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Future of CDC

I am grateful for the opportunity to speak in the debate, particularly because I am not a member of the International Development Committee, although I follow its work closely. I welcome the Committee's report on CDC, which has operated in the shadows for too long and which is increasingly a subject of public concern. I am pleased to note that the issue of compliance by CDC fund managers with the Department for International Development-sponsored CDC investment code has been raised in the report, because it is an important issue. I have followed the issue at first hand after one of my constituents, Mr Dotun Oloko, came to see me about the investments of two CDC-backed funds in Nigeria, Ethos and Emerging Capital Partners. Mr Oloko's concerns have been set out in written evidence received by the Committee, so I will not detail them here. Suffice to say that Nigeria's Economic and Financial Crimes Commission reports that four of the companies in which CDC-backed funds have been invested are fronts for laundering money. That money is said to have been corruptly obtained by James Ibori, the ex-Governor of Nigeria's Delta state. Mr Ibori, who has previously been convicted twice in the UK, is on trial here again, this time for alleged money-laundering offences involving CDC investee companies. CDC's investment in such companies raises many concerns. As hon. Members will recall, CDC's investment code requires that all businesses in which CDC's capital is invested must"““comply with all applicable laws and international standards intended to prevent bribery and financial crime.””" Under these rules, companies with links to a politically exposed person, such as Mr Ibori, his relatives and close associates, should have been subject to an enhanced due diligence process. Why did the funds fail to pick up on these links, even after they had been brought before a Nigerian court and were widely publicised in print and in the electronic media? A simple internet search would have revealed the details of corruption associated with these CDC investee companies. I also want to know whether procedures were in place, both within the funds and within CDC, to ensure compliance with money laundering laws in the UK, the US, Jersey, South Africa and Mauritius—all countries where the funds and CDC are variously registered. For example, here in the UK, the Money Laundering Regulations 2003 require CDC to implement procedures to forestall and prevent money laundering. If, as the evidence from this case suggests, CDC has failed in that respect, will there now be a broader review of CDC's portfolio with regard to money laundering risks? My constituent Mr Oloko's own investigations revealed another stunning fact: a discrepancy of several million pounds between the amount one of CDC-backed funds claims was paid for its investment in a Nigerian fertiliser company, and what was actually received for the shares in Nigeria. The fertiliser company is reported—alleged—to be a front for Mr Ibori. Yet this appears to have gone unnoticed by CDC and, once it was informed, unreported too. In future, will CDC be required to report such information, if there are reasonable grounds to suspect that a crime has been committed? There are other causes for concern. CDC continues to be an investor in a bank whose director has been jailed and in other indicted investee companies. Those companies include one where a former CEO is facing criminal charges in Nigeria as well as civil action in the UK and another which Private Eye magazine has accused of tax evasion and corruption. DFID's response has been equally worrying. When concerns were raised, did it seek further information from Mr Oloko? No, it did not. Did it bring in independent investigators? No, it did not. All it has done is to ask the funds and CDC—the very institutions whose actions need investigation—to give assurances that no wrongdoing occurred. That is not sufficient to reassure the public. A key question, still to be answered, is whether CDC passed on the information that it received from Mr Oloko to the police, as required under the Proceeds of Crime Act 2002. We do not know, because CDC refuses to say. When I met the director of the Serious Fraud Office earlier this year, he told me that he learned about the concerns directly from my constituent, Mr Oloko. CDC's Nigerian investments are not the only causes for concern. CDC also invested in funds that have backed companies accused of human rights abuses, such as Anvil Mining, and of profiting at the expense of the poor. For example, in Uganda the CDC-backed power distributor Umeme has hiked electricity prices to the point where many poorer Ugandans have been forced to steal electricity from the grid; Umeme's manager is reported to have called for their execution. DFID officials have argued that the measure of CDC's contribution to relieving poverty is the profitability of the companies backed by its funds, which is not a serious argument. While investment is certainly needed to relieve poverty, it is both simplistic and irrational to assume that any investment, even if conditioned by environmental and social safeguards, automatically translates into positive impacts on poverty reduction simply because that investment generates growth. Before I was elected to this House, I worked for Oxfam for more than 10 years. I have seen some of these development questions at first hand. Many of the funds in which CDC invests make extensive use of tax havens. I listened with interest to the right hon. Member for Gordon (Malcolm Bruce) on the complications and issues around tax havens, which is a matter of concern. Those funds are using tax havens, and although the right hon. Gentleman explained that that is not always to avoid paying taxes, it still raises concerns.