Compliance Evangelist

As reported by the BBC, Beny Steinmetz was found guilty, in a Swiss court over the weekend for bribery and corruption in obtaining mining rights in Guinea. The corruption was engaged in by the Beny Steinmetz Group (BSRG) which paid $2m to Mamadie Touré, wife of the then Guinean President, Lansana Conté, to help it secure rights to mineral deposits back in 2007. The corruption was memorialized in contracts which specified the agreements for BSRG to make payments and transfer shares in the mine to Mamadie Touré. As the quid pro quo for these commission payments, Mamadie Touré would take all necessary steps to have BSRG awarded the rights to the Simandou deposit, which had been previously awarded to Rio Tinto. Additionally, a further $2m would be dispersed among other people to facilitate the acquisition of the rights.

Two Financial Times (FT) articles laid out the basic facts. They were Contracts link BSGR to alleged bribes (mine rights article) and ‘Agent’ tried to destroy contracts, says FBI (FBI sting article). Both articles were by the same triumvirate of FT reporters, Tom Burgis, Misha Glenny and Cynthia O’Murchu in 2013. The articles revolved around allegations that “The resources arm of Beny Steinmetz Group agreed to pay $2m to the wife of an African president to help it secure rights to one of the world’s richest untapped mineral deposits, according to documents seen by the Financial Times”. These payments were allegedly memorialized in “Copies of two contracts from 2007 and 2008, apparently signed by BSGR’s representatives in the mineral-rich west African nation of Guinea, set out agreements for the company to make payments and transfer shares to Mamadie Touré, wife of the then president Lansana Conté.”

The Australian company Rio Tinto “held the rights to the whole of Simandou, a mountain range groaning with iron ore in Guinea’s remote interior, for a decade.” But in August, 2008, the Conté government withdrew the mining group’s concession, “saying it had taken too long to develop a mine.” In December 2008, just days before the dictator’s death, the then Guinean government assigned over half the rights of Simandou to BSGR. The FT also reported, “One African mining veteran described BSGR’s sale as the “best private mining deal of our generation.”” After spending $160m developing its assets in Guinea, 18 months later, in April 2010, BSGR sold a 51% stake of its Guinean venture to Vale of Brazil for $2.5bn.

The FT also reported that after the transfer of mining rights from Rio Tinto to BSGR, another mining entity, “Vale of Brazil, the world’s biggest iron ore miner, bought a 51 per cent in BSR’s Guinea assets in April 2010. Late last year, as a Guinean government committee levelled corruption allegations against BSGR, Vale put the Simandou project on hold. Earlier this month, it suspended payments on the $2.5bn it agreed to pay for its stake.” All of this came to light when Frederic Cilnis was arrested on April 14, 2013 in Jacksonville, Florida and charged with obstruction of justice for attempting to persuade Mamadie Touré, to destroy documents which showed the bribery scheme engaged in to obtain mining concessions. Unfortunately for Cilnis, Mamadie Touré was a Cooperating Witness (CW) for the US government. At the time, BSRG admitted that it worked with Cilnis, although Cilnis was never an employee of the company.

The Cilnis Complaint detailed five separate contracts which showed the efforts of BSRG to pay bribes and engage in corruption to obtain the mining concession. In addition to the five contracts, Cilnis had Mamadie Touré sign an Attestation denying any involvement with him or helping BSRG obtain the mining rights in Guinea. Cilnis requested the CW produce original copies of the contracts and that he personally had to witness their destruction.

Protocol – 1

This contract, dated June 20, 2007, was between the CW and the Guinean subsidiary of the Entity. For her assistance in obtaining permits, the Entity’s Guinean subsidiary would transfer 5% of its shares to a company controlled by the CW.

Protocol – 2

This contract, dated February 28, 2008, stated the Entity “commits to giving 5% of the shares of stock of blocks 1 and 2 of Simadou [the mining concession]” to the CW.

Commission Contract

In this agreement, dated February 27, 2008, the CW’s company commits to “taking all necessary steps from the authorities the signature for the obtaining of the aforementioned blocks”. For this consideration, a $2MM would be made available for the distribution “among persons of good will who may have contributed to facilitating the granting of the blocks”.

Engagement Letter

This is an undated document. In it the Guinean subsidiary proposed to allow the CW up to a 5% shareholding stake in the Guinean subsidiary. There would be a further transfer of 17.65% of the capital by the Guinean subsidiary as well.

August 3, 2010 Contract

In this contract the Entity’s holding company agrees to pay to the CW the additional amount of $5MM, in two tranches. The first payment of $2.5MM was to be paid at contract execution and the second to be paid 24 months later. Interestingly, the Compliant stated that this contract “required the CW to conceal the CW’s relationship with the Holding Company, reciting that the CW and the CW’s company ‘commit herewith to make no use of the document, in any manner, directly or indirectly, and not to use this document against the [Holding Company] and/or its partner and/or its associates in Guinea or elsewhere.’”

The Attestation

In addition to the documents that Cilnis sought to have destroyed, he prepared and presented to the CW a document entitled “Attestation”. The CW signed this Attestation and copies were made. According to the Complaint, the Attestation was drafted as if it was written and prepared by the CW herself and in it were the following statements:

  1. I have never signed a single contract with the Entity, neither directly or indirectly through anyone else.
  2. I never intervened with Guinean officials in favor of [the Entity]…
  3. I have never received any money from [the Entity], neither directly or indirectly… [The Entity] never gave…any money, neither directly to me nor to anyone else on by behalf. They did not promise to pay me anything, neither to me, nor to anyone else on my behalf.

Destruction of Documents

Unfortunately for Cilnis he told Mamadie Touré several times that the documents need to be destroyed, rather urgently. He wanted to find a place to burn all of them. When Mamadie Touré suggested that she could destroy the documents, Cilnis reported that he had been instructed to see it happen in person. For the destruction of the documents, the Complaint notes that Cilnis offered the CW $1MM. $200,000 of this total would be paid now and “$800,000 at a later date.”

Tomorrow we will look at the allegations made in the Swiss court against Beny Steinmetz for which he was found guilty.

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