hunter-s-thompsonIn a tale worthy of the famous Hunter S. Thompson maxim, that “When the going gets weird, the weird turn pro”; the tale of BSG Resources (BSGR) and the Simandou mining concession in Guinea took a very weird turn this week when it was announced that the Australian mining giant Rio Tinto had suspended Alan Davies, head of the company’s energy and minerals business unit. According to the trio Tom Burgis, Neil Hume and Jamie Smyth, writing a Financial Times (FT) article entitled “Rio suspends head of energy division after Guinea probe”, the suspension occurred this past summer “after an investigation into payments of $10.5m made to a consultant on Simandou, an iron ore project in Guinea.”

For those who may have forgotten BSGR is part of the conglomerate of Israeli diamond tycoon Beny Steinmetz, which was allegedly involved in the same project, purloining the rights to the mining site from Rio Tinto. In two further FT articles, entitled “Contracts link BSGR to alleged bribes” (the “mine rights article”) and “FBI sting says that ‘agent’ sought to have mining contracts destroyed” (the “FBI sting article”), by the triumvirate reporters Tom Burgis, Misha Glenny and Cynthia O’Murchu; there are 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 FBI sting article reported that on Sunday April 14, 2013, “Frederic Cilins held the last of a series of meetings with the widow of an African dictator to discuss what she was going to do with some sensitive documents.” Unfortunately for Cilins he “did not realise that the woman he was talking to was wearing a wire and that FBI agents were watching. As he left the meeting, the agents arrested him carrying envelopes filled with $20,000 in cash, the indictment says. That was a pittance compared with the $5m he was taped offering the dictator’s widow during what US authorities say was a two-month campaign to tamper with a witness and destroy records.”

Cilins was not convicted of any Foreign Corrupt Practices Act (FCPA) violations but for obstruction of justice in connection with his attempts to have the documents destroyed. He served 11 months of a three-year prison sentence before he was deported to his native France.

All of the above came full circle with the announcement of the suspension of Davies because BSGR is alleged to have stolen the mining rights out from under Rio Tinto. However, the contract signed by deceased President Lansana Conté was disavowed by his successor, Alpha Condé. It was then rebid and the winner was—you guessed it—Rio Tinto. It turns out that Davies may have been involved in approving the ‘payment’ made to a third party consultant. Rhiannon Hoyle and Scott Patterson, writing in a Wall Street Journal (WSJ)  article entitled “Rio Tinto Executives Are Ensnared in Probe”, said the company made “payments in 2011 to a consultant, François de Combret, a former Lazard Frères managing director who was close to senior government officials in Guinea.” The consultant “aided the company in negotiations with Guinea’s government.”

They went on to report, “On Wednesday, Rio Tinto said it had been investigating the emails since August. The company said it had notified the U.S. Department of Justice, the U.S. Securities and Exchange Commission, the U.K.’s Serious Fraud Office and the Australian Securities and Investments Commission of the emails. The company didn’t say why it forwarded the emails to authorities.” (Hint – to try and get some cooperation credit with the DOJ?)

Unfortunately for Davies, internal company emails (reviewed by the WSJ) show “that Mr. Davies sought approval for the payments to Mr. de Combret from Sam Walsh, then head of Rio’s iron-ore division. “May I please have your approval to agree a final fee with François of US$10.5m,” Mr. Davies wrote in a May 10, 2011, email to Mr. Walsh soon after Rio had agreed to pay $700 million to Guinea to secure the rights to the mine. Mr. Davies said in the email that Mr. de Combret had provided significant help in obtaining rights to mine two large pieces of the Simandou concession from the Guinea government and noted his “closeness” to Guinea President Alpha Condé. Mr. Walsh, after reviewing Mr. Davies’s request, sent an email to Mr. Albanese, then CEO of Rio Tinto, recommending that the company make the payment, subject to certain conditions. “Worth giving this a try,” Mr. Albanese replied. Mr. Walsh wasn’t reachable for comment.” So you have the Chief Executive Officer (CEO) of a major company allegedly involved in this entire decision making process.

Also ensnared in the same investigation was the Legal and Regulatory Affairs Group Executive Debra Valentine, who resigned from the company. Davies was “suspended immediately”.

I don’t think Hunter S. Thompson could have put it any weirder.

This publication contains general information only and is based on the experiences and research of the author. The author is not, by means of this publication, rendering business, legal advice, or other professional advice or services. This publication is not a substitute for such legal advice or services, nor should it be used as a basis for any decision or action that may affect your business. Before making any decision or taking any action that may affect your business, you should consult a qualified legal advisor. The author, his affiliates, and related entities shall not be responsible for any loss sustained by any person or entity that relies on this publication. The Author gives his permission to link, post, distribute, or reference this article for any lawful purpose, provided attribution is made to the author. The author can be reached at tfox@tfoxlaw.com.

© Thomas R. Fox, 2016

 

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