The Self-Dealings of Sonangol’s CEO

On 20 May 2002, the chairman of the board and CEO of Sonangol, Manuel Vicente, went into partnership with Grinaker LTA International Holdings, a South African company, the Banco Africano de Investimentos (BAI), and Mário Palhares in setting up Grinaker LTA Angola – Civil Construction and Public Works. Each partner took an equal 25 percent shareholding.

A few months after it was set up, Grinaker LTA Angola – Civil Construction and Public Works in partnership with the Portuguese construction company Soares da Costa, got the contract for the new Luanda headquarters of the Angolan national oil company, Sonangol: a contract worth US $83.5 million. Work started in June
2003, and the 21-storey building was opened early in 2008.

The same partnership of Grinaker LTA Angola and Soares da Costa won the contract in 2006 to build the headquarters of Sonangol Exploration and Production (P&P), the operational subsidiary of the Sonangol group. The 14-storey building, with an initial budget of US $56.6 million, is in the final stages of construction.

In legal terms, Manuel Vicente’s participation as a 25 percent shareholder in Grinaker LTA involves passive corruption and conflict of interest. Apart from his duties at Sonangol, at the time of the Grinaker agreement Manuel Vicente was and remains vice-chair of the board of directors of BAI, representing the majority shareholder, Sonangol. At that time Mário Palhares was chairman of the board of BAI.

The Bank’s reaction

On May 15 2010, the Angolan weekly newspaper Semanário Angolense, published a summary of the present investigation after three weeks of unsuccessful calls to obtain an answer from Sonangol’s chair and CEO, Manuel Vicente as the main subject of the story.

The African Bank of Investiments (BAI), in which Sonangol is the majority shareholder with 8.5 percent of its capital, reacted to the disclosure of the investigation by Semanário Angolense by publishing a statement on the paper’s issue of June 05 2010. In its statement BAI asserts that the report “contains false or untrue information, damaging to the interests of our institution.”

Furthermore, BAI states that “Grinaker is a commercial enterprise of entirely private capitals, resulting from the transformation of a company of limited capitals to an anonymous society, in 2002, effected by a notarised deed, which also demonstrates that participation of a foreign company in its shareholding structure, the South African construction company Grinaker LTA, in partnership with the African Bank of Investiments. The first had 47 percent of the shares while the second controlled 51 percent of the capital.”

Furthermore, BAI indicates that both Manuel Vicente and Mário Palhares “underwrote one percent of the capital each, as members of the board of directors appointed by BAI”, and that “the shares they have underwritten are kept in custody of the institution.”

The statement reiterates that Sonangol awarded the contracts to Grinaker as a choice for the best proposals and in compliance with a public tender.

The facts

As proof of its good faith, BAI defends both Manuel Vicente and Mário Palhares alluding to the notarised deed that establishes Grinaker LTA Angola, but without presenting any evidence to support its claims.

This investigation has also had access to the notarised deed BAI refers to, and it clearly states “the deed of May 20 2002, drawn up from pages 50 to pages 62, of the notary’s book for diverse deeds n° 198-A of the Second Notary (…)”. This deed establishes the division of shares at 22,500.00 kwanzas each for BAI, the South African construction company Grinaker LTA, Manuel Vicente e Mário Palhares. Thus, it grants 25 percent of the shares to each partner.

The notary establishes that “as consequence of the deeds undertaken by the shareholders and upon their agreement transform, without dissolution, this company into an anonymous society (…)”.

Nonetheless, the bank’s statement reveals the same swiftness with which it convolutes public capitals with private capital of government officials, public managers and other high ranking members of the regime, in contravention to the national legislation.

There are two immediate examples that are relevant to mention in this text. First, it pertains to the role of the head of Sonangol London, José Carlos de Castro Paiva, who represents the national oil company as chairman of the board of directors of BAI. Castro Paiva, has also the dual role of being the front for and representing Dabas Management, a private company established in Mauritius, which holds 5 percent shares in the bank. The second case is of Sebastião Pai Querido Martins, member of the board of directos of Sonangol, who has one percent of shares in BAI. His family company Gianni Janice Darlings, formally holds the share.

It should have been Sonangol to answer for the contracts it awarded to Grinaker, and not BAI, which does not represent the national oil company at any time. Nevertheless, the case of BAI, in the context of corruption in Angola, will merit, in due time,  a disclosure.

