The Australian Federal Police are examining a cache of documents obtained by The Australian Financial Review in which lawyers repeatedly raised corruption concerns over a $US10.3 million ($15.4 million) payment made by the ASX-listed Horizon Oil to an unknown shell company in Papua New Guinea.
As shares in Horizon fell 30 per cent on Monday following the revelations, the petroleum company said it would conduct an “independent investigation into the matter”.
It said this was required due to the “seriousness of the allegations made in the article”.
In an earlier statement to the ASX, Horizon said it had “no actual knowledge
of any wrongdoing relating to that transaction”.
The share price plunge, the federal police interest and appointing of an independent investigator follows a Financial Review report on how lawyers working on the 2011 deal flagged links to PNG’s then petroleum minister William Duma.
In the same documents, the lawyers warned about “illicit payments” and of the US Department, Justice Department or Securities Exchange Commission being “likely” to investigate if the transaction was ever examined by regulators.
The federal police confirmed they had received the Horizon documents and said “the information is being assessed at the current time.”
“The AFP takes all allegations of foreign bribery offences by Australian entities and citizens seriously, and is committed to combating this insidious crime type,” the statement said.
The documents were sent anonymously to the AFP at its Canberra headquarters as well as the Australian Securities and Investments Commission, after the Financial Review began investigating the PNG gas deal late last year. ASIC declined to comment.
Any investigation will need to examine how Horizon’s management failed to see the same “red flags” as lawyers for its joint venture partner, the Canadian oil giant Talisman (now Repsol).
Two in-house lawyers at Talisman and an external adviser warned against buying out the shell company, Elevala Energy, raising issues around “corruption”, and likened the potential transaction to “fruit of the poison tree”.
“The legitimate role of Elevala is not clear,” said outside counsel Douglas N. Greenburg, a partner with Latham & Watkins in Washington.
These legal opinions were shared with Horizon’s former chief executive Brent Emmett, who resigned in 2018. Mr Emmett declined to comment.
Current chief executive Michael Sheridan, who was chief financial officer, company secretary and sat on the board at the time, was responsible for making the payments to Elevala, documents seen by the Financial Review indicate.
Differing conclusions
In a statement on Sunday, Horizon’s lawyers Ashurst, who advised on an earlier stage of the deal, said they had “conducted searches” on Elevala and “these revealed nothing corrupt, illegal or anything in breach of bribery laws”.
That is a very different conclusion to that reached by Talisman, which raised concerns about Elevala’s sole director and shareholder, Simon Ketan, being “a lawyer with what appears to be close connections to government officials”.
Talisman’s lawyers also noted Mr Ketan and Mr Duma were named together amid allegations of tribal landholders being defrauded of government compensation.
Mr Duma has denied any wrongdoing and said any suggestion he acted improperly “amounts to political witch-hunting with malicious intent to make me look bad”.
Mr Ketan, who previously worked with Mr Duma, said the transaction happened more than seven years ago and the files for the “private commercial deal” were closed.
Talisman did not go ahead with the transaction, leaving Horizon to purchase Elevala’s entire 10 per cent stake in the petroleum licence, PRL 21, for $US10.3 million.
This followed Horizon having its licence over the same gas field in the PNG highlands revoked by Mr Duma, during his tenure as Petroleum Minister.
After an aborted legal battle Horizon, concerned it would lose an asset valued at more than $100 million at the time, wrote to Mr Duma saying it was “open to any suggestion” on how the “current tension might be defused”.
That was the trigger for a settlement and resulted in Elevala being issued 10 per cent of the licence.
Horizon purchased Elevala’s stake just 10 weeks after it was issued the licence.
Talisman’s lawyers noted that a “quick flip … for $US10 million” would not appear to meet the minister’s desire for local companies to be involved in the sector.
The nine-year-old payment is threatening to derail Horizon’s development program in PNG, as it seeks to commercialise a new LNG pipeline and processing plant in the Gulf of Papua.
The issue flared before Christmas when one of its partners, Spanish oil giant Repsol, sought to sell its PNG operations and questions were raised with the Horizon board and management about the issuing of licences.
Horizon’s shares fell 3.6¢ or 30 per cent to 8.4¢.
Extracted from AFR