The US authorities have arrested a man in Florida in connection with the controversial acquisition of mining rights in Guinea by Beny Steinmetz Group Resources (BSGR), according to a US court document and a press statement from the Guinean government.
Without naming BSGR, yesterday's indictment - seen by Global Witness - says that a federal grand jury corruption investigation is under way into "potential violations of the Foreign Corrupt Practices Act" and money-laundering.
According to the indictment Frédéric Cilins - who has worked as an adviser to BSGR - was arrested on April 14 with $20,000 of cash at Jacksonville airport in Florida. He is charged with: "tampering with a witness"; "obstruction of a criminal investigation"; and "destruction, alteration, and falsification of records in a federal investigation". The charges for tampering and destroying records each carry a maximum penalty of 20 years in prison.
While BSGR is not named in the indictment, a statement issued the same day by the Guinean government - and published on the Guinean website guinee7.com - says that Mr Cilins' arrest relates to the "circumstances surrounding the acquisition of mining titles in the Republic of Guinea by the BSGR group". Furthermore, the indictment refers to the company at the centre of the grand jury investigations as "the Entity", while specifying that this "Entity" had obtained rights to Simandou in 2008 that had earlier been stripped from another company. Only one company fits the description of the "Entity": BSGR.
BSGR did not reply to questions e-mailed by Global Witness Tuesday morning relating to the arrest of Mr Cilins and other allegations. In e-mails sent last year, the company declined to meet with or answer questions from Global Witness regarding how it obtained its mining rights in Guinea. It has also declined to comment to Reuters news agency in relation to Mr Cilins' arrest.
BSGR obtained exploration licences for blocks 1 and 2 of the iron-rich Simandou mountain range - that is, half of the total concession area - in 2008, soon after they were confiscated from mining giant Rio Tinto. BSGR paid nothing for the rights to Simandou and sold 51% of its stake in 2010 for $2.5 billion to the world's largest iron ore producer, the Brazilian company Vale. Of this sum, $500 million was paid out immediately, with the remainder to be paid in stages. Even allowing for the $160 million that BSGR says it invested in Simandou and a neighbouring concession, the profit was immense. The Guinean government's entire annual budget in 2010 amounted to just $1.2 billion.
BSGR struck these agreements under former regimes - first, during the 24-year rule of the late dictator Lansana Conté and then under a period of often brutal military rule from December 2008. Longstanding opposition figure Alpha Condé was elected President two years later and, pledging to fight against corruption, launched a review of past mining contracts. The review has, among other matters, raised questions over alleged corruption linked to the Simandou deal and the way in which BSGR obtained its blocks.
BSGR has denied all allegations of corruption and said that it is committed to transparency, saying in a press release of 25 March this year that it "acquired its exploration and mining rights in Guinea after a fully transparent and legal process". In the same statement, BSGR also denounced the Guinean government as "illegitimate" and said the mining review process was biased and contrary to the Guinean constitution.
The 17-page US indictment alleges that Mr Cilins tried to pay "the former wife of a now-deceased high-ranking official in the Government of Guinea" to hand over documents relating to the Simandou deal - with a view to having the documents destroyed. The documents are being sought for a federal grand jury corruption investigation into "potential violations of the Foreign Corrupt Practices Act... relating to bribes of officials of a former government of the country of Guinea for the purpose of obtaining valuable mining concessions".
The "former wife" referred to is, according to a source familiar with the affair, Mamadie Conté, one of former President Conté's four wives.
According to official documents relating to a review of mining contracts in Guinea, Mr Cilins was an adviser to BSGR. In a letter to the Vale-BSGR joint venture (VBG-Vale BSGR Guinée) on 30 October 2012, the Technical Committee for the Review of Mining Titles and Conventions laid out the findings of investigators hired by the Guinean authorities, asking for the joint venture's reaction. The letter put forward the finding that Mr Cilins was "promoting the interests" of BSGR in Guinea, notably in relation to Simandou. The Committee also put it to Vale-BSGR that Mr Cilins was promised a substantial bonus if he succeeded in getting hold of the rights to Simandou for BSGR. BSGR, for its part, told the Technical Committee in a 26 December response that Mr Cilins "assisted or represented BSGR in meetings, which he helped organise, with the Minister of Mines" and that he "provided logistical assistance to BSGR for its establishment in the country". The company denies, however, that he was involved in negotiations for blocks 1 and 2 of Simandou and says that Mr Cilins stopped working for BSGR in 2006.
The indictment details the contents of five documents that Mr Cilins sought to obtain, describing a series of contracts according to which five million dollars and a share of proceeds from Simandou would go to the "former wife" of the "high-ranking official". The contracts involve complicated arrangements between multiple companies.
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One of the documents, entitled "Commission Contract" and dated 27 February 2008, was cited at length. It said that the "former wife"'s company "commits... to taking all necessary steps to obtain from the authorities the signature for the obtaining of the aforementioned blocks [of the Simandou mine]". It continues that the other party to the deal:
"proposes to distribute the commission... as follows:
The amount of two (2) million for the ["former wife"'s company] with attribution of one hundred (100) USD already paid out as an advance. The remainder of the amount will be distributed among persons of good will who may have contributed to facilitating the granting of the aforementioned blocks".
A separate contract of 3 August 2010, also referred to in the indictment, details an agreement under which a holding company would pay the "former wife" $5 million should it see a "positive outcome" for its operations in Guinea. The indictment says that this company did indeed wire funds to a bank account in Florida controlled by the "former wife".
The allegations surrounding the arrest of Mr Cilins have raised serious questions for BSGR over possible corruption surrounding one of Africa's most important mining concessions. If BSGR wishes to put an end to this controversy it should publicly address these questions in detail.
