© Reuters. U.N. monitors accuse British oil firm of "payoffs" to Somali officials

Aug 3 (Reuters) - U.N. sanctions experts have accused

British company Soma Oil and Gas of making large payments to

Somalia's oil ministry that created a "serious conflict of

interest," some of which appeared to have been used to pay off

senior officials.

In a report to a U.N. Security Council committee, the

experts said Soma paid nearly $600,000 as part of efforts to

protect and expand an energy exploration contract it signed with

the ministry in 2013.

According to a confidential report compiled by the experts

on the U.N. Somalia and Eritrea Monitoring Group, which was

reviewed by Reuters, Soma also paid $495,000 to a lawyer who was

advising the Somali government when it was negotiating a

contract with the company. The eight-member panel of

investigators that compiled the 28-page report monitors

compliance with U.N. sanctions.

The allegations outlined in the report, which has been

submitted to the U.N. Security Council's Somalia/Eritrea

sanctions committee, triggered an investigation into Soma by

Britain's Serious Fraud Office (SFO), according to people

familiar with the situation.

The SFO has confirmed that it opened the inquiry but it has

not outlined the allegations against Soma Oil and Gas. The

company's London headquarters were searched last week.

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The U.N. Somalia and Eritrea Monitoring Group said the

evidence it collected demonstrated that the Soma payments

"created a serious conflict of interest, in a number of cases

appearing to fund systematic payoffs to senior ministerial

officials".

In its response to Reuters, Soma denied any wrongdoing,

saying the contract to the company was awarded by Somalia's

cabinet and not members of the petroleum ministry and as such

there was no conflict of interest.

Somalia's Petroleum Minister Mohamed Mukhtar Ibrahim

declined to comment.

Somalia's petroleum ministry declined to comment as the

ministry staff has not yet seen the report, according to Ibrahim

Hussein, the ministry's head of external relations.

According to the report, Soma Chief Executive Robert

Sheppard told the Monitoring Group that the payments were part

of a "Capacity Building Agreement" requested by the Somali

government. This aimed to help the ministry hire local and

foreign experts to build up geology and other oil industry

expertise, something the country lacks after decades of conflict

destroyed its state institutions.

The U.N. monitors described the capacity building programme

as "likely part of a quid pro quo arrangement", whereby the

ministry would protect the Soma contract from any negative

consequences when a panel chaired by the Somali finance ministry

began conducting a review of all its contracts.

The monitors allege these "quid pro quo" arrangements

"undermine Somali public institutions through corruption".

Soma told Reuters in an emailed statement that the U.N

monitors "fundamentally misunderstood the nature, purpose and

destination of the payments made under the terms of the Capacity

Building Agreement", and said the company has been transparent

about the programme.

Soma is chaired by Lord Michael Howard, who led the British

Conservative Party when it was in opposition and was succeeded

in 2005 by David Cameron, who is now prime minister. The company

said the SFO had told it that "no suspicion whatsoever attaches

to Lord Howard".

Soma secured an exclusive contract in 2013 to conduct

seismic surveys on 12 offshore oil and gas blocks, totalling

60,000 square km. The contract awarded Soma the right

subsequently to pick blocks it wanted to exploit.

The payments to Somalia's oil ministry totalled $490,000

over a year, according to the report. It said most of that money

was earmarked for salaries, with about $40,000 put towards

office supplies.

The report said that in December 2014 Soma transferred an

extra $100,000 to the Somali oil ministry to construct a "data

room" in the capital Mogadishu, but by June there had been no

progress on its construction and oil ministry officials either

could not account for the money or did not respond to requests

for information.

"All payments pursuant to the CBA and relating to the Data

Room were made directly to the Somali Government following

appropriate due diligence and the implementation of various

legal safeguards," Soma said, adding that it had sought

independent legal advice.

"Soma has never made payments to individual government

officials," the company said.

U.N. monitors allege that at least six officials who drew

Somali government salaries were also on Soma's capacity building

payroll, which would in some cases have almost trebled their

salaries.

The report said those officials included director general of

the oil ministry, Farah Abdi Hassan, and his deputy, Jabril

Mohamoud Geeddi. Neither official replied to several Reuters

requests for comment.

The monitors also queried why "despite the apparent conflict

of interest", Soma had paid nearly half a million dollars to J.

Jay Park, a Canadian lawyer who was acting as an official legal

adviser to the Somali government when it was negotiating its

contract with the British company.

According to the report, Soma confirmed to the monitors that

it had paid Park's firm, Petroleum Regimes Advisory (PRA), but

said it did so because the Somali government was unable to cover

its own legal fees.

"Soma agreed to the Somali Government's request to pay these

fees and did so after taking legal advice which confirmed that

it was appropriate to do so," Soma said in its statement to

Reuters.

Jay Park told Reuters, "We respectfully differ with the

suggestion of a conflict of interest", adding that the Somali

government requested Soma to pay the legal fees only after the

negotiations ended and an agreement had been signed.

(Editing by Toni Reinhold)