By Laura Rena Murray and Beth Morrissey
[dropcap type=”3″]I[/dropcap]t was already nighttime when Mahmoud Thiam’s flight to Conakry landed on the tarmac of Guinea’s decrepit capital in 2009. Young guerilla soldiers brandishing guns roamed the streets, and basic necessities like water and electricity were in short supply. It was chaos.
The car that met Thiam at the airport went directly to a military camp where he was to have his first meeting with Moussa Dadis Camara, the young army captain who had just taken over the government in a coup d’etat following the death of long-time dictator Lansana Conté.
The former UBS banker had returned to Guinea, the homeland he fled as a boy when his father, a prominent Guinean banker accused of treason, was arrested and executed in 1971 by the country’s first president. Nearly four decades later, when Guinea’s new regime asked Thiam to serve as mining minister in 2008, he felt a duty to return, he said.
Although Guinea sits on billions of dollars worth of iron, bauxite, gold, diamonds, oil and other prized minerals, the country had failed to capitalize on its vast resources because of government instability, corruption and inadequate infrastructure. Thiam returned to Guinea, he later said, with a master plan to overhaul the mining sector and break the so-called resource curse. He described himself as a buffer between apprehensive mining companies and what he called “a new, inexperienced, very aggressive military government.”
Three years later, a new Guinean government accused him of lining his own pockets while helping to sell off Guinea’s richest resources to the highest bidders. The accusations of corruption – levied against Thiam and others – have left some of the country’s most promising development projects suspended while drawing international scrutiny. The F.B.I. and investigators from multiple other countries, including the United Kingdom, France, Switzerland and Guinea, are examining people and companies connected to some of the deals Thiam helped broker during his tenure.
Middlemen like Thiam were once considered necessary for multinational investors and businesses hoping to land lucrative contracts. Now those intermediaries can become liabilities, as countries like Guinea retroactively review suspect contracts, nullifying those they determine were obtained via corruption.
“What Guinea has shown is the past doesn’t go away,” said Mark Malloch-Brown, former U.K. minister of state and Deputy Secretary-General of the United Nations. “It catches up with you. It’s going to lead to ever greater vigilance.”
Night Court and Guinea’s Military Junta
Moussa Dadis Camara was young, brash and paranoid. Convinced that coups happen during the day, Guinea’s new leader ruled by night and televised his meetings on the “Dadis Show,” where he grilled mining executives and politicians on camera. Prior to Thiam’s arrival, Camara had cancelled all mining contracts, claiming it was a necessary move to root out corruption in the industry.
Camara sought the assistance of Revenue Watch, a New York-based nonprofit policy institute, but Camara’s eccentric and inept government raised doubts and he was turned down. Representatives of group who travelled to Conakry describe being put off by Camara’s televised midnight kangaroo court. In such an environment, Thiam said a major restructuring of the mining sector was impossible.
The first time they met, Thiam told Camara he would reverse the decision to cancel all mining contracts. “We are a country of laws and we respect our contracts,” Thiam recalled telling the leader. Thiam said he reinstated the contracts with stipulations that they be scrutinized for clauses unfair to Guinea and that companies would be accountable for failing to fulfill their contracts.
“The ultimate goal was to make certain projects irreversible,” he recalls. “So that no matter what happens after you leave, those projects will end up producing.”
Thiam’s list of projects to make irreversible included Simandou, a mountain of one of the world’s largest untapped deposits of iron ore, worth up to $140 billion.
At the time, British-Australian mining giant Rio Tinto had the rights to half of Simandou. Although the company was awarded rights to the entire mountain in the late 1990s, exploratory licenses for half of Simandou were signed over by Camara’s predecessor to BSG Resources Ltd. (BSGR), a private diamond mining company founded by billionaire Beny Steinmetz.
With Thiam’s arrival, Rio Tinto purportedly hoped to have the deal with BSGR reversed and the rest of Simandou returned. However, Thiam said he doubted Rio Tinto’s intentions to develop the mines quickly enough, citing their previous failures to meet promised timelines.
Even as Thiam’s relationship with Rio Tinto became more fraught, he said he was getting along well with BSGR. Thiam described Steinmetz as “daring” for willing to risk millions on the Simandou venture. And when Steinmetz invited Camara to his daughter’s wedding, Thiam attended on his behalf.
While the mining giants fought over Simandou, chaos broke out again in Guinea. In September 2009, less than a year after Camara’s junta took power, the Presidential Guard opened fire on political protestors at Conakry stadium. The soldiers killed more than 150 people, wounded more than 1,000 and raped dozens of women in the stadium. The international community condemned the bloodbath and the U.S., European Union and the African Union imposed sanctions.
