Bula report wrong - Stanley

Jim Stanley possesses a well-thumbed copy of the telephone book-sized report written by the Government-appointed inspector Lyndon MacCann, the main finding of which is that, in effect, he defrauded his company out of shares worth £2.5 million.

Mr MacCann travelled to Russia, Sweden and South Africa while preparing his report. He had inspectors appointed in Jersey to interview the owner of the St Saviour corporate services company which was at the heart of the matters into which he was inquiring. The British Department of Trade and Industry appointed an inspector to inquire into matters in that jurisdiction. Formal interviews were conducted with 35 people and requests for information made to a further 54 but, according to Mr Stanley, the inspector got it wrong.

"If you ask people about me, I don't think you'll find anybody who would describe me as stupid and I would have to be stupid to do what he says I've done."

Mr MacCann found that Mr Stanley was "at all material times" the beneficial owner of the British Virgin Islands company, Mir Oil Development Ltd. The company received 101 million Bula shares as part of a deal Mr Stanley negotiated in 1995 between Bula, Mir Oil, and a Russian company, KMNGG. At the time Mr Stanley was chairman and chief executive of Bula.

Mr Stanley says it is not the case that he owned Mir Oil when negotiating the deal. Around the time he was introducing the proposal to the Bula board, he gave Mir Oil to Craig Bond, the son of the disgraced Australian tycoon, Alan Bond. He did this to create the structure needed for the deal, he says.

According to Mr Stanley, KMNGG and Mr Bond had an understanding whereby Mir Oil would get a share of KMNGG's rights to the oil field, in return for Mr Bond finding the finance for developing the field. Mr Stanley then negotiated with Mr Bond that Bula would pay Mr Bond about £2.5 million in Bula shares and provide the finance for developing the oil field, in return for a share of Mr Bond's involvement with the oil field. Mr Bond, who wanted his involvement in the deal to remain a secret, was given Mir Oil by Mr Stanley.

The inspector showed that about £660,000 sterling which was received following the sale of more than 27 million Bula shares by Mir in late 1996 and early 1997, went to Mr Stanley, members of his family, or creditors of Mr Stanley. The former chairman does not dispute this, but says the funds were placed under his control after Mr Bond so instructed the Jersey corporate services com pany which handled the shares sale.

"The money was given as part-payment of a debt due from another business venture," Mr Stanley says. He will not expand as to what this venture was, other than that it was in Russia. He says Mr Bond had his own reasons for not wanting the funds from the transaction going through any bank accounts with his name. "If there is any confusion about all of this then it is because Craig Bond wanted confusion." Right from the start, Mr Stanley says, the Australian was adamant that his involvement in the Bula/Mir/KMNGG deal must remain secret.

During a lengthy interview in his office in a run-down former Soviet ministry building in central Moscow, Mr Stanley outlined his version of the controversial deal. It is the first time he has given his version of events, as he refused to meet with Mr MacCann, despite the existence of a High Court order that he should do so.

The background to the deal was the opening up of opportunities in Russia for Western resources companies following the collapse of the Soviet Union. Former state companies undergoing privatisation had licences for oil fields but no capital, and were looking for Western partners. Mr Stanley, from about 1993, began to spend time in Russia, searching for a lucrative deal.

In 1994 he negotiated a deal with a company called the Russian Corporation. This company was believed to have an agreement with another Russian company, Aki-Otyr, concerning a potentially lucrative oil field in western Siberia. The deal went ahead. The principal figures in the Russian Corporation were Alexander Marichev and his wife, Tatiana Kirillova, and they were appointed to the Bula board.

As part of the deal Bula would have first call on any other oil deals the Russian Corporation might get involved with in Russia. Mr Stanley says he knew Mr Marichev and Ms Kirillova had an understanding with KMNGG, concerning another Siberian oil field for which KMNGG had the licence. For this reason he never made any approach to KMNGG. It would have been wrong to cut across his Russian Corporation partners. "Then Craig Bond came forward and said he had an agreement [with KMNGG] and it turned out he had."

Vladimir Tokarev is a Russian geologist who was involved with both Aki Otyr and KMNGG. According to Mr Stanley, it was Mr Tokarev who came to an agreement with Mr Bond. "I don't know what Craig Bond brought to the deal and I don't want to speculate." By this time - early 1995 - difficulties had emerged concerning the Russian Corporation's agreement with Aki Otyr. There were disputes between Bula and the Russian Corporation directors over money. Mr Tokarev, as a director of Aki Otyr, would have known about these problems and may not have wanted to get involved in another deal with the Russian Corporation, Mr Stanley says.

For whatever reason, Mr Stanley says he found himself discussing a deal with Mr Tokarev which would involve Mr Bond. In order to "create a structure" for the deal, Mr Stanley offered Mr Bond the use of a shelf company he owned. This was Mir Oil, a company which was being managed by Sue Neil, the owner of Chamonix Corporate Secretaries Ltd.

Another KMNGG executive, Nikolai Bogatchev, has said that when negotiating the deal, his company dealt with no-one except Mr Stanley and that the Russians had believed Mir was an offshore Bula company introduced by Mr Stanley for tax reasons. Mr Stanley strongly rejects this contention and says Mr Bogatchev was not involved in the negotiations, and that Mr Tokarev supports his, Mr Stanley's version of events.

