Al Badie Group mired in corruption (Part 3) 

Following on from our Part 2 Al Badie Trading Establishment (ATE) was appointed as agent for Bechtel Corporation in 1998 prior to the issuance of tenders to construct an ethylene plant for Borouge, a 60-40 JV of Abu Dhabi National Oil Company (Adnoc) and Borealis of Finland. The project was won by Alliance Bechtel Linde (ABL) and announced on 11 November 1998 that it would be managed out of Bechtel’s London headquarters.

http://www.bechtel.com/newsroom/releases/1998/11/bechtel-linde-awarded-abu-dhabi-ethylene-plant/

The appointment was only made following intervention by consultants for Neste Oy of Finland (In 1994 absorbed into Borealis as a 50-50 partner with Statoil of Norway) who were familiar with the background and details of the project being tendered. Mohammed Al Badie, chairman of ATE and his son Khaled Al Badie (Al Badies) had represented themselves to the consultants as a member of the Abu Dhabi elite with impeccable contacts within Adnoc and with top decision makers in the Abu Dhabi Establishment. The Al Badies and their marketing manager Majid Shunnag frequently provided prospective clients and partners with influence-peddling material, such as videos, establishing their close ties with the then Crown Prince and now Ruler of Abu Dhabi and his inner circle of influential advisors and aides. In one such video Mohammed Al Badie is seen in the company of His Highness and his entourage on a private foreign visit. The purpose of showing the video was to influence clients to partner with the Al Badie Group (ABG)

A recommendation from the consultants to Neste was pivotal in gaining the representation for ATE. Majid Shunnag had approached Bechtel directly on behalf of ATE but had been rebuffed as Bechtel at the time had an existing working relationship with a prominent and well-connected Abu Dhabi businessman. As compensation for a successful recommendation on Al Badies’ behalf the consultants were promised a percentage of the agency fees that Al Badies would receive, provided Alliance Bechtel Linde (ABL), a joint venture between Bechtel Corp and Linde AG  was awarded the tender.

It later emerged that the Al Badies had diverted a major part of the fees contractually agreed with the consultants to top ranking public servants in Abu Dhabi. The third parties selected to receive inducements were able to influence the award of the Borouge ethylene plant contract in favour of ABL.  Al Badie eventually paid the consultants a small “lump sum” commission that was significantly less than the percentage they estimated was due under the contract. The consultants queried the very small payment only to be told that to achieve a successful outcome, Al Badie had to deduct “other expenses” from the agency fees paid by Bechtel. Shunnag disclosed that the “other expenses” amounted to 40% of the total fees paid to ATE by Bechtel. Pressured by the consultants to reveal details of the recipients, Shunnag maintained that the sum had been paid to an “ex-Adnoc” official who at the time of the challenge held one of the highest ranking public offices. Shunnag, who is believed to be a U.S. Green Card holder, further acknowledged the identity of the official who according to Shunnag was instrumental in influencing the tender award in favour of Bechtel/ABL.

It is alleged that the procedure of contracting payments for services rendered by a legitimate party and later diverting the payments to public officials has since emerged as a frequent “Modus Operandi” of the Al Badie Group. The Al Badies appeared to believe that this procedure would provide cover for the illegal payments. However, in not paying the legally contracted sums, Al Badies were obliged to expose the true fate of the withheld payments.

The Al Badies’ corrupt conduct was exposed when Khaled Al Badie, vice chairman of Al Ain Al Ahlia Insurance Company (AAAI) was named in 2013 as the principal figure in a bribery scheme involving Cyril Sweett International Ltd (Sweett), a provider of construction and property consultancy services. The public would have been none the wiser had it not been for the the Wall Street Journal’s investigative journalism that first exposed the bribery between an UAE based Sweett executive with close ties to Khaled Al Badie and HLW, a storied U.S. architectural firm interested in a $5.6 million contract to design a hospital in Morocco funded by the United Arab Emirates President’s personal foundation. It was reported that Sweett told HLW that in order to get the work it has to agree to pay 3.5% of the contract value to an official inside the Foundation. Following their agreement to pay the bribe HLW promptly withdrew from the contract and reported it to the U.S. authorities as obligated under FCPA guidelines.

Upon further investigation of Sweett’s activities in the UAE by the SFO, it emerged that they had a corrupt relationship with AAAI which resulted in a successful prosecution by the SFO under Section 7(1) of the Bribery Act 2010 and ordered to pay a hefty fine. It was clear in the sentencing that Khaled Al Badie demanded a bribe from Sweett over an AAAI funded hotel project in Dubai without payment of which they would not have been granted any consultancy role.

