Editorials Opinion and Analysis
The Risk Premium
by Mimi Swartz
(Page 4 of 6)
On bad days, when negotiations appeared to be breaking down, the daily lectures about the condition of the delta turned malevolent. The militants accused their captives of at least thirty “crimes against the Ijaw gods,” which included polluting their water, stealing their money, and killing their people. “We aren’t barbarians—we will give you a fair trial and then hang you,” one of them told Spell. Once, there was a brief encounter between Nigerian navy fighters and the militants, and Spell again found himself trying to avoid the spray of automatic weapons. The militants had told him that the hostages would be used as human shields if the government attacked; if MEND couldn’t keep the soldiers at bay, though, the hostages would be shot. On another occasion, the kidnappers marched their hostages deeper into the jungle. When captors and captives finally reached a designated spot, the prisoners were lined up, while the members of MEND loaded their weapons. Some of the men began to cry, tears silently rolling down their cheeks. The militants pointed guns at the heads of a few hostages—and then collapsed in laughter at their joke.
Near the end of February, the captors invited their prisoners to a special celebration. Each prisoner was allowed to pick out fresh clothes from a stack of jeans and button-down shirts. Spell and Oswalt got massages to help them recover from severe beatings they had received a few days before. The guards asked personal questions to send back to the negotiators, who wanted proof the hostages were still alive. Spell froze for a moment when he could not remember what he had given Regina for Christmas (a camera). Finally, the militants told them that they would be released in the next few days, pending media availability. “No hard feelings,” the guards said, their lilting Nigerian inflections particularly merry. “Remember how well we treated you.”
Just a few mornings later, a boat came up the river with a CNN crew in tow. In what seemed to be a well-orchestrated move, the militants allowed Macon Hawkins to leave. Later that day, the Ijaws assembled their remaining eight prisoners and started returning their belongings. “That’s mine,” Oswalt said, pointing to a necklace he’d worn constantly on the barge. The soldier ignored him. Then he passed by Spell.
“What’s it mean?” Oswalt whispered to his friend, his eyes wide.
Spell knew. “Cody, it looks like we’re not going,” he said, and he was right. Another boat came and took everyone away but Spell, Oswalt, and Hudspith.
That night, Spell’s fear got the better of him. As he waited and waited for a dinner he thought would never come, one thought roiled his mind: No one feeds a hog before he butchers it.
The kidnapping of nine employees could not have come at a worse time for Willbros. Once a division of Williams Brothers before it relocated from Tulsa to Houston in 2000, it was a construction colossus, among the world’s largest builders of pipelines, with operations in 55 countries. It had completed seemingly impossible engineering projects across the Andes and in the Amazon basin. During World War II, Willbros built the crucial Big Inch and Little Big Inch pipelines to carry crude and refined products from the Gulf Coast to the Eastern Seaboard. Over the next few decades, it constructed pipelines across South American jungles, Middle Eastern deserts, and Alaskan tundra. By 2004, the company had more than $660 million worth of projects in the works. Willbros was Shell’s contractor of choice in Nigeria; it had been operating there since 1962. But around the time of the kidnappings, it had run into legal trouble directly related to the challenges of operating abroad.
In any large construction project, it’s the contractor that goes into a foreign country first and assumes the initial risk. In corrupt countries, this meant Willbros’ clients could adopt a “don’t ask, don’t tell” policy, while the contractor, to remain competitive, had to cultivate and assuage the locals in order to ensure that the job would progress with as few interruptions as possible. Sometimes the best-run projects can go awry: In 2004 Willbros had encountered difficulty in Bolivia. Government officials there accused the company’s Bolivian subsidiary of failure to pay “taxes” (the euphemism of choice for bribes) and falsification of documents, and they demanded more money. A Willbros internal audit revealed that, at the instruction of J. Kenneth Tillery, the chief of Willbros’ international division, the company had been engaged in a cover-up—which made Willbros vulnerable to investigations by the SEC and the U.S. Justice Department under the Foreign Corrupt Practices Act. Tillery left the company in January 2005, but for Willbros, the problems were just beginning.
