The Dealmaker Who Helped a U.S. Hedge Fund Score Congo Oil Prize
2015-05-07 04:00:05.294 GMT
By Franz Wild
(Bloomberg Business) -- For a businessman who doesn’t spend
much time at his burgundy mansion in Morocco’s ancient city of
Marrakesh, Jean-Yves Ollivier throws quite a dinner party.
Three servants in black tuxedos silently file past in the
soft light, keeping the nine French art dealers, lawyers and
charity workers topped up with a fruity blend of cabernet
sauvignon and merlot. The guests dine on roast rosemary lamb,
Mediterranean vegetables and potato dauphinoise, on crimson
plates from Istanbul. Silver bowls brim with red roses and two
elephant tusks form an arch by a dining room wall. The chatter
ranges from quips on French politics to exclamations at the
crunchiness of the pomegranate seeds in the mousse.
Ollivier is dressed for comfort on this wet December night,
wearing a woolen gray-and-white-striped djellaba, a Moroccan
robe. He fills it out. Leaning back in an upholstered wooden
chair, he throws out his arms and chortles at the compliments
he’s receiving about his recently published memoirs. The book
tells how he rose from a teenage refugee fleeing Algeria to
become one of Africa’s canniest middlemen.
The Frenchman is happy to talk about his deals, and to say
that his Marrakesh residence — and the other places he has
around the world — are one benefit of his 45 years of working in
Africa. He’s made his career befriending the continent’s leaders
and finding ways for them, the companies they deal with, and
himself, to all make money.
One deal he cites as epitomizing his ability to match up
different interests: how he helped a venture by Och-Ziff Capital
Management Group LLC, the largest publicly traded U.S. hedge-
fund manager, buy a stake in an oil project being explored by
Eni SpA off the coast of the Republic of Congo. He says he also
advised his friend, Congolese President Denis Sassou Nguesso,
whose government granted the concession in 2010. The price was
about a third of its actual value then, according to McDaniel &
Associates Consultants Ltd.
“I am not the Godfather, of course, but I employ about the
same system.”
The U.S. Securities and Exchange Commission and the Justice
Department are investigating several Och-Ziff investments in
Africa with an eye to whether they violated anti-bribery laws,
the company said a year ago. New York-based Och-Ziff didn’t
specify which investments. Spokesmen for both the Justice
Department and the SEC declined to comment on their
investigations into Och-Ziff.
Och-Ziff, through its external public relations firm,
declined to comment. Ollivier said only that he hasn’t been
contacted by anyone in connection with the investigation. The
Congolese government declined to comment.
Ollivier, 70, also helped represent Congo in a dispute with
billionaire Paul Singer’s New York hedge-fund company, Elliott
Management Corp. He has been an adviser to Russian nuclear
company Rosatom Corp. and Swiss oil trader Vitol Group. And he’s
found himself among the thousands of people on a list of those
with secret accounts at the Swiss private-banking unit of HSBC
Holdings Plc. He said the accounts were legal, all taxes have
been paid and he’s been a Swiss resident for a long time.
Ollivier says his career is built on favor-trading that he
likens to methods used by Don Corleone in “The Godfather” film
trilogy.
“I am not the Godfather, of course, but I employ about the
same system,” he says in an interview the morning after the
dinner. “It starts by him helping this one and this one and this
one, not asking anything. But maybe one day I will ask you
something. The gain comes afterwards and for a mutually
beneficial project. That’s where I benefit, ultimately.”
After dinner, the guests pass under pointed archways and
domed ceilings and step across a zebra skin for Cuban cigars,
mint tea and pralines in the lounge. Ollivier picks out a Hoyo
de Monterrey. It’s short and thick, his favorite kind.
“I designed it myself,” Ollivier says of the house,
pointing out the clear run from the front door through the
atrium, lounge and across the lawn to three giant red cubes
perched upon a six-step waterfall feature. “I love architecture.
It is the trace of a human being on earth. Your soul remains in
the house.”
The interview is part of a decision Ollivier has made to
fashion a public persona, he says. He wants to counter what he
calls untrue suggestions in the media and books that he’s a spy
or an arms dealer. He’s also participated in and promoted a
documentary funded by South African military-equipment
manufacturer Ivor Ichikowitz’s foundation. It's about how he
helped negotiate a prisoner swap between Angola and apartheid
South Africa — then at war with each other — in 1987.
