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Monday, 29 October 2012 00:00
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PIB: Group kicks against agencies receiving gifts

Some petroleum industry stakeholders, under the aegis of Spaces for Change, at the weekend, expressed worries over some sections of the latest draft of the Petroleum Industry Bill (PIB), which tried to empower the two regulatory agencies to receive gifts of money, or other property, from third parties.

Specifically, Sections 33 (1), S. 63 (1) and S. 139 (1) of the PIB stated that the Upstream Petroleum Inspectorate (UPI), Downstream Petroleum Regulatory Agency (DPRA) and National Petroleum Assets Management Corporation could receive gifts.

But these experts argued that such gift-giving might not only upset the pursuit of transparency and accountability urgently needed in the oil sector, but that gift cultures were also fraught with ambiguities and intrinsic susceptibility to corruption.

Understanding gift practices within a regulatory context, they pointed out, would allow Nigerian lawmakers in particular, policy leaders, stakeholders and the general public to pursue an appropriate strategy for embedding transparency, corporate responsibility and institutional accountability in the PIB.

According to Sections 33, 63, and 139 of the PIB, “The Inspectorate/Agency/ Corporation may accept gifts of money or other property upon such terms and conditions as may be specified by the person or organisation making the gift provided such gifts are not inconsistent with the objectives and functions of the Agency under this Act.

“Nothing in subsection (1) of this section or in this Act shall be construed to allow any member of the Board or staff of the Agency to accept gifts for their personal (1) use. (2) Nothing in subsection (1) of this section or in this Act shall be construed to allow any member of the Board or staff of the Agency to accept gifts for their personal use.”

Executive Director, Spaces for Change (S4C), Mrs Victoria Ibezim-Ohaeri, one of these experts, while commenting on this, said that the PIB did not specify situations in which such gift-giving to the UPI, DPRA or the Corporation might be allowed.

Beyond the fractional obligation on the giver to specify the terms and conditions, she said that the bill was silent on the criteria for conceptually understanding the logic of the gift, adding that one-part obligation ostensibly heaped the onus of proving motive on the giver, while absolving the receiving agencies from a corresponding standard of accountability.

Ibezim-Ohaeri said: “Although the proviso to S. 33, 63 and 139 prohibits members and staff of the named agencies from accepting gifts for their personal use, the PIB overlooks the practical difficulty in distinguishing between gifts to the agency per se, and that of its officials, leaving the door open to the complex maneuvers, obligation and reciprocity inherent in gift-giving.

“Gift exchanges have historically been used to facilitate or cover up blatant graft, and more recently, have evolved into a frequent tool for bribery, tax evasion and money laundering. Consequently, many countries have been forced to draft new code of ethics for officials; overhaul gift regulations as part of their anti-corruption wars, and fix institutional loopholes that help mask gift-giving for illegal purposes.

“Without doubt, there is a clear consensus among both industry regulators and stakeholders that anti-corruption must undergird the proposed oil sector reforms. The PIB is widely perceived as a reflection of the government‘s 12 year effort to introduce sweeping reforms in the oil and gas industry, with a view to making the sector less corruption prone, more transparent and accountable, whilst strengthening the institutional organs,” she stated.

What is gift
In trying to explain the nature of gifts, Ibezim-Ohaeri added: “Gifts might include cash or assets given as presents, and political or charitable donations to a corporation and, or its officials. In some cases, it involves acts of hospitality, which often include meals, hotels, flights, entertainment or participation in sporting events or other activities.

“Outwardly, giving gifts appear harmless, as they are deeply rooted in cultural norms and familial ties across jurisdictions. In short, gifts are essential to nurturing and nourishing social relationships.

There is nothing intrinsically wrong with giving or receiving gifts or hospitality, as long as they are not bribes, are not intended to be bribes, and cannot be perceived as bribes. Entertaining and gifts are an important and enjoyable part of business and are essential in many cultures. Charitable donations help the world. (Global Infrastructure Anti-Corruption Center (GIACC))

“What distinguishes gifts from a bribe or an illegal gratuity is the motive, which is quite difficult to prove because unmasking the real motive behind a gift is largely subjective. Bribery is defined as the offering, giving, receiving or soliciting anything of value to influence an official act. (Corruption and Fraud Audit Consortium (CAFAC), Ghana.

“On the other hand, illegal gratuities are very similar to bribery schemes except that there is not necessarily intent to influence a particular business decision (CAFAC). The United States Illegal Gratuities Statute prohibits any gifts given or received "for or because of any official act performed or to be performed. Put another way, the Illegal Gratuities Statute was intended to proscribe behavior that did not rise to the level of a bribe, but nonetheless gave the appearance of impropriety (CAFAC),” added.

