip. A Technip official, Georges Krammer, was charged with embezzlement in an unrelated matter. When Technip refused to defend him, Mr. Krammer decided to air what he believed was other dirty linen at Technip, says his lawyer, Julian Schnerb. Among his revelations: the payments to Mr. Tesler. Technip declined to comment, citing the continuing inquiry.

Surprising Discovery

Mr. Krammer's tip led French and Swiss investigators to examine Mr. Tesler's bank accounts, where they made a surprising discovery: evidence that Mr. Tesler was kicking back some of his payments to executives of the consortium and its subcontractors. In June of this year, French investigators traced about $5 million from bank accounts of Mr. Tesler's company to a Swiss bank account of Mr. Stanley, who was head of M.W. Kellogg and later of Halliburton's Kellogg Brown & Root unit.

Halliburton fired Mr. Stanley in June. At the time he was Kellogg Brown & Root chairman, having stepped down as a full-time executive in December 2003. His lawyer declined repeated requests for comment.

Mr. Tesler's lawyer, Mr. Marembert, says there's an innocent explanation for the $5 million. He says the dollars were deposited in exchange for Nigerian naira, the country's currency, because Mr. Tesler needed local funds to carry out his work in Nigeria. The naira at that time was not a convertible currency, creating problems for foreigners seeking to work there, and Mr. Stanley had offered to help Mr. Tesler obtain the currency, Mr. Marembert said.

The French probe has pinpointed another payment suggesting close ties between Mr. Tesler and the oil minister, Mr. Etete, after the first contract was sealed. In an interrogation of Mr. Tesler, a French magistrate described the London lawyer's transfer of $2.5 million into Swiss bank accounts held by Mr. Etete under a false name between 1996 and 1998. Mr. Tesler confirmed making the payments but told the magistrate that the money was for an investment in offshore oil exploration leases in Nigeria and that he wasn't aware the accounts belonged to Mr. Etete, according to people familiar with the interrogation.

Mr. Etete, who was sacked as oil minister shortly after Gen. Abacha died and now lives in France, couldn't be located for comment. His lawyer didn't respond to several requests for an interview.

French investigators also have tracked more than $1 million paid by Mr. Tesler to an account controlled by Mr. Chodan, the Kellogg executive who later became a Halliburton consultant, said a person with knowledge of the investigation. Halliburton lawyers say Mr. Chodan has confirmed that he accepted payments from Mr. Tesler. Mr. Chodan's consulting contract was terminated by Halliburton in June.

There are other odd payments involving subcontractors on the Nigerian project. German construction firm Bilfinger Berger AG, one of the principal subcontractors, said it paid Mr. Tesler as a consultant. Mr. Tesler has told investigators that he paid $5 million to a senior Bilfinger Berger executive, Willy Bubenik, who died in 2002, in exchange for information and advice. Karina Annuss, a Bilfinger Berger spokeswoman in Mannheim, Germany, said that the company had no knowledge of any payments made to Mr. Bubenik.

Halliburton said in June it would take steps to immediately sever its long relationship with Mr. Tesler, and it asked its three partners in the Nigeria consortium to cease contact with him. Halliburton is looking into bringing a lawsuit to get back the money it paid Mr. Tesler over the years.

To the executives at Bonny Island in Nigeria, where the gas-liquefaction plant is located, it remains a mystery why Mr. Tesler received so much money because he had no visible role in the project. "I have never met Jeffrey Tesler," says Andrew Jamieson, the Shell-appointed managing director of Nigeria LNG since 1999. And Pete Oppenheim, the consortium's Nigeria-based construction director, said he scoured consortium records for references to Mr. Tesler before he gave testimony to Nigerian investigators. He said he found "not a word, not a scrap, not a nothing."

Write to Russell Gold at russell.gold@wsj.com and Charles Fleming at charles.fleming@wsj.com