Compliance Evangelist

As reported by the BBC, Beny Steinmetz was found guilty, in a Swiss court over the weekend for bribery and corruption in the obtaining of mining rights in Guinea. Steinmetz is the founder and President of BSRG.  Yesterday, I detailed the contracts between BSRG and Mamadie Touré which purported to show the amounts of money paid, the schedule of payments and wiring instructions. Today we look at the allegations made at trial, the defenses raised, the verdict and its aftermath.

Allegations

According to the New York Times (NYT), the allegations “centered on alleged payouts of millions of dollars to a former wife of an ex-president of Guinea, Lansana Conté, who died in 2008. The trial exposed the shady and complex world of deal-making and cutthroat competition in the lucrative mining business.” The corruption was engaged in by the Beny Steinmetz Group (BSRG) which paid $8.5 million 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 Blocks 1 and 2 of 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. Unfortunately for Steinmetz, President Conté died shortly after the bribes were paid.

Defenses

If this trial had been a comedy, you could not have a more laughable defense. Steinmetz lawyers put on what is affectionately referred to as the “Dog Bite Defense”. It is:

  1. My dog didn’t bite you.
  2. Even if my dog did bite you, it’s because you provoked him.
  3. Even if my dog did bite you, you really aren’t injured.
  4. My dog didn’t bite you because I don’t have a dog.

So how does the Dog Bite defense come into play here? According to the BBC, Steinmetz “insisted he had only been an “adviser” or a “spokesperson” for the company that bears his name. When confronted with details of the alleged bribery, as well as transcripts of conversations, his frequent response was: “I don’t know. I wasn’t involved and I don’t know the details.”

When confronted with the contracts agreeing to pay Mamadie Touré, Steinmetz claimed in a 2013 New Yorker article that “the documents that were discussed in Jacksonville did not prove anything, he said-they were forgeries”. When presented with a photograph of a signature BSGR representative, Asher Avidan on the contracts, Steinmetz said the signature “was identical but dismissed it as “a simple Photoshop.”” The problem with this defense is that you do have to admit that (1) the contracts exist and (2) the payments were made or promised. Indeed, when the prosecutors “produced details of a conversation (recorded by the FBI in 2013) in which one of Steinmetz’s co-defendants appeared to try to persuade Ms Touré to get rid of evidence of corruption, mentioning a certain person “up there” at BSGR who made all the decisions. “Who’s ‘up there’?” asked the prosecution.” Steinmetz replied, “I don’t know who is up there, may be God, but not me.”

Their next set of I don’t have a dog defense was that President Conté died shortly after the bribes were paid. Of course, President Conté, who died shortly after the bribes were paid, had awarded BSRG the mining concession before he died. (“How do you bribe a ghost?” a defense lawyer asked the court.) The final defense was that Mamadie Touré was not married to President Conté. Here Steinmetz’s lawyers claimed Steinmetz had never “paid a cent:” to Ms. Touré, and even if he had, she was never actually legally married to President Conté, and therefore under Swiss law did not qualify as a bribable public official. Not even sleeping with him. They added, “She is a lobbyist. Like a thousand others.”

Court Ruling

The Court made short shrift of Steinmetz defenses. According to an FT article, Judge Alexandra Banna rejected that Steinmetz’s arguments, the article stated, “Each defendant had a specific role to play. Benjamin Steinmetz, in his capacity as the effective head of BSGR, was the main beneficiary of the operation,” the Geneva Criminal Court said in a statement. “All important decisions were taken with his agreement and he personally intervened in several stages of the bribery operation.”” Mining Weekly quoted the ruling judge for the following, ““The fact that Steinmetz wasn’t aware of all details doesn’t change a thing,” the judge said in a ruling that took two hours to read out. “Steinmetz had his hand on the payments and was able to oversee the bribery process.””

Steinmetz was sentenced to five years in jail and fined ordered to pay a 50 million Swiss franc ($56.5 million) penalty.

Reaction

According to the BBC, Agathe Duparc of Swiss NGO Public Eye, which focuses on big Swiss businesses and multinationals based in Switzerland, said the case had “starkly revealed the inner workings of international corruption, against the backdrop of one of the poorest countries in the world”. Moreover, “While the trial had sent a strong signal to the commodities sector, it also showed that Switzerland should tackle legal loopholes that allowed such “predatory practices.” The FT further quoted the NGO, saying “The verdict must not, however, eclipse how difficult it remains for both Swiss and foreign prosecutors to investigate such complex cases,” it said. “Although Switzerland has not served as a haven of impunity today, it must take the necessary proactive measures to avoid being one tomorrow.””

In a Press Release Public Eye stated, “The court case, which Public Eye has been closely following, has starkly revealed the inner workings of international corruption, against the backdrop of one of the poorest countries in the world. It has illustrated how the abusive use of tax havens facilitates the concealment of illegal activities in countries where governance and regulations are weak.” It went on to state, “Public Eye commends the determination of the Geneva court, which refused to be fooled by the smokes and mirrors and evasion tactics of the defence team, no matter how slick. This verdict sends a strong signal to the entire commodities’ industry, a sector which is highly exposed to corruption risks.”

Tomorrow we will look at the Vale saga in this sordid tale.

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