How Tullow Oil Navigated the Uganda Curruption Allegations

When Tullow Oil PLC was confronted with allegations of bribery in Uganda, it did what few companies have done under similar circumstances, it defended itself publicly.

Last year, Ugandan lawmaker Gerald Karuhanga accused U.K.-based oil company Tullow of bribing Prime Minister Amama Mbabazi as well as the minister of foreign affairs and the minister of internal affairs. Karuhanga said he had documents proving Tullow had siphoned nearly $100 million to the officials through bank accounts in Malta and London for concessions in Uganda’s oil fields.

From the outset, Tullow denied the accusations and said Karuhanga’s documents were forgeries. But in April, the company went even further. Tullow published on its website a detailed set of documents it presented in its defense to a special Ugandan Parliamentary committee.

The presentation contained statements from both the Maltese and London Metropolitan police forces saying the documents were, in fact, forgeries. It also included an email from the Serious Fraud Office, the U.K.’s primary anti-graft agency, that said that office had decided not to investigate the allegations.

Those agencies previously declined to comment. Karuhanga couldn’t be reached for comment.

In today’s heightened enforcement climate, companies facing corruption allegations are rarely so transparent about the nature of the charges against them. On-lookers are left to parse cryptically worded regulatory disclosures or media leaks.

Tullow spokesman George Cazenove said in an interview that in this instance the company felt compelled to defend itself publicly.

“We were innocent, we knew we were innocent, and we wanted the world to know it,” he said. “The act of doing it was very cathartic.”

But if you’re going to go out on a limb, Cazenove said, you have to be sure you’re right. Tullow conducted its own extensive internal investigation and came away with the conclusion that the accusatory documents were clearly forgeries. The company also contacted various law enforcement agencies who reached the same conclusion, he said.

As the company prepared to defend itself before the Ugandan Parliamentary committee it realized there was a strong chance information would be leaked to the public, Cazenove said.

“It was pretty likely that it would be in the press and we didn’t want an important document to be released partially,” he said. ” We thought it was important for the whole story to be out there. We were also very keen for people outside Uganda, including our staff, to see the documents.”

As much as anything, the documents were released for Tullow’s employees to see, according to Cazenove. He said that the company felt “battered and bruised” and it wanted its employees to know that this was not how it does business.

So, did the strategy work? Thus far, no one has stopped Tullow from moving forward with a $2.9 billion deal it closed in February to bring in French oil major Total S.A. and Chinese group CNOOC as partners to help it develop its oil fields in Uganda. But a larger debate within Uganda over the allocation of its oil resources rages on.

By C.M. Matthews
03-May-2012
WSJ Blogs