At the dinner party, he signed and handed out copies of “Ni
Vu Ni Connu,” French for neither seen nor known, the memoir that
came out last year. On the cover, a serene Ollivier peers out
from a dark background.
During the morning chat, Ollivier sits on a couch in his
lounge, puffing on another cigar, resting an elbow on a table
cluttered with silver and opal artifacts. He sips on a pint of
what he calls an alcohol-free mojito: lime, soda, mint and lots
of crushed ice. Behind him, a life-sized wooden monkey
contemplates an apple. The interview later moves to his office
in a stand-alone garden hut and then to a reading room, where a
fire roars beneath a mantelpiece holding three leather busts.
Ollivier doesn’t spend much time at the Marrakesh house, or
at any one of his other residences around the world: in Paris,
Zurich, Brazzaville in the Republic of Congo and on the 15th
story of Marilyn Monroe’s old building on Sutton Place in
Manhattan’s midtown. His favorite is at South Africa’s Kruger
safari park. He says he spends more time in the air than in any
one place.
He flatly denies ever working as a spy, dealing in arms or
participating in any form of corruption or bribery.
“He is the epitome of the man in the shadows, who knows
everything and runs everything,” said Gerard Prunier, a French
academic affiliated with the Washington-based Atlantic Council
and the Association for the Study of the Middle East and Africa
and an author of books about Africa. “If you’re a businessman,
he can open all kinds of doors for you that you can’t.”
Ollivier’s career began at the age of 17, when he was cast
out by Algeria, where he was born. So were 1 million other
pieds-noirs, as the French people living there were known, who
fled around the time of independence in 1962. He became a
courier for the pied-noir resistance, traveling between the two
countries. He was caught, tortured and held in a Paris jail for
five months for charges including “plotting against the
authority of the state,” he said in his memoirs and on his
website.
Instead of completing high school when he got out of
prison, he went to London to learn English. An internship
arranged by a family contact there led to a job as a grain
trader back in Paris. In 1969, still in his mid-20s, Ollivier
shipped barley to Libya, where Muammar Qaddafi had just
overthrown the government. That same year, he successfully bid
for trader Grainex SA to sell wheat to China at the height of
the Cultural Revolution.
Ollivier traveled to South Africa for a French chemical
company in the 1980s and later sold oil to the government,
breaching sanctions against the apartheid regime. In 1986, he
says in his book, Jacques Chirac, shortly to become prime
minister of France and later president, asked him to help
negotiate the release of French hostages from Lebanon. By then,
he had direct access to a number of African leaders, and
companies and politicians were turning to him for help.
“What is necessary at a certain moment is that your file
will be put on top of the other files and there will be an
instruction to the people to look at your file favorably,”
Ollivier says, reaching forward and closing his fingertips
together as though picking a plum.
By 2009, Ollivier was a go-between for the Congolese
government and the oil venture Och-Ziff had set up. Daniel Och
had created the fund manager in 1994 after 11 years at Goldman
Sachs & Co., where he had most recently been co-head of U.S.
equities trading. As chief executive officer and chairman of the
eponymous company, he secured investments from pension funds,
foundations, corporations, private banks and more to build the
assets under management to $47 billion today, according to the
company website.
Och-Ziff invested across the globe in various asset
classes. In 2008, the fund manager set up a joint venture with
South African partners to invest in resources on the continent.
The resulting African Global Capital funds made investments in
projects including uranium mining in Democratic Republic of
Congo and a coal company in South Africa. It was African Global
that secured the oil deal in the Republic of Congo, the DRC’s
smaller neighbor to the northwest.
Starting in 2011, Och-Ziff began receiving subpoenas from
the SEC and information requests from the Justice Department in
connection with an investigation into possible violations of
anti-bribery laws, the company announced in a March 2014
regulatory filing. The probe related to an investment from a
foreign sovereign wealth fund in Och-Ziff, as well as the hedge
fund’s investments in “a number of companies in Africa,” it
said.
Legal expenses have risen due to the investigation, Och-
Ziff Chief Financial Officer Joel Frank told analysts on a May 5
earnings call, adding that the company hopes the probe will be
over by the end of the year.
