US oil conglomerate ExxonMobil is the subject of a pending criminal investigation in connection with allegedly corrupt dealings between merchant banker James Giffen and top government officials in Kazakhstan. Assistant US Attorney Peter G. Neiman, the lead prosecutor in the Giffen case, revealed during an April 4 court hearing in New York that the government was scrutinizing the oil company's role in a complex web of transactions that prosecutors say violated the Foreign Corrupt Practices Act (FCPA).

Formally, the government is focusing on transactions involving Mobil Oil Corp. in 1995-96. A 1999 merger created ExxonMobil. The oil company has maintained that it broke no laws in paying Giffen at least $51 million in fees for brokering a 1996 deal in which Mobil obtained a 25 percent stake in Kazakhstan's Tengiz oilfield for just over $1 billion.

Federal documents allege that Giffen funneled millions of dollars in fees received from Mobil, in a tangle of wire transfers, to bank accounts controlled by two senior Kazakhstani officials. [For background see the Eurasia Insight archives]. The complaint against Giffen does not name the Kazakhstani officials. Giffen pleaded innocent to charges against him on April 4.

If Mobil knowingly sent money to a foreign official in order to win business, it or its executives could be in violation of the FCPA. The penalties for such a violation include hefty fines and possible prison terms. [For background, see the Eurasia Insight archives].

Neiman's remarks in US Court, Southern District of New York were the second major development in the corruption probe since Giffen's arrest March 30. On April 3, the government filed charges against a retired Mobil executive, J. Bryan Williams, claiming that he failed to pay taxes on a $2 million kickback he took for cementing a deal between Mobil and Kazakhstan. Williams is due to surrender April 7. Giffen's trial, should it go ahead, will probably not begin until late 2003 at the earliest. Lawyers can conduct further investigation into parties' doings and knowledge before the trial starts.

ExxonMobil downplayed Neiman's comments. "We have no idea," said ExxonMobil spokesman Tom Cirigliano when asked whether the status of "subject" would mean fresh subpoenas or other official proceedings from the government. He stressed that Mobil knew of no illegal payments made or received in connection with its business dealings in Kazakhstan "We have responded appropriately to government inquiries," he continued. "We have not been advised by the government that we are a target of the investigation, nor have we received a letter saying that we are a subject."

According to two experts familiar with such investigations, if prosecutors describe an entity as a "target" of a probe, that implies that "they're going after you," while the status of "subject" is "wide open."

While it is not at all clear that Mobil will face charges, at least one legal expert thinks Neiman's language constitutes a watershed. "We now know that there is a realistic possibility that Mobil will be charged," this person said.