e are Israelis and we know how to fight. We are not going to let it go.” Beny Steinmetz’s words to a tribunal in Paris two weeks ago capped a colourful testimony via videolink from Israel.
The mining magnate’s rare public appearance was an attempt to clear his name and disentangle his company, Beny Steinmetz Group Resources (BSGR), from one of the industry’s biggest corruption scandals.
The two-week hearing at the International Centre for the Settlement of Investment Disputes (ICSID) ended on Friday, the latest chapter in a decade-long saga centred on the impoverished West African country of Guinea.
It is, according to lawyers for Guinea, “an exceptional case of exceptional importance with evidence of corruption which is equally exceptional”.
The hearing at ICSID, two years in the making, came about because BSGR believes it was wrongfully stripped of its rights to mine in Guinea in 2014.
The West African country claims that BSGR paid bribes to win access to Simandou, a giant, untapped deposit of iron ore; the miner has always denied wrongdoing.
It is now down to a panel of three arbiters to decide whether BSGR has any hope of reclaiming its assets or receiving compensation. But with investigations ongoing in multiple countries, is the story any closer to a conclusion?
Simandou is seen as the archetype of the “resource curse” – the theory that developing countries are often unable to benefit from their natural riches.
Iron ore, used in steel, has made the fortunes of companies such as Rio Tinto of Australia and Vale of Brazil. Simandou is thought to be one of the richest sources of iron ore anywhere, and developing it could treble the size of Guinea’s meagre economy.
The first entrant on the scene was the miner Rio Tinto, which acquired exploration rights in 1997. But Rio was deemed to have dragged its heels on the project.
The Guinean government, under its authoritarian president, Lansana Conté, grew impatient, and stripped the company of half its rights in July 2008. Six months later, shortly before Conté’s death, BSGR won the rights to blocks 1 and 2 of Simandou.
The decision was met with some surprise: BSGR was not considered a specialist in iron ore mining. (It disputed this at ICSID, arguing it had plenty of expertise.)
BSGR, first registered in Jersey, then Guernsey, was founded by Steinmetz in 2003, and focused on diamond mining, the source of his family’s wealth. The ultimate owner of the company is a Lichtenstein foundation called Balda and Steinmetz and his family are the main beneficiaries. Steinmetz himself is thought to be worth around $2.9bn (£2.4bn).
BSGR paid nothing for the licence to explore Simandou, though it says that it spent $160m developing the mine.
In any case, it always intended to bring in a partner: in 2010, with the price of iron ore soaring, the Brazilian mining company Vale agreed to pay $2.5bn for 51pc of BSGR’s slice of Simandou. Vale made an upfront payment of $500m; the rest was never paid. It was dubbed “the deal of the century”, a sensational victory for Steinmetz.
But matters began to unravel with the election of Alpha Condé as president of Guinea in late 2010. Condé’s government did not like the way Guinea’s biggest asset had been parcelled up.
The following year, Rio paid $711m to settle “outstanding issues” in Guinea and shore up its claim to blocks 3 and 4 of Simandou. Steinmetz called this “extortion”. He claimed the Guinean government demanded $1.25bn from BSGR for the same purpose, and refused to pay. Guinea says it floated the idea but never formally demanded any money.
From then on, according to BSGR, Guinea resolved to eject it from Simandou. Vale walked away in 2012, blaming a slump in the iron ore market, and in 2014, a government committee cancelled BSGR’s rights.
The legal fall-out has been considerable. Rio, a FTSE 100 company, sued BSGR and Vale in 2014, but had its case thrown out on a technicality.
Rio then reported itself to the authorities last year over a $10.5m payment it made in 2011 to a French banker for his help arranging its settlement with Guinea. BSGR has said it will counter-sue Rio for damages; Rio has said it will defend itself “robustly”.
Vale is also seeking arbitration against BSGR over their failed joint venture in Guinea. Neither Vale or Rio would comment on the ICSID hearing.
To date, two people have been convicted on charges relating to corruption in Simandou.
Frederic Cilins, a BSGR associate who forms a central part of Guinea’s case, served two years in prison in the US for obstructing an FBI investigation.
Earlier this year, Mahmoud Thiam, Guinea’s former minister of mines, who backed BSGR’s deal with Vale, was found guilty of laundering $8.5m in bribes he allegedly took in exchange for helping a Chinese company secure mining rights.
Prosecutors in the US, Switzerland and Israel continue to circle the case. In December, Israeli police detained Steinmetz and Asher Avidan A, the former head of BSGR in Guinea.
Both have restrictions on where they can fly, preventing them from appearing before ICSID in person.
For Steinmetz, the ICSID hearing was a chance to elaborate on his passionately held belief that BSGR is the victim of a conspiracy. The target of his fury is the billionaire philanthropist George Soros, who became an adviser to President Condé in 2010. Steinmetz claims Soros was motivated by personal animosity to sabotage BSGR’s claims in Guinea, saying: “He’s nuts.
The guy has an obsession with me.” BSGR has threatened to sue Soros for $10bn in damages. Soros’s representative calls Steinmetz’s claims a “PR stunt”.
In Paris, BSGR sought to pour cold water on Guinea’s claims that it paid President Conté’s fourth wife, Mamadie Touré, to use her influence to advance its cause.
After Conté’s death in 2008, Touré fled to the US and ended up co-operating with the FBI, which used a wiretap to record a conversation between her and Frederic Cilins, apparently discussing payments authorised by “Beny”, with Cilins allegedly urging her to destroy documents pertaining to BSGR.
Steinmetz denied giving Cilins instructions to pay bribes. “I have never spoken to Cilins about this,” he said. He was at a loss to explain a statement Cilins asked Touré to sign that was apparently approved on email by Steinmetz six days earlier: BSGR is furious that Touré did not give evidence in Paris and disputes the authenticity of contracts that appear to show she was offered a 5pc stake in the project. Guinea’s lawyers said Touré could not speak in Paris because she is a witness in a live FBI investigation.
In other exchanges, lawyers for Guinea attempted to shine a light on BSGR’s opaque structure, presenting a series of flowcharts to explain its multiple subsidiaries: it had two Guinea-based companies of the same name, for example.
The company’s leadership was also a matter of debate, with Steinmetz insisting he holds merely an advisory role, drawing a fee of up to $1m a year, and saying: “My power is very limited.” Steinmetz’s right-hand man, Dag Cramer, denied he was the CEO of BSGR “in a traditional sense”.
Instead, his company, Onyx, provided “the services that a CEO would provide in a company if you had [a] traditional structure”. Cramer said this arrangement, far from being “obtuse and evasive”, was a “common structure”. (Asked if Onyx had a compliance department, Cramer’s response was a terse “No”.)
Asher Avidan initially refused to testify at the hearing, on the advice of his lawyers.
Despite Steinmetz’s fiery testimony, there are signs that BSGR’s confidence in its case is not as sure as it could be.
Guinea’s lawyers accused it of acting more like a defendant than a claimant.
Late last year BSGR’s application to change the panel judging the case was thrown out by ICSID. BSGR also reportedly failed to show up at an arbitration with Vale earlier this year, claiming it would not get a fair hearing, and potentially forfeiting $1.2bn.