By the time U.S. authorities were contacting Och-Ziff,
Ollivier had a track record of working with the Republic of
Congo. There, Sassou Nguesso, a 71-year-old French-trained
colonel paratrooper, had come to power through a 1979 coup, just
as oil production was becoming significant.
Espousing Marxist-Leninist rhetoric, he quickly began
allowing Western companies to pump Congo’s oil. He’s ruled ever
since, except for a five-year gap when he lost elections. Sassou
Nguesso’s Cobra rebel fighters returned him to power in 1997 in
a four-month civil war.
“[President Denis Sassou Nguesso] doesn't care about money.
He doesn't spend. Yes, he likes beautiful suits and pens. The
man lives a very simple life. He’s devoted to his country.”
Congo’s output mushroomed to about 300,000 barrels of crude
oil a day in 2010, making up about 90 percent of export revenue,
according to the U.S. Energy Information Administration. This
hasn’t made the country’s people rich. About half live on less
than $1.25 per day, according to United Nations data. Almost one
in 10 children dies before the age of five.
Transparency International accused Sassou Nguesso of
embezzling a “substantial part” of Congo’s oil income by selling
crude at below market value in exchange for payments to his
benefit. The Berlin-based group and a French nonprofit in 2008
filed a complaint with France’s prosecutor’s office. It
requested legal action to get Sassou Nguesso and four other
African presidents to reimburse public funds they had embezzled,
according to a copy of the claim. Transparency International
estimated Sassou Nguesso’s fortune to be more than $1 billion.
“I know him intimately,” Ollivier says, dismissing the
allegations with a wave. “He doesn’t care about money. He
doesn’t spend. Yes, he likes beautiful suits and pens. The man
lives a very simple life. He’s devoted to his country.”
A French judge is currently investigating the claims
against Sassou Nguesso and his family, William Bourdon, the
lawyer who filed the complaint on behalf of Transparency
International and its partner, said by phone.
Because it is an investigation and not a court case, Sassou
Nguesso’s side isn’t required to respond. The inquiry has no
chance of leading to a court hearing because embezzling public
funds abroad isn’t an offense in France, and French courts don’t
have any jurisdiction abroad, Jean-Pierre Versini-Campinchi, a
Paris-based lawyer for Congo, said in an e-mailed response to
questions.
Congolese Communications Minister Bienvenu Okiemy requested
e-mailed questions when called on his mobile phone, but he
didn't provide an e-mail address and didn't respond to 10 text
messages or 20 calls. Minister of Special Economic Zones Alain
Akouala Atipault didn’t answer 10 calls to his mobile phone.
Four requests for comment submitted on the website of Sassou
Nguesso’s office went unanswered.
By 2002, Ollivier was advising the National Oil Company of
Congo, known by its French acronym, SNPC, on a loan of about
$350 million to build energy infrastructure. Rand Merchant Bank,
a South African investment bank, was a joint lead arranger and
participated in the financing. Oil trader Vitol was guaranteed
the product. Congo increased its crude production. And Ollivier
was paid for his services, he says.
“It’s the type of deal I love, where everybody wins,” says
Ollivier, drawing on his cigar under the mosaic ceiling in his
office.
Vitol said in an e-mailed response to questions that it had
a consulting agreement with “companies controlled by Mr.
Ollivier from 2002 to 2004.” It was related to the development
of Vitol’s business in Congo. Vitol said the details were
confidential and declined to comment on the loan.
Ollivier introduced SNPC to Rand Merchant Bank and was
involved in the initial negotiation but didn’t play a
“significant role in the arrangement thereafter,” according to
Peter Gent, the bank’s project finance head at the time.
Ollivier also lent SNPC chief counsel Blaise Elenga, a “long-
standing personal” friend, $185,000 to build a house, according
to a sworn statement he made to a Hong Kong court in an
unrelated case. Ollivier says it was repaid.
Elenga asked for questions to be sent via e-mail and didn’t
respond to five e-mails or eight telephone calls.
The Hong Kong case arose in 2006. A unit of billionaire
Singer’s New York hedge-fund company, Elliott Management, was
trying to recover more than $100 million in Congolese debt it
owned, according to court papers. The Elliott unit was winning
judicial orders allowing it to seize state assets, including oil
cargoes, and it alleged in the Hong Kong files that Ollivier was
helping Congo conceal these.
