ENI Eni Spa

By Sarah Kent in London and Eric Sylvers in Milan 

Royal Dutch Shell PLC's top executives last year were worried that a controversial Nigerian oil deal may have violated a U.S. Justice Department agreement with the Anglo-Dutch oil giant and would spark an American probe, according to a recorded phone call between the firm's chief executive and top finance officer at the time.

The company is already under investigation in Italy, Nigeria and the Netherlands for a $1.3 billion deal in 2011 with Italian oil firm Eni SpA and the Nigerian government for a lucrative Atlantic Ocean oil license known as OPL 245, according to Italian court documents, Nigerian public records and a statement from the Dutch prosecutor. The controversial oil block -- believed to contain billions of barrels of crude -- is a valuable prize for the two companies, which already pump huge volumes from oil-rich Nigeria.

The Justice Department declined to comment.

Italian prosecutors are pursuing criminal charges against Shell and Eni, saying in court records the companies knew the deal's proceeds would be used to pay bribes in Nigeria. Shell and Eni said Friday they paid the Nigerian government for the oil block but didn't believe the money would ultimately be used for bribes. Court documents allege the money went to various executives and Nigerian government officials. An Italian judge has yet to rule on whether a criminal trial will take place.

The phone call between Shell Chief Executive Ben van Beurden and then-CFO Simon Henry opens a rare window into the private conversations of the company's top executives and reveals how the Nigeria bribery investigation has become a nagging worry. On the call, they say they are speaking just hours after Dutch police raided Shell's offices in The Hague in February 2016 as part of an investigation into the deal.

In response to questions about the call, a Shell spokesman said the company notified U.S. and U.K. authorities about the raid and subsequently turned over the results of its own internal investigation into the Nigerian oil deal to them. Shell said it is cooperating with authorities but doesn't believe there is a basis for the Italian prosecution. The company didn't dispute the authenticity of the recording.

On the call, Mr. van Beurden told Mr. Henry that the company's legal team conducting their own investigation had turned up "unhelpful email exchanges" with "loose chatter" from Shell employees about the Nigeria deal, according to a recording heard by The Wall Street Journal that was provided by a person in possession of the recording.

The emails, Mr. van Beurden said on the call, included "things like 'Well, yeah, you know, I wonder who gets a payoff here' and whatever."

BuzzFeed reported the call on Sunday.

Mr. van Beurden said on the call that he didn't believe investigators had found anything incriminating, but he and Mr. Henry wondered whether the Justice Department was working with the Dutch police.

"Apparently it was judged to be, you know, just pub talk in emails, which was stupid, but nevertheless, it's there," he told Mr. Henry. Later in the call, Mr. van Beurden said Shell concluded the U.S. wasn't involved in the Dutch raid.

Mr. van Beurden, who took over as CEO in 2014 and wasn't involved in the OPL 245 deal, expressed concern that his predecessors hadn't disclosed enough about the deal to the U.S. Justice Department. The Justice Department had already investigated Shell for Nigeria bribery allegations in a separate case and entered a deferred prosecution arrangement with the company in 2010 requiring a $30 million criminal settlement and adherence to what the Justice Department called "enhanced corporate compliance and reporting obligations."

"We should have maybe at the time been more open with the DOJ than we now find we have been," Mr. van Beurden said on the phone call, referring to the bribery allegations arising from the subsequent 2011 OPL 245 deal.

The U.S. has been a tough enforcer of anticorruption laws and has used the Foreign Corrupt Practices Act to levy huge fines against international companies.

The U.K.'s Serious Fraud Office wouldn't confirm or deny its interest in the case. The Dutch Public Prosecutor said Sunday it is working on a joint investigation with Italian authorities into whether Shell bribed Nigerian officials, but wouldn't comment on the Shell executives' conversation. Italian prosecutors didn't respond to requests for comment.

Shell pursued the rights to OPL 245 for years before joining with Eni to strike the complicated 2011 deal now under investigation. Under the $1.3 billion arrangement, Eni put $1.1 billion into an escrow account for the Nigerian government.

In internal Shell emails obtained by nonprofit Global Witness and reviewed by the Journal, Shell's executives and managers in Africa show the deal was being structured so the government would send the escrow money to a company called Malabu Oil and Gas, which was linked to former oil minister Dan Etete, according to court documents. The deal was intended to settle years of wrangling over the block's ownership.

London-based Global Witness has conducted an investigation into Shell's oil deal with Finance Uncovered, a group of investigative reporters and campaigners. Italian prosecutors in court records say Mr. Etete's company then used the money for bribes, with the knowledge of the Nigerian government, Shell and Eni. Malabu couldn't be reached for comment.

Nigeria's then-President Goodluck Jonathan "is motivated to see 245 closed quickly -- driven by expectations about the proceeds that Malabu will receive and political contributions that will flow as a consequence, " Shell manager Peter Robinson said in an August 2010 briefing sent to Malcolm Brinded, then head of exploration and production.

Oil-industry corruption allegations helped lead to Mr. Jonathan's defeat in 2015. Mr. Jonathan has previously denied the bribery allegations in a statement. Attempts to reach Messrs. Etete, Robinson and Brinded were unsuccessful.

"This is one of the worst corruption scandals the oil industry has ever seen," said Simon Taylor, director of Global Witness.

--Aruna Viswanatha in Washington contributed to this article.

Write to Sarah Kent at sarah.kent@wsj.com and Eric Sylvers at eric.sylvers@wsj.com

(END) Dow Jones Newswires

April 10, 2017 02:47 ET (06:47 GMT)

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