Entangled in a civil corruption and racketeering case in U.S. federal court, BNP Paribas stands accused of helping to divert oil revenues from the Republic of Congo's state-owned oil company. Attorneys say this is the first use of the The Racketeer-Influenced and Corrupt Organizations Act, as modified by the USA Patriot Act of 2001, which gives U.S. courts jurisdiction over money laundering traceable to foreign governments. The RICO Act was created in the 1970s to fight organized crime, including the Mafia.
In June, U.S. Federal Judge Loretta A. Preska in Manhattan denied Paribas's appeal of her decision not to dismiss the case, saying the evidence presented shows "a sufficient amount of activity is alleged to have occurred domestically." The Paris-based bank has 7,500 employees at its New York branch, which was allegedly used to deposit oil proceeds and to book a covered oil option. The other two defendants include Bruno Jean-Richard Itoua, former chief executive of oil company Societe Nationale Des Petroles Du Congo, and the firm itself.
The RICO action, filed in October 2005 by Kensington International, a Cayman Islands hedge fund that buys distressed foreign debt, alleged that it hasn't been able to collect on several Congolese sovereign loans (already in default since 1985) because oil from that country has been sold illegally elsewhere. Kensington, an affiliate of New York-based Elliott Management, also alleges that BNP Paribas "conspired to divert oil revenues from the Congo into the pockets of powerful Congolese public officials, while...protecting both the oil and oil revenues from seizure by legitimate creditors," according to court records. The Republic of Congo, also known as Congo-Brazzaville, is the fourth-largest oil producer in sub-Saharan Africa.
Kensington is seeking $100 million plus attorneys' fees and court costs, although the law allows the judge to triple damages. Kensington has already won four civil judgments in England in the same case, including a $56 million judgment in 2002 and separate judgments of $22 million, $19 million and $1.3 million in 2003. No criminal charges have been filed in any country.
Kensington claims more than $1 billion in oil revenues went through accounts domiciled at BNP Paribas in New York in connection with at least a dozen loans collateralized by future deliveries of oil and through "complex, convoluted and unconventionally structured" prepayment agreements that used sham intermediaries, part of a money-laundering scheme to keep funds earned from Congo's oil sales from creditors. In court documents, however, BNP Paribas says this kind of financing "is completely normal in commodities exports [and was] structured with all the necessary diligence."
Lawyers for Kensington, SNPC and Itoua declined to comment. In court papers, however, BNP claims the lawsuit should be brought in France, Congo or even England, if it should be brought at all-not the U.S., and that the allegations are "a strained effort." Indeed, Kensington did sue Paribas in New York State Court in 2003 in a similar case, but a judge ruled in 2005 that the case should be litigated in the U.K.
In court documents, Paribas called Kensington a "vulture fund," and argues that the case is "a transparent effort to find some basis for keeping BNP-P in this forum." In an email statement, the bank's lawyers wrote: "BNP Paribas believes Kensington's claims are without merit. ...We will defend this lawsuit vigorously."
