Beny Steinmetz case shows how hard it is to prove corruption

Israeli billionaire Beny Steinmetz has been handed a five-year sentence and a CHF50 million (almost $56.5 million) fine over suspected corrupt business practices in Guinea. He is appealing the decision. Keystone / Martial Trezzini

Here’s a tip for anyone seeking to bribe their way into a multibillion-dollar deal. If your name is say, Beny Steinmetz, it might be wise not to draw attention to yourself by being associated with a company named, for example, Beny Steinmetz Group Resources.

This content was published on February 5, 2021 - 10:50
David Pilling, Financial Times

That was precisely the situation that Mr Steinmetz, a 64-year-old diamond and minerals magnate, found himself in last month when he faced charges in a Swiss court of corrupting foreign agents and of money laundering. His lawyers said he was merely a roving ambassador for the company that bore his name. If there were improprieties, he was unaware of them.

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The court did not believe that. It found Mr Steinmetz guilty, handing him a five-year prison sentence and a fine of $56 million. Mr Steinmetz is appealing.

The rights in question relate to two blocks of the Simandou iron ore concession in the west African country of Guinea. In December 2008, just two weeks before the death of Lansana Conté, then Guinea’s president, rights to the blocks were awarded to BSGR. Rio Tinto had previously been stripped of ownership by presidential decree. It hardly mattered that BSGR had no experience of exporting iron ore. Within 18 months, the company had sold a 51% stake to Vale, a Brazilian mining company, for $2.5 billion. BSGR had paid nothing for the blocks (though it said it had invested $160 million).

The mystery was this. What could have induced Conté to make a gift of so profitable an asset? The answer, according to the prosecution, was Mamadie Touré, the youngest of Conté’s four wives. Prosecutors alleged that BSGR had paid Ms Touré bribes worth nearly $8.5 million. Mr Steinmetz’s lawyers maintain that Ms Touré was a chancer and not Conté’s wife at all, meaning she fell outside the definition of a corruptible official.

Signed documents detailed payments. A tape obtained from a Federal Bureau of Investigation wiretap featuring Frédéric Cilins, a French national working for BSGR, revealed an attempt at a cover-up. In the recording, Mr Cilins is heard pressing Ms Touré to destroy the documents. Mr Steinmetz’s lawyers say the documents are fake, which begs the question why anyone would go to such lengths to have them vaporised.

Whatever the rights and wrongs surrounding Simandou — and there are surely more wrongs than rights — a few conclusions can be drawn.

Hard to prove

One is how difficult it is to prosecute such cases. There had been other investigations into Simandou, but nothing much had come of them. A US grand jury probe into potential breaches of the Foreign Corrupt Practices Act did result in a two-year sentence for Mr Cilins, who pleaded guilty to obstructing a criminal investigation. The Swiss finally took up the case because Mr Steinmetz, an Israeli citizen, had been living in Geneva and some of the alleged bribes had gone through Swiss banks. For that, they are to be commended.

The world tends to learn about the most egregious cases of corruption, such as the systemic pillaging of Malaysia’s 1MDB fund which resulted in a 12-year sentence for former prime minister Najib Razak. But most cases never see the light of day, or result in a deferred prosecution agreement where the company or defendants pay a fine but admit no guilt. Many are hidden from view inside a network of shell companies and a welter of bank transfers facilitated by lawyers, bankers and lobbyists — many of whom work in financial centres such as London, Paris and New York.

Corruption is hard to prove. Even Jho Low, the alleged mastermind of the 1MDB scandal, remains at large.

In 2018, the UK Financial Conduct Authority dropped a criminal probe into Credit Suisse for its alleged role in the $2 billion “tuna bond” hidden loans scandal involving Mozambique. The Swiss bank has claimed that three of its bankers, who pleaded guilty in a US court to handling bribes, were acting on their own.

Dan Gertler

Most recently, as a Swiss court was handing Mr Steinmetz his sentence, another businessman who had made billions from African minerals — Dan Gertler — was celebrating a presidential reprieve from Donald Trump. Mr Gertler, who trades mineral assets in the Democratic Republic of Congo, has been given a special year-long licence to do business in dollars — a lifeline. He has been accused of corruption and sanctioned but never prosecuted.

Under the Magnitsky anti-corruption act, the US Treasury had in 2017 sanctioned Mr Gertler for that right for what it called “opaque and corrupt” deals. Mr Gertler says he acquired mineral rights through legal channels and not through favours from former president Joseph Kabila.

In court, everything is hard to prove. In the court of public opinion, some things are clearer. In countries without a strong legal system it is all too easy for officials, elected or otherwise, to sell off their nation’s treasure on the cheap. Unscrupulous buyers are 10 a penny.

Civil society in resource-rich countries should press above all for transparency in such transactions. Legal authorities in rich ones must stamp out the routine — one might say systemic — practices that facilitate the looting of entire nations.

As an addendum it is worth noting: not a single ounce of iron ore from Simandou has ever been exported.

Copyright The Financial Times Limited 2021

© 2021 The Financial Times Ltd. All rights reserved.

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