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São Tomé Seeks U.S. Probe
Of ERHC Oil Deal
By CHIP CUMMINS
Staff Reporter of THE WALL STREET JOURNAL
December 14, 2005; Page B2
LONDON -- The attorney general of the West African island nation of São Tomé and Príncipe has asked U.S. officials to investigate Houston-based ERHC Energy Inc., an over-the-counter-listed company that earlier this year clinched a number of oil-exploration awards, for what it said could be violations of U.S. anticorruption laws.
The tiny, former Portuguese enclave, situated in the Gulf of Guinea off the coast of Gabon, has drawn the interest of large Western companies eager to explore the potentially oil-rich waters around the islands.
In a report probing São Tomé's most recent round of oil-exploration auctions, the São Tomé attorney general's office singled out ERHC for special scrutiny related to a previously negotiated contract the company reached with São Tomé officials over preferential rights to oil exploration in the islands' waters. The report has been forwarded to the U.S. Department of Justice and the U.S. Securities and Exchange Commission, according to people familiar with the situation.
ERHC trades on the OTC Bulletin Board. According to filings with the SEC, its major shareholder as of late last year was Chrome Energy LLC, which in turn is controlled by a Nigerian businessman named Emeka Offor. Despite its small size, ERHC has gained a popular following among some OTC stock traders. A representative of ERHC, reached yesterday in Houston, said the company's chief executive, Ali Memon, hadn't yet seen the report and couldn't comment further at this time. Chrome wasn't available for comment.
ERHC had partnered with a number of bigger, well-known Western oil companies in the most recent round of bidding. Devon Energy Corp. and Noble Energy Inc. have since left their respective consortiums with ERHC. Devon, of Oklahoma City, said its potential share of the project wasn't big enough to warrant its attention; Noble, of Houston, didn't return calls. Pioneer Natural Resources Co., of Irving, Texas, which is still partnered with ERHC, declined to comment. None of the companies has been accused of wrongdoing.
The report, a copy of which was reviewed by The Wall Street Journal, doesn't identify concrete evidence of wrongdoing, but says at "every stage" of the probe, "there is the suggestion that ERHC and its parent Chrome may have made improper payments to government officials or provided benefits to their families in order to secure the assistance of such officials in continuing the contract."
In the report, the office said it would seek the assistance of the two U.S. agencies in probing whether ERHC violated the U.S. Foreign Corrupt Practices Act. Reuters new service Monday reported the attorney general's intention to request U.S. assistance.
It is unclear if U.S. officials have acted on the request. Spokesmen for the Justice Department and the SEC declined to comment.
The office of São Tomé Attorney General Adelino Pereira, in a statement last week, said his investigation found that procedures used to select winning companies were "seriously flawed." The exploration rights were awarded by the Joint Development Administration, an agency formed between Nigeria and São Tomé that is handling competitive bidding for the rights to explore acreage that straddles the territorial waters of the two West African nations.
Write to Chip Cummins at chip.cummins@wsj.com
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