A number of people gave evidence to Mr MacCann that they had believed at the time the deal was being negotiated, that Mir Oil was a Bula company. Mr Tokarev gave a confused account to the inspector of how he came to meet Mr Bond. Mr MacCann stated in his report that he found much of Mr Tokarev's testimony evidence "unconvincing". Mr MacCann said there were legal reasons why the Mir/KMNGG agreement should not have been signed at the time it purportedly was, and that an examination of the computer disc in the Bula office in Dublin used by Mr Stanley's son, Brendan, showed forms identical in layout to the one purportedly signed between Mir and KMNGG.

Mr Stanley says a number of people used the office which was described to the inspector as being Brendan's.

When Mr Stanley presented the deal to the Bula board in early 1995, it wanted to know the name of the beneficial owner of Mir. Mr Stanley wrote a letter to the board in which he stated that neither he nor any related party owned the company. One of the reasons underlying the board's concern was that Mr Stanley had been asking the company solicitors about his obligations under the related party regulations. However, Mr Stanley says that this was because Mr Bond had wanted Mr Stanley's son, Brendan, to front as the owner of Mir Oil.

"If I wanted someone to front for me do you think I would discuss it with the company solicitor?"

Pressed by the Bula board, Mr Stanley told it Mir was owned by Charles Ellis, a South African businessman. "I phoned Ellis and he agreed. I told him there would be a few Bula shares in it. He was at me all the time looking for deals," Mr Stanley says. He claims Pat Mahony, the then Bula finance director and the current managing director, "knew right from the start that Ellis was a nominee". Mr Ellis, he says, did not know who he was fronting for.

Mr Ellis has denied knowing anything about the deal or ever having been involved in any Russian oil agreement. His evidence was accepted by Mr MacCann. Mr Mahony says it was not the case that he had been told Mr Ellis was a front for the true owner. He also rejects Mr Stanley's claim that the current management is intent on incriminating him. "On foot of the MacCann report we have to take certain action, but we are much more interested in going forward."

In April 1997 Mr Stanley resigned from Bula. At the time it was emerging that a statement issued in October 1996 concerning test well results from the western Siberian oilfield at the heart of the Bula/Mir/KMNGG deal, were incorrect. A modest oil flow had been announced whereas in fact only insignificant amounts of oil had been found. Mr Stanley says he resigned because of pressure from the institutions, and that he believed other resignations were to follow. He also says that at the time of his resignation, he believed his boardroom colleagues had dismissed allegations which were being made against him concerning the false test well report.

"I would not have resigned otherwise. I have said to them that if I had known they were going to start a witch-hunt, I would never have resigned. The last thing you do in a situation like that is resign."

He strongly denies that he had any involvement in the drafting of the false well report. Mr MacCann, in his report, finds that Willie Donachie, a Bula technical consultant, prepared the false report at the request of Mr Stanley and Tim Howell, the former Bula technical manager. Mr Donachie believed the false report was needed to give Bula extra time to raise funding. In the months following the false announcement, 27 million Bula shares were sold by Mir Oil. At the time the share price was steadied by the announcement.

The sale of the 27 million shares was organised by Mr Stanley. He says he became aware that a party was looking for "large batches" of Bula shares. He contacted Mr Bond and got his consent, and then proceeded to organise the sale. "I remember because he was travelling at the time and he was very difficult to contact." Because of the number of shares involved, he says, they were sold at a reduced price.

Despite all the evidence against him Mr Stanley says he is confident his legal action to have Mr MacCann's findings overturned, will be successful. "If I didn't think my chances of overcoming MacCann were excellent, I would not be doing it." Legal arguments will be made against the findings of the report, but the substance of the controversy will also be addressed, he says. He does not know if Mr Bond or Ms Neil will give evidence. "I haven't asked them."

Mr Stanley says it is not true that the evidence against him is overwhelming. "It is not the case that everyone is saying black and I am saying white. The people who are positive for me are buried [in the report]. I think he was directed to people who were against me."

Mr Bond made approaches through his solicitors to the Dublin courts during Mr MacCann's investigations, but never met with the inspector. Likewise, Mr Stanley never met with Mr MacCann, despite a High Court order that he do so. The fact that he is now technically in contempt of court is a "disincentive" to his returning to the State, he says, and he has not been back for almost a year. However, he says that any attempt to activate the contempt issue will trigger an appeal to the European Court of Human Rights.

Mr Stanley says he wanted to meet with the inspector and offered to do so informally. "He could have asked me for pointers." However, Mr MacCann had only been prepared to meet with him in the Irish embassy in Moscow, to be interviewed under oath. "My legal advice was not to meet him." Assurances to do with Mr Stanley's right to silence and related matters were sought, but not granted.

When the controversy first broke there were many reports in the media speculating about Mr Stanley's whereabouts, but he says his contact numbers were always known by his former Bula colleagues. He says Mr Mahony used the Moscow offices which Mr Stanley still uses, on a number of occasions when he was in Russia on Bula business in recent years. Bula, he claims, never had any difficulty if it had wanted to contact him.