The announcement that Bula Resources is no longer pursuing its former chairman and managing director, Mr Jim Stanley, brings to an end the company's involvement in Russia, which began in 1993.
During the four years to 1997, the company lost approximately £20 million (€25 million) in two disastrous deals from which it has walked away with nothing. Since 1997, the fallout from the deals has also cost the company dearly in legal fees and management time.
In 1993, Mr Stanley was Bula's main representative seeking opportunities in the Russian oil and gas sectors. In October 1994 Bula signed an agreement with a company called the Russian Corporation, aimed at Bula getting an option on 51 per cent of the share capital of another Russian company, Aki-Otyr.
Aki-Otyr's principal assets were licences to produce oil from a number of fields in Western Siberia. The consideration involved a cash payment by Bula of $5.5 million (£5.09) to the Russian Corporation, along with 90.3 million Bula shares, an allotment equal to more than 5 per cent of the company's total shares.
Shareholders voted for the deal in November 1994. Three Russian Corporation representatives were appointed to the Bula board.
During 1995 and 1996 difficulties began to emerge in relation to the Russian Corporation's title to the 51 per cent stake in AkiOtyr. The fiasco was settled with the resignation of the three Russian directors from the Bula board, and the return of 60.9 of the 90.3 million Bula shares allotted. In total, the deal is estimated to have cost Bula £8 million.
Meanwhile, a second and ultimately more expensive disaster was being put in place. In March 1995 Mr Stanley told Bula finance director Mr Pat Mahony that a second deal was available, again involving another Western Siberian oil field.
A Russian company, KMNGG, had the production licence and Bula could buy into it via offshore companies Mir Space and Mir Oil Development Ltd, which reputedly already had an agreement with KMNGG. The proposal was that Bula would become involved by the allotting of 101 million Bula shares to Mir Space and would take on the funding obligations in relation to developing the Siberian oil field. The board agreed the deal in March 1995. Again problems developed.
The Russian Corporation representatives on the Bula board were unhappy with the new deal and raised questions as to who owned the offshore companies. Mr Stanley, as well as other directors, denied any involvement. Some members of the board were later told who the alleged owner was, but refused to tell the Russian directors. The alleged owner was a South African, Mr Charles Ellis.
A well test result announced by Bula in October 1996 was subsequently discovered to be incorrect. The following month 27.8 million Bula shares were sold by Mir Oil.
In April 1997 Mr Stanley resigned and the following month Bula announced that the October 1996 well result was incorrect. In September 1997 Bula made a successful application to the High Court, freezing the remaining shares owned by Mir Oil. In October 1997 the Tanaiste, Mr Harney, appointed inspector Mr Lyndon MacCann to investigate who owned the Mir companies.
Mr MacCann's inquiries took him to South Africa and Russia. Inspectors were appointed to assist in Britain and in Jersey. However, Mr Stanley refused to meet Mr MacCann on the inspector's terms. Mr Ellis said he'd never had any dealings with Mir Oil, Mir Space, or KMNGG, following which an Australian national, Mr Craig Bond, swore an affidavit saying he owned the offshore companies. Mr Bond, son of the disgraced Australian tycoon, Mr Alan Bond, also refused to meet Mr MacCann.
In his report Mr MacCann found Mr Stanley had benefited from the sale of the Bula shares held by Mir and that he was at all material times the owner of the offshore companies.
Mr Stanley, who has been involved in a range of business dealings in Russia since 1993, moved there permanently around the time of his resignation from Bula. He is believed to be still involved in oil deals there.
