Diamond Magnate Beny Steinmetz Arrested in Guinea Case -- Update
December 19 2016 - 11:05AM
Dow Jones News
By Scott Patterson and Rory Jones
Israeli diamond magnate Beny Steinmetz was arrested Monday on
suspicion of bribing government officials in Guinea, Israeli
authorities said, widening the fallout from a long-running scandal
involving one of the world's richest iron-ore deposits.
The move is among the most dramatic yet in a saga related to the
fierce competition to mine a vast iron-ore vein in Guinea's
Simandou mountain range.
Rio Tinto PLC, which once had the rights to Simandou, last month
dismissed two executives and turned over evidence to
law-enforcement authorities after emails became public detailing a
$10.5 million payment the British-Australian company said it made
to a man with close ties to Guinea's government.
Israeli authorities said Mr. Steinmetz's arrest was part of a
continuing international investigation involving law-enforcement
authorities in the U.S., Switzerland, Guinea and Israel.
Allegations of wrongdoing have followed Mr. Steinmetz and BSG
Resources Ltd., the mining arm of his family-owned conglomerate,
since the company struck a deal to win the rights to Simandou from
Rio Tinto in 2008.
The Guinea government, after an investigation, later stripped
BSGR of its rights to Simandou. It was a major blow to Mr.
Steinmetz, who made his fortune as a diamond merchant in Africa and
had made a bold attempt to expand his mining operations in
Guinea.
A spokesman for BSGR denied the bribery allegations, which he
said were launched by the Guinea government.
"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 a statement.
A spokesman for the Guinea government didn't immediately respond
to a request for comment.
Mr. Steinmetz appeared in a Tel Aviv-area court Monday, posted
bail for 50 million Israeli shekels ($13 million) and was ordered
under house arrest at the request of Israeli police, authorities
said. His next court appearance is on Jan. 2.
The U.S. Department of Justice has been investigating claims of
bribery and obstruction of justice and presented evidence to a
grand jury, The Wall Street Journal has reported. The Justice
Department declined to comment.
Simandou has been a source of fascination and corruption
allegations in the mining industry since 2008, when it was at the
center of a tug of war between mining companies hoping to cash in
on China's booming need for industrial materials like iron ore
The block of iron-ore deposits was once controlled by Rio Tinto,
but in 2008 Guinea's government handed half those rights to BSGR
after the firm carried out a three-year, $165 million exploration
program. Guinea said Rio had failed to develop the resource.
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 the now-deceased Guinean President
Lansana Conté. BSGR denied the allegations on Monday. The widow of
Mr. Conté, 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.
The arrest of Mr. Steinmetz follows a mounting scandal at Rio
Tinto, which last month 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 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 allegedly detailing the payments
to Mr. de Combret.
Mr. de Combret had been helping Rio negotiate with the Guinean
government to retain the Simandou iron-ore concession, according to
internal Rio emails 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, Alpha Condé.
Mr. Walsh later became CEO of Rio Tinto in 2013. He stepped down
earlier this year and was replaced by Jean-Sébastien Jacques.
Messrs. Walsh and Davies and Ms. Valentine couldn't be reached 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 10:50 ET (15:50 GMT)
Copyright (c) 2016 Dow Jones & Company, Inc.
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