It is also claimed that AAAI’s auditors deliberately ignored bribery in their reports in respect of Khaled Al Badie even when the bribery may have been well publicised as the result of the SFO-Sweett prosecution. The 2015/16 accounts of AAAI were signed off by Deloitte’s local office without drawing attention to the bribes demanded by Khaled Al Badie, an officer of AAAI in which the Abu Dhabi Investment Council, a sovereign wealth institution, was a major shareholder.

The UAE Penal Code imposes criminal liability on an individual who offers to a public official or any other person assigned with a public office, a gift or an advantage of any kind or a promise of anything of the like, to commit or omit an act in breach of such official’s duties. The Penal Code extends the liability to any individual who mediates the bribe. The Penal Code provides a broad meaning to the term ‘public official’ and includes ‘any individual employed by a government ministry or a department and any individual who performs a job relating to public service by a mandate given to him by a duly authorized public official’. There is one exception however and this occurs when a briber or a mediator informs the judicial or administrative authority of a crime before it is discovered. In this case, the briber or mediator may avoid liability and be exempt from sanctions.

http://www.ethic-intelligence.com/experts/10736-anti-corruption-legislation-uae/

As the Al Badies did not inform the UAE authorities of their acts of bribery it is surprising that they have not been sanctioned under the UAE penal code for bribing public officials on behalf of Bechtel and for demanding bribes from Sweett. It could be concluded that they may have been considered too well connected to prosecute. The Crown Prince of Saudi Arabia recently detained businessmen and public officials suspected of corruption and forced them to disgorge the proceeds of their corrupt activities. His Highness Sheikh Mohammed Bin Zayed Al Nahyan, Crown Prince of Abu Dhabi is known for his zero tolerance of any form of public corruption. Should he choose to reclaim the proceeds of corruption from Abu Dhabi’s business elite such as the Al Badies bringing them to account for their acts of corruption, it would be welcomed by the majority of citizens .

The withheld payments were contested by the consultants through their London based lawyers. Both Mohammed Al Badie and Bechtel declined to disclose the amounts that were paid by ABL to ATE under the  agency agreement dated March 28th, 1998 quoting confidentiality. Requests for information to Bechtel were addressed to Michael Bailey, Bechtel’s General counsel and Director of Transparency International, despite Bechtel having been involved in relationships with individuals who were later prosecuted for corruption.

Mr Bailey’s indirect response indicated that Bechtel was unwilling to cooperate and suggested that the request for information should be addressed to Mohammed Al Badie, safe in the knowledge that Al Badie was not willing to divulge any details. In this way both Bechtel and Al Badie sought to cover up the unusually large quantum of agency fees and to allegedly conceal the use of the fees to fund the bribery of public officials capable of influencing the award. Bechtel has a long history of attempting to suppress publication of activities in which an agent or agents acting on their behalf engaged in bribery. In the latest case of the CCC family feud (see link to Telegraph article below) and according to court testimony, the most senior figures in Bechtel were fully aware of the payment made by CCC to senior figures of the Saudi Royal Family including Prince Waleed Bin Talal, one of the members of the Saudi elite who was recently detained by the Crown Prince on charges of corruption. Should the Saudi methodology used to deal with corruption become more widely adopted in the UAE then corrupt parties detained would have to include the Al Badies.

http://foreignpolicy.com/2015/01/30/steamrolled-investigation-bechtel-highway-business-kosovo/

https://www.justice.gov/opa/pr/former-bechtel-executive-sentenced-42-months-prison-and-ordered-forfeit-52-million-connection

http://www.telegraph.co.uk/business/2017/02/06/bribery-allegations-may-have-implications-bechtel-family-feud/

Because of Bechtel’s unwillingness to address the request for information regarding the quantum of agency fees, the consultants were unable to calculate the precise sum ATE owed under their contract. Had Bechtel or Al Badie disclosed the sum enabling the consultants to sue for the amounts due, Al Badie would have run the risk of having the diversion of funds to pubic officials exposed in a court of law. Such a revelation would almost certainly have led to an investigation of Bechtel under U.S. Foreign Corrupt Practices Act (FCPA) legislation, hence the reticence to make any disclosure.

The consultants further maintain that Bechtel and the Al Badie’s refusal to provide the requested information was sensitivity to the quantum of the payments that substantially exceeded the norms of reasonable agency remuneration levels. Most American multinationals follow a policy whereby any agency fees are sufficient to cover the costs incurred by the agent and to yield a small profit, but not large enough that there would be even a remote possibility of payments being employed by the agent to facilitate bribery.

