A long-running corruption investigation involving a mining
company controlled by one of Israel's richest men could yield up to
a half-dozen indictments in the U.S., according to people familiar
with the matter.
In a briefing last month, U.S. prosecutors told Guinean
government officials that senior executives at BSG Resources Ltd.
were among some of the people who could be indicted, according to
people familiar with the meeting.
BSGR is the mining arm of Israeli billionaire Beny Steinmetz's
family-owned conglomerate. The investigation involves allegations
of bribery and obstruction of justice against people connected to
BSGR and a deal the company struck in 2008 to win prized mining
rights in Guinea's Simandou mountain range, one of the world's
largest deposits of iron ore.
The timing of the possible indictments is unclear, and
investigators could still decide to drop the investigation.
Spokesmen for the U.S. Justice Department and the Federal Bureau of
Investigation declined to comment.
The February briefing followed the release from U.S. prison of a
key individual in the investigation, Frédéric Cilins, in January.
Mr. Cilins, a French citizen, had served two years for obstructing
the federal investigation into bribery allegations related to BSGR
and its mining operations in Guinea.
An attorney for Mr. Cilins, William Schwartz, declined to
comment.
The U.S. investigation is one of several probes world-wide
involving how the government of the West African nation awarded
rights to Simandou. The entire block of iron-ore deposits was once
run by Anglo-Australian miner Rio Tinto PLC, but in 2008 Guinea's
government awarded half of those rights to BSGR after the firm
carried out a three-year, $165 million exploration program. Later,
BSGR struck a $2.5 billion deal for Brazilian mining giant Vale SA,
an iron-ore specialist, to buy a 51% stake of its Guinean
assets.
Mr. Cilins had worked on behalf of BSGR in Guinea when it was
pursuing mining rights there in the mid-2000s. A Guinean government
report alleges that Mr. Cilins paid bribes to the wife of the
now-deceased Guinean President Lansana Conté to help Mr.
Steinmetz's company win Simandou.
Mr. Cilins hasn't been charged with bribery or other violations,
and has denied the allegation.
The widow of Mr. Conté, Mamadie Touré, is cooperating with U.S.
officials, a person familiar with the investigation said. An
attorney representing Ms. Touré declined to comment.
In April 2013, Mr. Cilins was arrested in a federal sting
operation in a Jacksonville, Fla., airport and charged with
obstructing the U.S. investigation. Mr. Cilins pleaded guilty last
year in a Manhattan federal court but didn't agree to cooperate
with investigators.
Since then, Guinea, now under a different regime, has stripped
BSGR and Vale's rights to Simandou after a government investigation
found BSGR had engaged in corrupt activities. The probe cleared
Vale of any wrongdoing. BSGR denies wrongdoing and has filed a
formal arbitration request to win compensation from Guinea for
stripping it of the iron-ore deposit.
Guinea's Minister of Mines Kerfalla Yansané told The Wall Street
Journal in February that the country plans to put the rights up for
auction again in the next few months. However, new iron-ore
projects aren't as enticing as they once were, with the steelmaking
ingredient prices hitting a six-year low.
In Switzerland, authorities in late 2013 opened a criminal probe
in parallel with an investigation by officials in Guinea into
whether BSGR paid bribes to secure the Simandou mining contract. In
the U.K., the Serious Fraud Office is seeking information about the
deal from two law firms that have acted on behalf of BSGR,
including Skadden Arps Slate Meagher & Flom LLP, according to
testimony by a BSGR official in a U.K. high-court proceeding. BSGR
said in December that it had asked the court to review the
lawfulness of the SFO's alleged actions.
Skadden and the SFO declined to comment.
In a separate proceeding, Rio Tinto is suing BSGR, Vale and Ms.
Touré, among others, in Manhattan federal court, alleging that they
colluded to rob it of part of its Simandou rights.
Vale, which wrote off the $1.14 billion book value of Simandou
in 2014, last Friday said it has transferred its stake to BSGR.
Vale, which declined to comment, has denied any plot to rob
Rio.
Mahmoud Thiam, a U.S. citizen who took over Guinea's mining
ministry soon after BSGR won the concession, said he recently
handed over roughly 10,000 documents related to Simandou to the
Guinean government, which is reviewing the documents for potential
publication.
He had delayed handing over the documents for a time because he
was seeking guidance from Guinea's government about how they handle
them, Mr. Thiam said.
Write to Scott Patterson at scott.patterson@wsj.com
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