In the massacre’s wake, international investors started pulling out of Guinea. But not everyone was running in the other direction.
Twelve days after the massacre, Thiam brokered an agreement between Guinea and two companies associated with the obscure, privately owned China International Fund (C.I.F.) to create a national mining company that would hold rights to all of Guinea’s unexploited mining and gas reserves. Thiam’s detractors were suspicious. According to the agreement, the C.I.F.-related entities–China Sonangol and China International Fund Singapore–would own an 85 percent initial capital share of the national mining company. In exchange, the government publicly announced, C.I.F. had promised to build infrastructure projects valued at $7 to $9 billion. These pledges, however, were not enshrined in the agreement. Thiam became president of two branches of the new mining company while still serving as Guinea’s mining minister.
“This is the scam of the century,” said former Mining Minister Ahmed Kanté, who saw the contract as a sellout of Guinea’s resources to private interests. Imprisoned under Camara’s junta, Kanté would later be reinstated as director of Guinea’s state mining fund in 2011 and tasked with reforming the mining code.
Within weeks of signing the contract, C.I.F. lent the Guinean government $3.3 million to pay for an audit of its competitor’s activities in Guinea.
In December 2009 Camara’s top aide, who had led the presidential guard during the stadium massacre, shot Camara in the head during a confrontation. Seriously wounded, Camara stepped down and his vice president took over.
State Department cables from the following February, released by WikiLeaks, reveal how the political instability was affecting investors: “Many mining companies fear that Thiam, who is reportedly still working closely with junta President Dadis Camara, will use the transition period [to the newly elected government] to guarantee contracts that will personally benefit [members of Camara’s political party].” The cable went on to quote Rio Tinto’s Stephen Din as saying he believes that, “The Minister will use the next six months to ensure that companies like the Chinese International Fund (CIF) and Israeli mining company BSG Resources (BSGR) are able to secure their contracts in return for bribes.”
In December 2009 Thiam signed an agreement with BSGR to develop two blocks of Simandou. BSGR had invested over $160 million in exploring the Simandou blocks from 2006 to 2010, according to the company’s website. It received the concession at no immediate cost, but pledged to develop the mine, build housing, infrastructure and a railroad to get the iron ore to a port in Liberia, at a cost of $2.5 billion.
BSGR agreed to form a joint venture with Vale, which would pay $2.5 billion for a 51 percent controlling stake in the new company, VBG. Thiam says he gave Vale eight weeks for due diligence before granting permission for the deal. Although he admits the timeframe was “extraordinarily short,” Thiam says he “wanted to render some projects irreversible. I was on a clock.”
Vale says it “acquired its interest in VBG after the completion of extensive due diligence conducted by outside professional advisors and on the basis of representations that BSGR had obtained its mining rights lawfully and without any corrupt or improper promises or payments.”
Not everyone agreed with Vale’s version. In August, Rio Tinto filed suit in the U.S. against Vale, BSGR, Steinmetz and Thiam claiming the companies had been conspiring to steal Rio Tinto’s Simandou concessions since 2008, violating the U.S. Racketeer Influence and Corrupt Organizations Act. In its suit, Rio Tinto claims Vale feigned an interest in partnering with it in order to gain access to Rio Tinto’s confidential documents, which Vale then handed over to BSGR. Rio Tinto alleged that the Israeli company used the inside information to wrangle concessions by bribing the former government and, subsequently, Thiam.
When asked about the suit, BSGR said that it had acquired the concession lawfully. “Rio Tinto chose to do nothing with its mining rights so the mining rights were taken away,” a spokesman for the company wrote in an email. “Baseless and bizarre lawsuits won’t change that fact.”
Vale said that it unequivocally condemns the use of corrupt practices and reiterated its commitment to transparent corporate governance. The company filed an arbitration claim against BSGR in the London Court of International Arbitration earlier this year.
Thiam maintains he struck the best deals to fill Guinea’s coffers and says the contracts he negotiated were “fully compliant with the Guinean law.”
International Attention – Fallout
The current Guinean government disagrees. After Alpha Condé was elected president in December 2010, he continued the mining reforms started under the Camara regime. The new mining code requires anti-corruption plans, codes of conduct, background checks, higher royalties and stronger rules regarding the share of state ownership.
“The decision to revoke a mining license on the basis of proven corruption of public officials signals a new approach to mining sector governance in Guinea, based on the rule of law, open competition, long-term partnerships and win-win agreements,” explains Nava Touré, president of Guinea’s mining review committee. He argues that the new mining code “will allow Guinean citizens to reap the greatest benefits from their mineral assets, by ensuring investors are selected according to their capacity to develop mines and associated infrastructure, and on the best possible terms for the country.”