In the case of the Al Badie Agency Bechtel is alleged to have deliberately sought to conceal the payment of unusually large agency fees because of the potential implications. Bechtel did not respond to, or legally challenge, the allegations of corrupt behaviour by their agent Al Badie or launch an internal investigation as a response to the allegations of graft by their agent Al Badie.

http://www.telegraph.co.uk/business/2017/04/01/bechtel-linked-corrupt-abu-dhabi-group/

It appears that Mohammed Al Badie and Majid Shunnag, acting as Bechtel’s Agent, have been unusually silent to counter the serious allegations of corruption. They are concerned by the existence of a large volume of audio tapes of recorded conversations and supporting documentation that establish beyond reasonable doubt the corruption practiced by them on Bechtel’s behalf. The tapes are being kept as evidence to substantiate the claims of bribery.

Mohammed Al Badie and Shunnag separately acknowledge that Bechtel abruptly terminated the Agency Agreement thereby excluding ATE from any further benefit arising from the following expansion contracts of the ethylene plant. Their stated reason is conflicting and at the same time highly improbable.  Abu Dhabi commercial law is known to be structured to favour the local agent’s interests more than those of the foreign partner including decisions such as the termination of an existing agreement, particularly if the agent is as powerful and well connected as Al Badie.  Industry sources conclude that if Bechtel/ABL did indeed unilaterally terminate an existing agreement, after having been successfully chosen to construct Abu Dhabi’s first ethylene plant, a contributing factor may have been their discovery of the bribes. Persons familiar with the engineering, procurement and construction industry operating in the Gulf maintain it would have been inconceivable that Grant Sowerby and Rob Jones, the local Bechtel and Linde managers respectively at the time were unaware of Al Badie’s activities, or that this information was not conveyed by Sowerby to the senior legal management of Bechtel. Bechtel’s reasons for termination have never been explained or disclosed by Al Badie, presumably because Bechtel allegedly was  concerned that reference to Al Badie’s bribery would have been self-incriminating. Persons familiar with Abu Dhabi business life state that for Bechtel to terminate a high-profile contract with a powerful local agent such as Al Badie for the reason stated would be an unnecessary high risk gamble and totally unacceptable in local business culture. The resulting disgrace for a humilated Al Badie would have had serious implications for Bechtel’s future prospects in Abu Dhabi. The only possible cause for Bechtel to abrubtly terminate the agency agreement is the discovery of Al Badie’s bribery payments leaving them with no alternative but to immediately disengage. In this event Al Badie would have no say in the matter.

FCPA expressly prohibits corrupt payments made through third parties or intermediaries. Specifically, the act covers payments made to “any person, while knowing that all or a portion of such money or thing of value will be offered, given, or promised, directly or indirectly”. The U.S. Congress anticipated the use of third-party agents in bribery schemes, defined the term “knowing” in a way that prevents individuals and businesses from avoiding liability. Congress made clear that it wants to impose liability not only on those with actual knowledge of wrongdoing but those who purposely avoid actual knowledge. Liability attaches when a company or its employees authorize, or have knowledge of, corrupt payments by third parties. Bechtel are aware of the FCPA provisions and interpretation. They would have understood disclosure that they had authorised the payment of abnormally large agency fees, would automatically have led to their auditors or others flagging the payments as suspicious. Under FCPA provisions suspicious payments trigger the obligation to investigate and self-report any illegal activity uncovered by the investigation. Had they conducted a rigorous investigation, it would certainly uncover the bribery of high ranking Abu Dhabi public officials and the intent to illegally influence the award in favour of Al Badie’s principal, the Bechtel Corporation.

Financial industry watchdogs suspect that the payments to the high-ranking Abu Dhabi public officials may have been concealed by channelling them through one of Al Badie’s off-shore entities several of which were active at the time as revealed in the Panama papers leaks.

Part 4  will further report on the allegations of bribery by Mohammed Al Badie as Bechtel’s agent and how he acted as a “sales agent” to find a buyer in Abu Dhabi for Neste’s 50% stake in Borealis to IPIC for which he found the need to enlist a well-connected and respected ranking member of UAE’s diplomatic corps only to deceive and defraud him using his customary subterfuge of withholding payments. It will also detail how the Al Badies and Shunnag colluded in deceiving their clients with their well-rehearsed good-cop/bad-cop routine and how they colluded to lock-up, threaten and intimidate a client to force him to rescind, under duress, his legally agreed commisions that Al Badie then diverted to high ranking public officials without the client’s knowledge or consent.

Link to part one

Link to part two