5/19/2014 Just Anti-Corruption Rio Tinto Lawsuit Alleges Stunning Corporate Betrayal by Vale in Guinea Print

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Rio Tinto Lawsuit Alleges Stunning Corporate Betrayal by Vale in
Guinea
Posted By Stephen Dockery On May 2, 2014 @ 5:50 pm In Africa, Tagalong Probes by
Other Countries, USA | Comments Disabled
At the heart of the Beny Steinmetz case is a stunning corporate betrayal, Anglo-
Australian mining concern Rio Tinto plc alleges in a civil lawsuit filed this week in federal
court in Manhattan.
According to the April 30 complaint
[1]
, Brazilian mining company Vale engaged in
confidential business discussions in New York with Rio Tinto as a ruse to access the
companys secret data on the Simandou iron ore concession in Guinea, which it had
spent hundreds of millions of dollars and 11 years developing.
The data was then used to convince Guinean officials who, Rio Tinto alleges, were in
the process of being bribed by BSGR that BSGR had the technical expertise to develop
the concession.
After the now-late president of Guinea, Lansana Conte, ordered half of Rio Tintos
concession to be awarded to BSGR in December 2008, Vale switched sides. In April
2010, Vale paid BSGR a $500 million down payment on a $2.5 billion agreement to
purchase a majority interest in Rio Tintos former concession. Two months later, the
complaint alleges, BSGR paid a $200 million bribe to Mahmoud Thiam, Guineas then-
minister of mines.
Steinmetz himself met with Thiam in Paris around the time of the alleged bribe payment,
the complaint alleges.
FBIs cooperating witness
In Rio Tintos version of events, the FBIs cooperating witness in its ongoing Foreign
Corrupt Practices Act investigation of the Guinean deal Mamadie Toure, the fourth
wife of the now-late President Conte was comparatively purchased for pennies.
Toure, who is a defendant in Rio Tintos lawsuit and who now lives in Florida, gave a
statement to the current government of Guinea
[2]
alleging she was bribed to arrange
introductions for Steinmetz and BSGR agents to her husband. While her statement isnt
clear in places, she appears to be alleging she received
[3]
around $3.5 million in bribes.
Confidential information allegedly pilfered
Rio Tinto said it set up a sophisticated U.S.-based data center with the secret business
information as part of its negotiations with Vale. The center allowed Vale to tap into
extensive knowledge of the Simandou area that Rio Tinto had acquired over years of
explorations that began in 1997.
More than sixty individuals from Vale, five attorneys from a New York-based law firm
representing Vale, and twelve employees of a New York-based accounting firm also
representing Vale had access to the Data Room, the complaint said.
5/19/2014 Just Anti-Corruption Rio Tinto Lawsuit Alleges Stunning Corporate Betrayal by Vale in Guinea Print
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The information included, but was not limited to, geological and technical information,
product characteristics, suitable mining methods and drilling operations, processing and
logistics including the viability of different transportation options, and the status of
efforts to bring the mine into production, it said.
That information, allegedly secretly provided by Vale to BSGR, was critical. It allowed
BSGR, whose expertise was in diamond mining, to convince Guinean officials to award it
the mining concession, according to the complaint. After winning the concession, BSGR
used Rio Tintos pilfered data to drill and explore exactly where Rio Tintos findings
indicated, the complaint said.
Caught off guard by Vale
The complaint says Rio Tinto had caught wind of BSGRs alleged bribery scheme. But
Vales alleged treachery caught Rio Tinto by complete surprise, the complaint said.
Rio Tinto continued to share confidential information with Vale including intelligence it
had gathered that BSGR was paying bribes to steal the concession nearly up until the
Guineans presidents December 2008 order to give BSGR the concession.
Given BSGRs reputation for corruption and bribery well known among those active in
the mining industry, including Vale Vale was on notice that Steinmetzs and BSGRs
efforts to misappropriate Riot Tinots right included bribing various Guinean officials, the
complaint says.
As late as November 2008, in meetings in New York, Vale entered into negotiations to
purchase part of Rio Tintos Simandou concession, the complaint says.
And yet, Vale continued to fraudulently conceal its association with Steinmetz and
BSGR, and continued to misappropriate confidential information about Simandou mining
operations from Rio Tinto, according to the Racketeer Influenced and Corrupt
Organizations Act complaint.
Vale protected itself
Rio Tinto alleges Vale included a legal clause in its deal with BSGR to protect the
company in case BSGR got caught in its scheme.
For example, Vales transfer of the balance of payment, some $2 billion, is conditioned
on BSGRs fulfillment of certain critical objectives, one of which is the resolution of any
legal claims or uncertainties surrounding BSGRs acquisition of Blocks 1 and 2. This is a
clear reference to the theft of the blocks from Rio Tinto and reflects Vales concern
that its scheme with BSGR will be uncovered, the claim said.
The Rio Tinto complaint asks for treble damages at trial for the loss of its concessions.
Rio Tinto still holds two of the four mining blocks it once held.
Vale and BSGR were not immediately available for comment on. Vales CEO previously
made a statement
[4]
saying it was Rio Tintos responsibility to present evidence for
such allegations.
After a Guinean investigative panel found evidence of bribery in the transaction, the
Guinean government approved stripping
[5]
BSGR and Vale of their mining rights last
month.
The U.S., Guinea, the United Kingdom, Switzerland and France all have open
5/19/2014 Just Anti-Corruption Rio Tinto Lawsuit Alleges Stunning Corporate Betrayal by Vale in Guinea Print
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investigations
[2]
into the deal.
Snagging faxes
Also in the complaint is an allegation that BSGR associate Frederic Cilins set up shop in
Guinean hotel Novotel to intercept mining information coming to the hotel from other
businesses.
By developing contacts in the Novotels business center and surreptitiously obtaining
copies of all incoming and outgoing faxes, Cilins learned details about Rio Tintos efforts
to explore and develop the Simandou mine, the claim said.
Cilins recently pleaded guilty
[6]
to obstructing justice after he tried to destroy
evidence of BSGR bribery.
The case number in the Southern District of New York is 14-cv-3042.
Previous Coverage by Just Anti-Corruption
Rio Tinto Sues BSGR and Vale; Alleges Conspiracy to Steal Guinea Mining Concession
April 30, 2014
Guinean Panel Publishes Evidence Linking Steinmetz to Alleged Mining Corruption
April 15, 2014
News Website Says It Erred In Characterizing Steinmetz as Target of Investigation
March 19, 2014

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