In his own affidavit, Ollivier denied that he’d hidden
assets. In the December interview, he said he’d created a web of
shell companies to conceal the owners of Congo’s oil and the
payments the SNPC was receiving. He also worked out a way to
ensure the cargoes were paid for before they left the country,
instead of the usual 60 or 90 days later, he said.
“I built that and I’m very proud of that,” Ollivier says,
standing up and casting an arm down for emphasis. Speaking of
Elliott, he said it was “tackling people and destroying the
reputation and names of the people who were close to the
regime.”
In the Hong Kong affidavits, he also disclosed more about
his relationship with Congo and the SNPC: he said he’d known
Sassou Nguesso since 1974, he rented office space to the SNPC in
Paris, he acted as an SNPC oil broker and international
relations consultant and he organized crude-backed loans for it.
For the loans he received commissions of 0.375 percent.
Ollivier was involved “in the cross-border manipulation
through which Congo’s assets have been concealed and
dissipated,” Donald Steven Schwarzkopf, an advocate for Dechert
LLP who represented the Elliott unit, said in an affidavit to
the Hong Kong court.
Ollivier denied the allegations in his affidavit to the
court, saying he had “not conspired in any way” to prevent the
Elliott unit from recovering its debts. In an interview he
called the accusations “rubbish.” An Elliott spokesman declined
to comment.
In the end, Congo settled out of court with Elliott.
Ollivier says that was his idea. On top of the fees Ollivier
made, he came out of it with a Congolese diplomatic passport, he
says, an honor he’s been awarded in a few African countries.
They’re all legal, he says.
Ollivier also says he lobbied lawmakers in the U.S. and
U.K. in favor of legislation banning vulture funds, so named
because they allegedly prey on poor countries. Sassou Nguesso
paid Ollivier $1.3 million between March 2007 and September 2010
to lobby U.S. officials for debt relief for Congo, among other
things, Justice Department records under the Foreign Agents
Registration Act show.
He was lobbying for Congo just as Italian oil major Eni was
looking at new projects off the country's coastline — in a deal
that Ollivier was helping to shape. In April 2009, Eni's local
unit signed a production-sharing contract with Congo’s oil
ministry. One condition: the Rome-based company had to commit to
transfer a 25 percent share to a company of the government’s
choice, Eni said. The contract gave the Italian producer a 90
percent stake in the block; the other 10 percent was held by the
SNPC.
Ollivier says ensuring that another company could get a cut
in the block and then finding the Och-Ziff venture, New Age
(African Global Energy) Ltd., were his doing. He says he advised
Sassou Nguesso that Congo needed a third party to help ensure
Eni wasn’t inflating costs, as any single operator might be
inclined to do to increase its own share of the profits.
“I told the president that for this field it would be a
good thing to have a barking dog which would create a lot of
pressure on Eni and will control that cost,” Ollivier says. A
grin spreads across his face.
Eni declined to comment specifically, saying only that it
“operates in full respect of the economic interests of the state
as defined in the agreements signed.”
New Age had sprung out of Och-Ziff’s 2008 foray into
Africa, when it formed a joint venture with Palladino Holdings
Ltd., a company controlled by South African businessman Walter
Hennig with natural resource projects and property in several
African countries.
The venture’s two African Global Capital funds controlled
66 percent of New Age at the outset, as they and other
shareholders paid $140 million toward the startup’s launch,
according to an internal Och-Ziff memo. The funds’ investment
committee, which gave the final approval on all deals, was led
by Michael Cohen, Och-Ziff’s London-based head of Europe, Middle
East and Africa, the memo said.
AGC “has effective control of the company and each
investment decision is subject to the firm’s approval,” it said.
Cohen, who has since resigned from Och-Ziff, declined to
comment.
“We’re obviously very close to Och-Ziff as we are with all
of our shareholders,” New Age CEO Steven Lowden said in a phone
interview. “They are a highly valued shareholder. They know the
equity space, they know the oil and gas space.”
“Everybody wins. Congo gains a good partner, who pays me by
giving me some shares. It's a puzzle you put together. The
problem is to have all the pieces of the puzzle.”
Three months after signing with Eni in 2009, the oil
ministry told the company that it had selected New Age,
according to Eni. After a year of verifying New Age’s
credentials, Eni transferred the 25 percent stake, it said. New
Age paid Eni $53 million, according to a 2011 prospectus of the
venture when it was considering a Toronto Stock Exchange
listing.