The Power to Receive Gifts under the PIB
Ibezim-Ohaeri noted that whereas the Bill empowered regulatory agencies to receive gifts, the provisos to sections 33, 63 and 139, prohibit staff and agencies from receiving gifts for their personal use. S. 32 (2)(e) recognized gifts as a source of funding for the Inspectorate and the DPRA.

She stated that in practice, gifts or donations to agencies were often aimed at carrying the goodwill of officials that worked there, which often had the effect of prompting officials to do something, or perform an act in a particular way.

She said: “Philanthropy - including gifts - is used as a form of public relations, or advertising or promoting a company‘s image or brand, through cause-related marking and high-profile sponsorships.

“Noting that the Bill failed to impose controls or limits to the agencies‘ gift-receiving mandate, it would be safe to assume that monetary and realty gifts from individuals and institutions are welcome, including from the entities which they regulate. While the prohibition against receiving gifts for personal use is a proactive measure, the big question then is, ―is a gift distinctly made to an agency capable of influencing its officials to perform acts that confer any undue advantage or benefits to the giver?

“From the standpoint of reasonableness, would a gift to the Inspectorate for instance, by a company bidding for an oil prospecting license be said to be free from any colourations of reciprocal exchange?

“Is there any probability that Inspectorate‘s receipt of a gift by an entity it regulates may spur the relaxation of its regulatory oversight towards the giver‘s environmental felonies? These questions, among numerous concerns, propel the need to lower the incentives for
corruption, check abuse and instill greater transparency in the gift-receiving mandate.

“Ordinarily, this seemingly broad discretionary power to receive gifts may not be sufficient to invite a red flag, but the historical deep-seated corruption in the Nigerian oil industry calls for the adoption of drastic measures to close all avenues, including the prohibition of practices that stimulate corporate impropriety.

“Absent necessary controls, gifts may present an entry barrier to unscrupulous companies planning to obtain inefficient subsidies, monopoly benefits and regulatory laxness in the future. Not only that, pays-offs cloaked as gifts may find their way into the named regulatory agencies, bringing about a situation where contracts and concessions are not awarded to the most efficient bidders.

“Aware of the profound corruption risks that belie gifts and donations, corporations across the globe are broadening the scope of their laws and policies on facilitation payments, corporate hospitality, charitable donations and gifts. “While each matter will turn on its own facts, key considerations for assessing gifts and others are whether these are reasonable in the circumstances, for a purely business or professional purpose, and clearly documented. For instance, the UK Department for Energy and Climate Change strictly requires all gifts valued at above €140 to be documented and published on its website.

“The UniThe Walmart case in the US has shown the potential for class actions against company directors and senior executives for failing to take steps to implement systems to prevent bribery and corruption, or for failing to act appropriately when such issues came to light,” she stressed.

Gifts and corruption: Global trends
The Executive Director of Spaces for Change disclosed that dozens of state and senate hearings and investigations into the BP Deep-water Horizon Oil Spill lamented the unspeakable abuse laden in the gift culture.

She said that there was a close connection‖ that existed between the agency‘s inspectors and oil and gas industry employees to the extent that the MMS became inseparable from its regulated entities.

This closeness, which the Washington Post described as cozy ties to industry, according to her, was alleged to have precipitated MMS‘s lax efforts to oversee oil and gas production.
The co-chairman of the National Commission on the BP Deepwater Horizon Oil Spill and Offshore Drilling also affirmed that while the IOC internal enquiries defended gifts-giving and receiving as normal etiquette and custom, external enquiries criticized the practice as inherently fraught with expectations of reciprocation and obligation.

Accordingly, critics demanded an overhaul of the IOC, “including the elimination of gift exchanges with its inherent biases, preferences, privileges, exceptions and exemptions.”
On the strength of the findings regarding how cozy closeness led to the relaxation of vigilance, which facilitated the Gulf disaster, Secretary Salazar‘s Order 3299 disbanded and separated the components of MMS into three agencies, one focused only on collecting revenue, another on offshore management, and the third on safety and environmental protection.

The PIB and the legitimization of gifts:
From Total Ban Vs. Partial Prohibition, Ibezim-Ohaeri said: “It is settled that gifts constitute a big source of worry to countries determined to wage war against corruption. Combating corruption has become an international priority with all governments maintaining a vigilant stance to weed out the corruption that has historically been endemic in international business practice.

“Countries are now responding to gift-related corruption either through an outright ban on gifts and hospitality or thorough a partial prohibition.

“Disturbingly too, the PIB‘s failure to establish necessary ethical and transparent monitoring controls that would limit abuse has very grave implications for the proposed oil sector reforms, in particular, the objectives of transparency and accountability promotion, which the Bill seeks to achieve.