Any company that does business in a corrupt country runs the risk of corrupting itself. Willbros’ internal investigation, reported in its 2005 10K filing, also revealed that, dating back to 1996, company executives had paid bribes in other countries to avoid paying taxes and had paid off judicial authorities to rule their way in foreign courts, generating the money to do so through fictitious invoices from nonexistent vendors. Although the FCPA provisions are designed to allow American companies to compete with foreign rivals, Willbros had gone too far: To win a contract in Nigeria in 2004 worth $387.5 million, Forbes reported, Willbros employees paid out about $6 million in bribes. When asked by Nigerian officials for $1.5 million more, Willbros had to borrow from an unnamed German multinational corporation, which promptly delivered $1 million in cash in a suitcase to a Nigerian-based Willbros manager, who greased the proper palms. Under the FCPA, that conduct was against the law.
In addition, investigators found that Tillery had invested in companies that then charged Willbros for goods and services. Eventually the Justice Department and the SEC launched investigations, and class-action lawsuits on behalf of shareholders followed. The value of Willbros stock dropped 30 percent. “Special risks associated with doing business in highly corrupt environments may adversely affect our business,” the 10K filing confessed, but Willbros had little choice but to continue operating in Nigeria, where 84 percent of its ongoing projects were located. It could not afford to pull out, but it was at a disadvantage against European and Chinese companies that were not constrained from participating in the routine corruption in Nigeria.
With the price of oil rising, pressure was also coming from Willbros’ major Nigerian client, Shell, to speed up work on new pipelines. Dissatisfied with Willbros’ progress, the client started withholding payments; in turn, Willbros had to reduce its spending to maintain its profit margin. One of the things it cut back on was security. Meanwhile, MEND was launching ever more violent attacks on foreign companies to pressure the Nigerian government for reform. Willbros was in the classic contractor’s bind, taking all the risk and getting squeezed from all sides: the client, corrupt officials, desperate insurgents, and U.S. watchdogs.
To keep working in Nigeria was dangerous, but not as dangerous as losing everything. As the deadline for Dark February approached, Shell removed its employees from the line of fire. Willbros did not. The company decided to take the risk. Russell Spell didn’t know it, but he was taking the risk too.
Regina Spell got the news about her husband’s kidnapping from Willbros’ human resources department. The call came on a day like any other—she had been racing around to get her daughter, Kaitlin, to a dance competition on time. The phone rang, and she saw Willbros’ name on the caller ID and didn’t think much of it. An irrepressible woman with lively blue eyes, Regina had made her peace with her husband’s occupation. She was used to managing the family alone; she and the kids had long ago stopped walking him to the airport gate because it was just too sad, knowing they wouldn’t be together again for months. In January 2006 they had dropped him off at the curb and waved. Not that she didn’t worry. Regina always made Russell call when he reached the barge, instead of when he landed in Nigeria, because that way she knew he was completely out of danger.
Now a woman she hardly knew was telling her that her husband had been kidnapped by terrorists. For fifteen minutes, Regina hid in her bedroom so that her daughter wouldn’t see her tears; then she washed her face and took Kaitlin to the competition, because she didn’t want her daughter to know anything was wrong. Regina had not had the easiest life; there had never been a lot of money, and her parents had divorced when she was 18. Life with Russell, whom she married at 22, had been good, steady, with the wolf far from the door, and Regina wasn’t going to let go without a fight. The next day, she told her children—Kaitlin was eleven, Matthew nine—what had happened and resolved to keep their lives as normal as possible for as long as she could.
This was not easy with the daily calls from Willbros and frequent bulletins from the FBI, which knew little more than she did. She faxed a couple of letters that Russell probably would never see to Willbros for approval, all the while knowing she was writing to a husband she might never see again. She spent her days watching CNN and searching the Internet for news about Russell, thinking Willbros might have missed something. Too often, she stumbled across false Web stories that said some of the men had escaped, and she imagined Russell lost in the jungle. Then the kids would come home from school, and she would cook dinner and help them do their homework. She was, she realized, just another prisoner.
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