That came to little more than a third of the stake’s net
present value of $142.5 million, based on projections of future
earnings, according to an estimate by Calgary-based petroleum
consulting firm McDaniel & Associates, cited in the New Age
prospectus. That valuation is based only on reserves found in
the first of three fields, not in the Nene Marine field, which
wasn’t producing then, nor the third field.
Eni said in the e-mail that the payment wasn’t based on
value and rather, was simply to reimburse the company for its
costs. McDaniel declined to update the figures.
Marine XII continues to show enormous promise. Eni says the
probable reserves are now 5.5 billion barrels of crude. Nene
Marine, one of the three fields found in Marine XII, started
producing in January, with output expected to plateau at 140,000
barrels a day, according to Eni. Chief Executive Officer Claudio
Descalzi said in June that the company planned to invest $1.5
billion in Congo.
While it’s too early to say definitively, Marine XII could
double Congo’s oil output and make the country a more important
location for Eni, David Thomson, senior analyst with energy
research company Wood Mackenzie in Edinburgh, said in an
interview.
“This could be absolutely transformational,” Thomson said.
“The success at Marine XII reaffirms Congo as being core to
Eni.”
New Age awarded Ollivier a 6.3 percent stake in the block,
which he converted into a 2.4 percent direct stake in the
company, according to corporate records filed in Jersey, where
it is registered. That stake is worth $15 million, based on New
Age’s total worth of $619 million, according to a financial
statement for last year. New Age also paid Palladino, the South
African partner, $13 million for the “active and time-consuming
role” it played in completing the Marine XII transaction,
according to Palladino.
“Where is the conflict of interest?” asks Ollivier, getting
up and pacing into the faint light pouring through the open
double doors. “Don’t you pay your broker? Everybody wins. Congo
gains a good partner, who pays me by giving me some shares.”
New Age has “at all times conducted its business in
accordance with the highest ethical standards and all local and
international legal requirements,” according to a letter from
its lawyers, Clyde & Co., in London.
Though Ollivier says he’s now trying to forge an energy
agreement between three major emerging-market nations, deals
such as Marine XII may be becoming rarer.
Middlemen are less useful in today’s Africa, where more
transactions are done through big corporations. Almost half the
continent’s countries have a stock exchange. African stocks have
rallied 13 percent in the last two years, outperforming global
emerging-market equities by a factor of more than four. African
issuers last year sold a record $16 billion of international
bonds. Nations including Senegal and Zambia are using low
borrowing costs in dollars to fund infrastructure from roads to
power projects.
Ollivier “had a key position,” said Olivier Longchamp of
the Berne Declaration, which researches and campaigns for
transparency in the commodities trade. “He is a kind of symbol
that sums up the way deals used to be made.”
He’s still a consultant to Rosatom, “providing
consultations on realizing several projects abroad,” the Russian
nuclear company said in an e-mailed response.
Ollivier says he’s also focusing more time on the
Brazzaville Foundation for Peace and Conservation, which he
helped found last year to act as a conflict resolver. He
recruited England’s Prince Michael of Kent, the Queen’s cousin,
as its patron. It will have the added bonus of allowing its
members to use it as a networking platform, he says. Ollivier’s
work to promote peace is well documented, Prince Michael said in
an e-mailed response to questions.
Ollivier says that as he looks back on his career, a key
principle stands out:
“One rule counts: I’m not here to judge anyone. It’s just
family. Family, you don’t judge. Friends, you don’t judge,
either. You cannot judge. Who are you to judge?”
After a few more exchanges, the interview is over. Ollivier
accompanies a reporter out to the gravel driveway, then steps
past a life-size brass bulldog beside the heavy wooden front
door and across the threshold, out of sight. —With David
Kocieniewski, Jesse Westbrook, Tom Schoenberg and Dave Michaels,
Michael J. Kavanagh and Paul Burkhardt
For more, read this QuickTake:The Resource Curse
To contact the author on this story:
Franz Wild at fwild@bloomberg.net
To contact the editors on this story:
Antony Sguazzin at asguazzin@bloomberg.net
Anne Swardson at aswardson@bloomberg.net
Ana Monteiro at amonteiro4@bloomberg.net