Michael S. Goldberg, a partner in the Houston and New York offices of Baker Botts. (John Everett)
In February, Houston’s Baker Botts trumpeted the news in a press release that its Houston-based client, Cobalt International Energy, had learned from the Department of Justice that the federal agency had closed an investigation without any enforcement action into allegations about the company’s Angolan operations and corrupt practices.
By mid-March, there was new, possibly less welcome, news for Baker Botts’ client—and eventually other oil companies doing business in the African country.
In a filing with the Securities and Exchange Commission this week, Cobalt disclosed that that federal agency has initiated an “informal inquiry” about Cobalt’s payments for a technology center in Angola.
In its SEC disclosure, Cobalt noted that, along with BP, it had in a 2011 agreement to secure rights to explore Angola’s southern-African continental shelf for oil and pledged to meet requirements to “make certain social contributions” to Sonangol, the Angolan state oil group, including for the operations of the technology center.
“We believe our activities in Angola have complied with all applicable laws, including the [Federal Corrupt Practices Act] FCPA, and we will cooperate with the SEC’s inquiry in the future,” the Cobalt disclosure to the SEC stated.
Michael Goldberg, a Baker Botts partner in Houston who continues to represent Cobalt, declined to comment about the investigation.
The prior investigation into Cobalt by DOJ lawyers and the one disclosed in the company’s most recent SEC filings are unrelated, according to Zorka Milin, a senior legal adviser for Global Witness, a nonprofit advocacy group aimed at rooting out international corrupt practices,
Her organization conducted an investigation three years ago and found that Cobalt, BP and business partners were “funneling” $350 million to the Angolan research center, but those companies were not able to confirm that the center existed or operated, Global Witness reported.
Disclosure of the new SEC investigation highlights the need for an extraction disclosure rule — which President Donald Trump killed by signing a resolution, Milin said.
That rule called for oil and gas companies to report what they pay to foreign governments. Had Trump not signed the resolution killing it, the rule on the books, which the Obama administration finalized in June 2016, would have required publicly traded oil, gas and mining companies to start disclosing all payments they make to foreign governments to the SEC.
“These kinds of suspect payments would have been disclosed under the Dodd-Frank Section 1504 oil transparency rule. This would have alerted the relevant authorities, investors and communities in resource-rich countries to the potential corruption risks. The rule was developed by the Securities and Exchange Commission (SEC), but was overturned by the Trump administration in February. The Dodd-Frank law is still in place however, and the SEC is required to re-issue a new rule to implement it,” Milin said in a statement.