“Also, the Bill does not require individual and corporate bodies interacting with the regulatory agencies and corporation to adopt and adhere to an appropriate corporate code of conduct,” she noted.

Total ban
The Executive Director of Spaces for Change stated: “Gifts raise questions about motives and interests. Marcel Mauss observes that while gifts are ―in theory voluntary, disinterested and spontaneous, they ―in fact‖ involve ―obligation and economic self-interest.

“Echoing similar sentiments, the United States Senate Committee investigating the Olympic scandals, the Special Bid Oversight Commission attributed the bribery scandals to exchanges of gifts in a ―kinship‖ and ―familial‖ network that breeds hypocrisy, dependence, and obligation.

“Implicit in the Special Oversight Commission‘s recommendations however, was a view that the IOC should eradicate the gift culture on the grounds that it is inherently corrupt.
“In a PIB-focused e-conference convened by Spaces for Change on July 14, 2012, industry experts advocated for a total ban on gift-giving. Because of the difficulty in drawing a line between a gift and a bribe, a blanket ban on receiving gifts by any of the agencies is not only appropriate, but will go a long way in inspiring confidence in the proposed reforms.

“In other words, it was recommended that the newly-proposed entities: UPI, DPRA and the Corporation should eschew offering, making, soliciting or receiving any gift or hospitality to or from any person or organization who has had or could have any connection with the organization‘s business.

“Such a blanket ban appears to be a vital option considering The United States Senate Committee investigating the Olympic scandals, the Special Bid Oversight Commission attributed the bribery scandals to exchanges of gifts in a “kinship” and “familial” network that breeds hypocrisy, dependence, and obligation. Implicit in the Special Oversight Commission’s recommendations however, was a view that the IOC should eradicate the gift culture on the grounds that it is inherently corrupt.

“It would be recalled that a plethora of independent private and public investigations into the oil sector activities disclosed horrendous levels of malfeasance entrenched in Nigeria‘s oil sector operations.

“The Deep-water Horizon explosion investigative reports vividly illustrate the risks associated with allowing regulatory agencies to receive gifts or property donations by third parties, especially entities that they regulate.

“With these examples in mind, allowing such sensitive (gift-receiving) provisions to stay in the PIB has strong potentials to open the door to an era of graft and corruption that would run out of control,” she added.

Partial prohibition
The other side of the argument, she said, was that a total prohibition would broadly criminalize a range of harmless gift-giving and undercut an individual's legitimate right to curry general goodwill, keep doors open and try to influence government.

Thus, being able to set limits or strict controls on receiving gifts, Ibezim-Ohaeri explained, might be a more practical way of countering inherent risks, stating that  the Global Infrastructure Anti-Corruption Center (GIACC) recommended the setting up of a benefits register disclosing the details of any gift or hospitality given or received.

She said: “The benefits register should be publicly accessible and routinely inspected by the organization‘s management and the appointed auditors. Towards the establishment of an anti-corruption corporate culture, a benefits register should be supported by the development and the implementation of a publically-accessible gifts and hospitality policy for promoting ethical behaviour on the part of officers and employees.

“Such a policy must specify very clear guidelines, conditions and circumstances in which political and charitable contributions, facilitation payments, gifts, hospitality and expenses, offered to agencies and its officials may be made. It is also imperative for staff of the named agencies to undergo periodic trainings on how to undertake market-focused risk assessments and due diligence on supply chain and third parties.

“For the PIB to worth its salt, the government, the National Assembly who would soon commence intense legislative deliberations on this Bill must show glaring determination to raise the stakes against corruption in the oil sector.

“Should the National Assembly opt for partial prohibition, such arrangement must be backed by strict corporate communication procedures detailing how the public, including other oversight legislative mechanisms can independently access, track gifts offered and accepted by officials of those agencies from receiving gifts, but also by clearly specifying the agencies‘ conditions and criteria for receiving political and charitable contributions, gifts, hospitality and related expenses.

“Another important aspect is to ensure an effective documentation and communication procedures/processes for disclosing gifts received. Annexed to this is the establishment of a secure, confidential and accessible means for internal or external parties to raise concerns about such gifts, and to provide suggestions for improvement of bribery prevention procedures and controls and for requesting advice. For these speak up‘ procedures to be effective, there must be adequate protection for those reporting concerns.

“Finally, and most importantly, Section 4 of the PIB requires all agencies and companies established under the Act to be bound by the Nigerian Extractive Industries Should the National Assembly opt for partial prohibition, such arrangement must be backed by strict corporate communication procedures detailing how the public, including other oversight legislative mechanisms can independently access, track gifts offered and accepted by officials of those agencies,” she stressed.