Alfren ex-oil executives banned from running company for 14 years

FTSE-250 company once valued at £2.6 billion with operations across the Middle East collapsed in 2015

Crude oil storage tanks. Nick Oxford / Reuters

Former Alfren boss Osman Shahenshah and his chief operating officer have each been banned from running a UK company for 14 years for failing to declare their financial interest in deals involving the collapsed oil exploration company.

Afren, once valued at £2.6 billion on the FTSE 250, went bust in July 2015 after an executive pay scandal and a cash crisis triggered by slumping oil prices. The independent upstream oil and gas company had operations across Africa and the Middle East before it went into administration.

Mr Shahenshah, 56, the London-based former chief executive, and Mr Shahid Ullah, 59, the Texas-based ex-COO, also face money laundering and fraud charges in London.

The former executives failed to declare their interest in a series of high-value transactions which led to their disqualification as directors, the UK Insolvency Service said on Wednesday.

In one instance in 2013, Alfren paid $300 million (Dh1.1bn) to a joint venture partner that resulted in a 15 per cent fee payable through an agreement with a British Virgin Islands company.

The BVI company was controlled by the two directors and their families, the Insolvency Service said.

Mr Shahenshah and Mr Ullah failed to tell Alfren’s board about the agreement or the $45m fee, which handed Mr Shahenshah $9.2m. Mr Ullah received $7.9m and other Alfren employees pocketed $8.2m, the Insolvency Service added.

_____________

Read more

_____________

The former directors engaged in a series of “cloak and dagger” transactions after Afren’s shareholders capped bonuses and “excessive” benefits packages for senior executives, the Insolvency Service said.

David Brooks, group leader at the Insolvency Service, accused the men of negotiating “secret benefits” following the cap.

Mr Brooks said the lengthy disqualification period “underlines the gravity of directors breaching their fiduciary duties”. The disqualifications prevent Mr Shahenshah and Mr Ullah from forming, managing or promoting a company in the UK until 2032.

The directors were sacked in October 2014 over unauthorised payments related to Afren's Nigeria business dealings, the Financial Times reported at the time. Afren's shares dropped months later after the oil group admitted it had overstated the potential of an Iraq oil field.

The men are to stand trial in September over fraud and money laundering charges related to a two-year investigation by Britain’s Serious Fraud Office.

Mr Shahenshah faces two counts of fraud by abuse of position. He is also accused of taking money from one of Afren’s Nigerian oil partners Oriental Energy Resources “knowing or suspecting that it was criminal property, namely the proceeds of fraud”. Separately, he faces a charge of paying $8.2m from the offshore vehicle to former Afren staff.

Mr Ullah faces four similar charges.

After the charges were read out in court in September 2017, the men indicated that they would plead not guilty and were granted unconditional bail.

Mr Shahenshah’s solicitor Steven Gentle did not immediately respond on Wednesday to a request for comment. Mr Ullah and his lawyer could not immediately be located.