Agents of a mining company owned by an Israeli diamond-trading billionaire are alleged to have offered a $12 million bribe to secure iron ore mining rights in the Republic of Guinea, according to a sworn statement from the Federal Bureau of Investigation.
The revelation emerged from a fast-moving grand jury investigation that came to light this week when Frédéric Cilins, 50, identified as an agent of BSG Resources Ltd., was arrested in Florida on Sunday. Cilins said he was authorized by his mining company client to pay for the destruction of records implicating the company in foreign bribery, according to the affidavit filed Monday by FBI Special Agent Peter Kilpatrick.
The Justice Department did not identify BSG Resources, but official records cited by anti-corruption campaigners Global Witness show Cilins acted for the company in Guinea and helped negotiate the mining rights discussed in the affidavit.
The grand jury investigation convened in Manhattan in January is examining suspected money laundering and Foreign Corrupt Practices Act violations in a region of Guinea where BSG Resources operates a multi-billion-dollar iron ore mining project. BSG Resources is owned by Israeli Beny Steinmetz, who comes from a wealthy diamond trading family and has a long history of doing business in some of the most corrupt places in Africa.
In his affidavit, Kilpatrick revealed extensive FBI surveillance of Cilins, including the covert recording of his conversations by telephone and face-to-face with an unnamed cooperating witness, described as the wife of a Guinean official who has since died. The witness was identified by Global Witness on Tuesday as Mamadie Conté, one of the four wives of former dictator Lansana Conté, who died in 2008 after 24 years in power.
The bribes described by the FBI appeared to have been part of a notorious deal in Guinea, in which BGR Resources received the mining concession from Lansana Conté for free, after the government had taken the concession back from the Anglo-Australian miner Rio Tinto Ltd.
BSG Resources two years later flipped a 51 percent stake in the concession to Brazilian miner Vale SA for $2.5 billion.
On its website, BSG Resources, which is based on the British island tax haven of Guernsey, says it has held iron ore mining tenements in the southeastern Simandou region of Guinea since 2008 and has targeted an annual production rate of 50 million to 70 million tons.
In a public statement this week, BSG Resources reiterated denials made in November of corruption in its Guinea transactions. The company said it was not aware of any allegations against BSG Resources employees - though it did not mention agents.
“BSG Resources has over 6,000 employees and operates in 12 countries globally, creating value and prosperity for stakeholders. We are not aware of any allegations against any of our employees,” the statement said.
Cilins has worked for BSG Resources as an adviser, according to Global Witness. Powerscourt Group, the company’s public relations firm in London, said today that the company would not be answering questions about the Cilins matter.
The Cilins arrest appeared to send shock waves through a key commercial partnership for the company. Brazil’s Vale SA — one of the world’s largest iron ore producers - said Tuesday it was “deeply concerned” by the allegations of corruption by its joint venture partner and would cooperate with U.S. and Guinean authorities, according to Reuters.
Officials in the Guinean capital of Conakry have hailed Cilins’s arrest as a boon to local investigations of BSG Resources.
“The State Ministry for Justice of the Republic of Guinea thanks American law enforcement agents for the conduct of this operation,” the ministry said in a statement from the presidency’s press office that was carried by local media. The actions of the U.S. “show that the United States remains vigilant in the fight against corruption.”
Following elections in 2010, the newly installed government of Alpha Condé began reviewing mining contracts, including the Simandou deal, reportedly with financial support of billionaire philanthropist George Soros.
BSG Resources is one part of Steinmetz’s privately held conglomerate BSG Investments Ltd., which is also involved in real estate, diamonds and jewelry production and investments.
According to the FBI affidavit, the unnamed cooperating witness, believed to be Mamadie Conté, told Kilpatrick that while her husband was still in office, she was visited by Cilins and others who said they represented the unnamed company and asked that she prevail upon her husband to help them win permission to do so.
“Cilins offered the [cooperating witness] $12 million to be distributed to the [cooperating witness] and ministers or officials within the government of Guinea who might be needed to secure the mining rights if all went well after their introduction to” the witness’s husband, Kilpatrick said in the affidavit.
Kilpatrick also described five contracts and other documents memorializing commissions, payments and partnerships between the cooperating witness, a subsidiary of Cilins’s client company and a local holding company that were contingent upon winning permission to mine in the Simandou region.
Cilins is charged with offering the cooperating witness between $1 million and $6 million to permit him to destroy the documents.
He is being held by the U.S. Marshals in advance of a bail hearing scheduled for Thursday before U.S. Magistrate Judge James R. Klindt in Jacksonville, Fla.
A spokeswoman for the U.S. Attorney’s office for the Southern District of New York said today that her office anticipated that Cilins would appear before a judge in the district in the near future.
Correction: This story has been corrected to reflect that FBI Agent Kilpatrick signed an affidavit and did not give a deposition.
The Cilins case in the Middle District of Florida is 13-mj-01087 and the Southern District of New York it is 13-mj-975.
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