By Scott Patterson and Rory Jones
Allegations of corruption have shadowed Beny Steinmetz ever
since he outmaneuvered one of the world's largest mining companies
in 2008 for some of the richest iron-ore deposits on Earth in the
West African nation of Guinea.
On Monday, Israeli authorities arrested Mr. Steinmetz -- one of
Israel's richest men -- on suspicion of paying bribes to Guinean
officials, furthering a six-year-long probe involving authorities
in the U.S., Africa, Israel and Switzerland. Mr. Steinmetz, 60
years old, who hasn't been charged, was put under house arrest
after posting 100 million Israeli shekels ($26 million) in cash and
property as bail, Israeli authorities said.
Mr. Steinmetz's arrest marks a dramatic turn in the saga
surrounding a lucrative iron-ore vein in Guinea's remote Simandou
mountain range. Its green-forested hills hold some of the world's
largest and highest-quality deposits of iron ore and have lured
mining companies competing to exploit China's booming need for that
key ingredient for making steel.
Last month, Rio Tinto PLC, the British-Australian mining giant
that Mr. Steinmetz outmaneuvered in 2008, fired two top executives,
saying they were involved in a $10.5 million payment made to a man
closely connected to Guinea President Alpha Condé. The former
Guinean mining minister who Rio Tinto has alleged colluded with Mr.
Steinmetz's mining company, BSG Resources Ltd., was charged last
week in U.S. federal court with laundering proceeds from bribes in
a separate mining case.
In 2014, the Guinea government stripped BSGR of its rights to
Simandou and accused people connected to the company of paying
bribes to a previous regime. It was a major blow for Mr. Steinmetz,
who was trying to expand beyond the business that made his fortune
-- selling African diamonds, including to his biggest client,
Tiffany & Co.
BSGR issued a statement on Monday, again denying the bribery
allegations.
"It is BSGR's strong belief that these allegations of bribery by
the Government of Guinea are not only baseless, but are a
systematic attempt by the Government of Guinea to cover up the
endemic corruption which has blighted this country for a number of
years," a BSGR spokesman said in the statement.
A spokesman for the Guinea government declined to comment.
Mr. Steinmetz's arrest heightens the stakes for a host of
companies, executives and consultants who have participated in
commercializing the rights to Simandou.
The U.S. Department of Justice has been investigating claims of
bribery and obstruction of justice related to Simandou and
presented evidence to a grand jury, The Wall Street Journal has
reported. The Justice Department declined to comment.
Prosecutors in Switzerland, where businesses tied to Mr.
Steinmetz are located, have also been questioning witnesses with
knowledge of the Simandou bids. Swiss authorities declined to
comment.
While involving many players, the feud over Simandou boils down
to Rio Tinto and BSGR.
Rio Tinto, the world's second-largest producer of iron ore, held
the rights to Simandou from the 1990s. But in a surprise move,
Guinea revoked its rights in 2008, saying the giant firm wasn't
moving quickly enough to develop the resources.
Guinea handed half those rights to BSGR after the firm carried
out a three-year, $165 million exploration program. BSGR then
struck a $2.5 billion deal for Brazilian mining giant Vale SA,
which focuses on iron ore, to buy a 51% stake in its Guinea
asset.
The Guinea government later alleged that BSGR won its rights by
paying bribes to the wife of now-deceased Guinean President Lansana
Conté.
Mr. Conté's widow, Mamadie Touré, is cooperating with U.S.
officials, according to people familiar with the investigation. An
attorney for Ms. Touré didn't respond to a request for comment.
In April 2013, U.S. investigators arrested Frédéric Cilins, a
French citizen, after he met with Ms. Touré in Florida. They
charged him with obstructing the U.S. investigation. Mr. Cilins
pleaded guilty in a Manhattan federal court but didn't agree to
cooperate with investigators. He was released in January 2015.
Simandou is also the source of a mounting scandal at Rio Tinto,
which made great efforts to win the deposits back after BSGR and
Vale took them.
Last month, Rio Tinto dismissed two top executives for their
alleged role in making $10.5 million in payments to a consultant in
Guinea, former Lazard Ltd. managing director François de Combret.
Rio Tinto fired its energy and minerals chief, Alan Davies, and its
head of legal and regulatory affairs, Debra Valentine, following a
review of internal company emails detailing the payments to Mr. de
Combret.
Mr. de Combret had been helping Rio Tinto negotiate with the
Guinean government to retain the Simandou iron-ore concession,
according to the emails, which were reviewed by The Wall Street
Journal. Attempts to reach Mr. de Combret were unsuccessful.
The emails show Mr. Davies in 2011 asked permission from the
company's then-iron-ore chief, Sam Walsh, to make the payments to
Mr. de Combret. Mr. Davies said in the email that Mr. de Combret's
services "were of the most unique nature," including helping to
facilitate communications with Guinea's president, Mr. Condé.
Mr. Walsh later became chief executive of Rio Tinto in 2013. He
stepped down earlier this year and was replaced by Jean-Sebastien
Jacques, who remains the CEO. Messrs. Walsh and Ms. Valentine
couldn't be reached for comment. Mr. Davies has denied the
allegations.
Another key player in the Simandou controversy, Mahmoud Thiam,
who served as Guinean minister of mines for a time under President
Conté, was charged last week in a criminal complaint in an
unrelated case with two counts of money laundering. Mr. Thiam, a
one-time UBS Group AG banker, is accused of laundering proceeds
from bribes he allegedly received from a Chinese conglomerate
operating in Guinea.
Mr. Thiam didn't respond to a request for comment.
Write to Scott Patterson at scott.patterson@wsj.com and Rory
Jones at rory.jones@wsj.com
(END) Dow Jones Newswires
December 19, 2016 18:25 ET (23:25 GMT)
Copyright (c) 2016 Dow Jones & Company, Inc.
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