The Legal implications

Corruption in Angola has revealed an extraordinary contradiction: at the same time as new laws have been passed to combat corruption, there has been increasing impunity for acts that alienate state resources, harm the well-being of Angolans, and corrode the moral fabric of society.

So it is important to put into context the legal norms and how these have been violated in this case. Until 10 June 2003, and including the period in which the Sonangol management granted the contract to the consortium of Grinaker LTA Angola and Soares da Costa, the Law on Economic Misdemeanours  (Law 6/99) was in force. Article 48 of this law defines passive corruption as follows:

Anyone who, while working in an organ of the state, in a public enterprise whether wholly or partially publicly funded, whether in person or through an intermediary whom he has authorised or approved, solicits, accepts or receives money, goods, any kind of patrimonial benefit or benefit of any other nature, to pre-empt, delay, commit or omit any act, in a manner contrary to the duties of the office he occupies, will be punished in accordance with the value of the goods or benefits obtained, in terms of Article 421 of the Penal Code.

Article 49 of the same law defines active corruption as follows:

Anyone who gives or promises to an employee of organ of the state or of a public enterprise whether wholly or partially publicly funded, whether in person or through an intermediary whom he has authorised or approved, money, goods, any kind of patrimonial benefit or benefit of any other nature not due to him, so as to secure the commission, the omission, the pre-empting or the delay of any act, will be punished according to the penalties set out in the previous article.

Thus Manuel Vicente broke the law by using his public office to authorise the construction of the Sonangol building by a company in which he was a qualified shareholder, thus securing himself part of the revenue from the project. At the same time, as chief executive and vice-chairman of BAI, Manuel Vicente also broke the law in using his position as a representative of the bank, an institution set up in great measure with public funds, to go into partnership with the bank in Grinaker LTA Angola.

The foreign partners, Grinaker International Holdings and Soares da Costa, committed active corruption involving a public official, in terms of the article of the law quoted above.

Meanwhile, the Law on Economic Crimes (Law 13/03), which has been in force since 10 June 2003, has revoked part of Law 6/99, including articles 48 and 49 that are described above. This law defined public employment as exercising “functions not only in public service but also in public enterprises and publicly funded companies”. The same law refers to the Penal Code (articles 318 and 323) for the definition and criminalisation for acts of bribery and corruption of public services.

Consequently, Manuel Vicente’s position as chairman of the board and CEO of Sonangol had a bearing on his decision in granting a contract to a firm in which he had an interest. The Penal Code (Article 322) defines such an action, receiving a promise of a share in the profits of an enterprise, as an act of corruption subject to a maximum penalty of between two and eight years in prison.

According  to the  Penal  Code,  through  the  continuation  of  the contract under the purview of the 2003 Law on Economic Crimes, the foreign partners, Grinaker LTA International Holdings and Soares da Costa committed an act of active corruption involving a public office bearer, Manuel Vicente.

It has become current practice for foreign firms to set up partnerships with powerful figures in the regime, such as Manuel Vicente. In this way the companies not only gain multi-million dollar contracts that are often over-invoiced, but also enjoy the same impunity as the leading members of the regime.

International treaties

The awarding of the contract for the Sonangol Research and Production to a consortium of Grinaker LTA and Soares da Costa took place in a legal framework that includes the incorporation of the SADC Protocol Against Corruption into Angolan law. The Council of Ministers approved this treaty on 8 August 2005 in its Resolution 38/05, which brought a broader and more specific definition of corruption into Angolan law.

For the case in question, the Protocol (article 3, 1, c) defines corruption as “any act or omission in the discharge of his or her duties by a public official for the purpose of illicitly obtaining benefits for himself or herself or for a third party”. The Protocol (article 3, 1, f) also defines influence peddling as an act of corruption.

The Law on Public Probity, ratified on 25 March 2010 as the main instrument of the zero tolerance policy towards corruption, reaffirms the legal provisions discussed in this article.

The looting of state patrimony and illegal self-enrichment have led to the deepening of poverty and the blocking of human development for the majority of Angolans, as well as created the potential for socio-economic and political instability in the country. Institutionalised corruption violates the dignity of Angolans.