PROSECUTION SHOULD PROCEED IN KAZAKH BRIBERY SCANDAL

June 27, 2003
The bribery scandal over oil deals in Kazakhstan gives international companies plenty to worry about.

Bob Tippee

The bribery scandal over oil deals in Kazakhstan gives international companies plenty to worry about.

The industry, however, must be clear about this: The prosecution should proceed.

Controversy centers on James Giffen, an American advisor to Kazakh President Nursultan Nazarbayev.

US federal officials arrested Giffen Mar. 30 for alleged violations of the Foreign Corrupt Practices Act (FCPA), which outlaws bribery.

Under that and subsequent indictments, Giffen is suspected of funneling more than $78 million in payments from western oil companies to two top Kazakh officials. Although not named in the indictments, Nazarbayev is known to be one of the suspected officials.

Since Giffen's arrest, J. Bryan Williams, a former Mobil Corp. executive indicted along with Giffen, has pleaded guilty to evading taxes on an alleged $2 million kickback linked to Mobil's 1993 deal to develop giant Tengiz oil field.

Other companies active in Kazakhstan worked through and made payments to Giffen, whom they knew as the Kazakh government's main representative.

A crucial legal question is whether companies exercised sufficient diligence over money paid to Giffen. They had reason to consider him the proper conduit for legitimate payments to the government.

The court will decide whether Giffen was illegally diverting the funds and whether, if so, the companies should have known it.

These issues are always murky. They put companies uncomfortably between the FCPA and the sovereignty of governments with which they deal.

What oil companies must not do is hope nobody notices or, worse, join the Kazakh government in pressuring US officials to quash the Giffen prosecution. A June 26 article in the Financial Times reports the lavish extent of the latter initiative. It's not a savory story.

When oil and gas companies work abroad, a fair share of the consequent wealth should flow to host-country residents—all the residents, not just a few crooks in government.

Too often the crooks get rich while everyone else stays poor. Bribery, sad to say, is how the world works, destabilizing whole countries and corroding the legitimacy of international commerce.

Oil and gas companies should lead the effort to make the world work differently.

(Author's e-mail: [email protected])