Bribery claims tarnish Beny Steinmetz’s African treasure

Four years ago, Beny Steinmetz’s mining company was toasting what one industry veteran called the “best private mining deal of our generation”. After wresting rights to half of Simandou, Africa’s richest iron-ore deposit, from rival miner Rio Tinto, BSG Resources had struck a $2.5bn deal to bring in Vale of Brazil as its partner.

Today, BSGR’s pursuit of riches in Guinea lies in ruins. This week a two-year inquiry in the west African nation concluded that there was “precise and consistent evidence establishing with sufficient certainty the existence of corrupt practices” in the way BSGR won its rights. The government is expected to move swiftly to follow the inquiry’s recommendations and cancel the company’s rights.

For the billionaire scion of one of Israel’s great diamond families, who has built a formidable reputation in African mining, Simandou has started to look like an albatross. BSGR’s Guinean dealings have triggered corruption investigations in the US and Switzerland, where Mr Steinmetz lives. For the first time, evidence published by the inquiry this week appears to put Mr Steinmetz himself at the centre of an alleged bribery scheme and subsequent cover-up.

BSGR has denied wrongdoing throughout the Guinean inquiry into the corruption allegations, first revealed in the Financial Times in 2012. BSGR says “it will prove the allegations raised in Guinea’s rigged and illegitimate process are false”. “International arbitration will provide a fair and transparent forum that finally exposes these fabricated claims to the due process of law that will allow us to establish the truth,” it adds.

Mr Steinmetz’s representatives did not provide answers to questions from the FT about his role in what the inquiry says was a scheme beginning in 2006 to bribe the wife of the dictator who granted BSGR its rights. Nor did they respond to questions about his alleged involvement in efforts last year by a former BSGR intermediary to destroy contracts purporting to lay out the bribery scheme before they fell into the hands of the US prosecutors.

At the heart of a corruption investigation, which now spans three continents, is the account given by Mamadie Touré. According to BSGR, it is “a wholly incredible and unsupported version of events”.

Ms Touré was the fourth wife of Lansana Conté, a dictator who for 24 years ruled a nation rich in minerals, mired in penury and ranked by Transparency International among the most corrupt countries. When the military seized power upon Conté’s death in 2008, Ms Touré moved first to neighbouring Sierra Leone, then to Florida.

When the FBI got wind that she had been receiving allegedly corrupt payments related to a mining deal in her homeland, she became a co-operating witness in its investigation, which proceeded hand-in-hand with Guinea’s own probe into past deals. Under US law, it is a crime to pay or offer anything of value to a foreign official to win business and to move funds derived from corruption into the US.

In a sworn statement prepared in the US and published by the Guinean inquiry, Ms Touré says Mr Steinmetz was present, along with other representatives of the company, at meetings she arranged with her husband to lobby for the company to be granted mining rights. Ms Touré says in her statement that Mr Steinmetz discussed her lobbying efforts with her and was personally involved in striking agreements under which she would be given cash and shares to advance the company’s interests.

In her statement, Ms Touré says one of her meetings with Mr Steinmetz took place in June 2007. One person familiar with BSGR, who asks not to be named, says: “Beny Steinmetz looks forward to proving with passports and other evidence that he never set foot in Guinea until 2008.” This person declines to share that evidence with the FT and will not elaborate on what Mr Steinmetz did in Guinea in 2008.

If Ms Touré did intercede on BSGR’s behalf as she says, it worked. Shortly after what Ms Touré says was her initial contact with the company’s representatives, BSGR won its first Guinean iron-ore rights in 2006. In mid-2008, Conté’s government stripped Rio Tinto, the Anglo-Australian mining house, of half the rights to Simandou. Six months later, days before Conté’s death, those rights were awarded to BSGR.

BSGR paid nothing for its exploration rights, as is standard industry practice. The company says it spent $160m on preliminary work on its Guinean assets before striking its deal to sell a 51 per cent stake in them to Vale in April 2010 – a handsome return, even if only $500m of the $2.5bn sale price was payable immediately. The rest was to be paid as targets were met. But in 2011 the Guinean government ordered work on the project to stop. In October 2012, Vale said it had put the project on hold. The following April, after the corruption allegations surfaced, Vale announced in a company filing that it had suspended payments to BSGR, citing the Guinea government’s probe into the Vale-BSGR joint venture and stating that “a force majeure event under the agreement” had occurred.

Mr Steinmetz is BSGR’s main financial beneficiary but formally only an adviser to the company. He has twice been questioned by Swiss prosecutors and his Geneva home has been searched, but neither he nor the company have been charged in any of the investigations into BSGR’s dealings in Guinea.

BSGR maintains that it is the victim of a conspiracy orchestrated by Alpha Condé, Guinea’s president, “to steal our mining rights and transfer them to political allies”. It says contracts purporting to lay out bribes to Ms Touré are fakes.

Nonetheless, in March Frederic Cilins, a Frenchman who had worked as a BSGR intermediary in Guinea, pleaded guilty in New York to obstruction of justice, admitting that he offered Ms Touré up to $6m to destroy the contracts in the hope of preventing them falling into the hands of the US prosecutors who had launched a grand jury investigation into the corruption allegations early last year. What Mr Cilins had not known when he made his offer to the dictator’s widow during a meeting at a Florida airport close to her home, was that she was wearing a listening device monitored by the FBI.

The transcript of that and other conversations in French were published by the Guinean inquiry this week. In the transcript, Mr Cilins tells Ms Touré that he is speaking to her on behalf of “number one”. When she asks who that is, Mr Cilins whispers: “Beny”.

Mr Cilins adds that he consulted Mr Steinmetz, who lives in Geneva, in person before flying to Florida to see Ms Touré. Mr Cilins says that Mr Steinmetz had told him: “Do what you want, but I want you to tell me . . . ‘It’s over’. There are no more documents.’”

Those same words were included in a court filing in the Cilins case by US prosecutors, attributed to an unnamed co-conspirator referred to as “CC-1”. Now, the FBI transcripts confirm what people familiar with the case have long maintained: that CC-1 is Mr Steinmetz.

Before Mr Cilins pleaded guilty, he appears to have prepared a written version of events that contradicts Ms Touré’s account. The statement has no official heading or stamp. It carries what appears to be Mr Cilins’ signature. The Guinean inquiry published the statement along with the rest of its evidence, without revealing how it acquired it or what its purpose was. It is dated November 2012, shortly after the inquiry first put its allegations to BSGR and months before Mr Cilins’ arrest.

In this statement, Mr Cilins says Ms Touré was not the president’s wife and was neither present at meetings between the president and representatives of BSGR nor involved in arranging them. He also says he knew of no gifts or payments from BSGR to Ms Touré and that his dealings with her were limited to “the food-processing sector”. He adds that he understood that people ascribed to Ms Touré “certain supernatural powers from African culture . . . which afforded her a certain social status”.

Asked whether Mr Cilins stood by his statement, his US lawyer declined to comment. According to the FBI transcripts, Mr Cilins later persuaded Ms Touré to sign a statement that also contained denials of her role in the alleged bribery scheme. Ms Touré could not be reached for comment.

This article has been amended since its original publication to clarify the circumstances in which Vale announced the suspension of payments to BSGR.

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