In October 2012, the mining review committee sent a letter to the BSGR-Vale joint venture, accusing BSGR of bribing senior military officials and former President Conté’s family members to acquire Simandou. Asserting the company was not financially or technically equipped to develop the project, the committee accused BSGR of intending to sell rights to a third party from the outset. The letter further accused Thiam of facilitating bribes, by receiving money and organizing its distribution.
In April 2013 the F.B.I. arrested a former BSGR associate at an airport in Jacksonville, Florida, who was carrying $20,000 in Wells Fargo Bank envelopes. Authorities claimed the associate, Frédéric Cilins, attempted to obstruct their investigation by trying to purchase and destroy contracts related to the BSGR-Simandou deal sought by the F.B.I.
Following the arrest, the Justice Department revealed the existence of a grand jury investigation into possible violations of the Foreign Corrupt Practices Act in connection with an alleged bribery scheme for Simandou concessions. Cilins later pleaded guilty to a single count of obstructing a federal criminal investigation and was sentenced to two years in prison.
By April of 2014, the Guinean government revoked the mining licenses of VBG, the BSGR and Vale joint venture set up to develop Simandou. The decision came after the mining committee released a report stating “that a number of items of proof exist, which are clear and corroborative, and establish with a sufficient certitude the existence of acts of corruption connected to the issuance of the licenses and the mining convention obtained by VBG.” The report further stated that the committee’s opinion was disputed solely by VBG’s minority shareholder, [BSGR], which “failed to introduce even an iota of actual evidence to support its contentions.”
Vale claims it had no part in the fraudulent conduct charges levied by the mining review committee, saying “the mining concessions had been tainted by corrupt practices on the part of BSGR.”
BSGR denies any wrongdoing, insisting it never paid bribes and claiming that the mining review committee had been “established to provide a pre-text to illegally seize BSGR’s assets.” The company is fighting back against its detractors, saying the allegations are based on false evidence. However, Touré argues that BSGR has had ample time to show evidence to defend its case throughout the review process – more than 18 months – but failed to do so. Touré further contends that BSGR failed to show up at a hearing to answer the committee’s questions and Vale “did not provide any elements demonstrating that the titles were awarded without corruption.”
In an effort to regain its claim to part of Simandou, BSGR filed an arbitration request in August with the International Centre for Settlement of Investment Disputes, an organization under the World Bank that facilitates arbitration for business disputes, accusing Guinea’s current president of illegally stripping BSGR of its mining rights as part of a “politically motivated international campaign against BSGR.” This month, the company filed a claim seeking judicial review of the British Home Office and the Serious Fraud Office for assisting the Guinean government in its investigation of BSGR. “In acceding to the request for assistance, the SFO and [Home Office] would facilitate an investigation brought in bad faith for political reasons, and which will be pursued without regard for fair trial or due process rights of individuals affected,” the company wrote in a statement.
Even Malloch-Brown has been unable to escape the company’s ire, having recently settled a lawsuit brought by BSGR when he cancelled a contract with the company after he was hired by their PR firm, FTI Consulting in 2010. “You don’t run a first-class consulting business and have a client like that,” Malloch-Brown said in an interview. He pointed out the culpability of high-powered law firms hired to negotiate suspect contracts, and public relations firms that work behind the scenes to lend them a veneer of legitimacy. “This whole issue of the lawyer, the bankers and others who enable these people is key,” he warned. “[These] people are, in that sense, accessories to this.”
Thiam also denies wrongdoing, including receiving or distributing bribes on BSGR’s behalf.
“It is true, however, that I often gave money, from my personal savings, to many of my fellow citizens: friends, fellow ministers, colleagues or others,” he wrote in an extensive open letter adressed to the Guinean president. “Those charitable gifts included cash, a vehicle and footing medical bills,” he wrote.
Thiam says he is proud of signing contracts with BSGR, saying Guinea has attracted a record number of investors while enduring the global financial crisis, and economic and political sanctions. “Major projects are in development today, thanks to the courageous positions we have taken and defended.”
When Thiam left the Guinean government in January 2011, he appeared to have done well for himself. He became a private consultant, often holding court at the Four Seasons hotel in New York. There he was in his element, with the son of the Senegalese president stopping by to say hello and the maître d’hotel greeting him with a familiar, “Nice to see you again, sir!” His meetings were continuously interrupted by incoming calls allegedly from African presidents and businessmen in Togo, Andorra, South Africa and Madagascar.
He acquired luxury real estate: two Manhattan apartments and an office on Madison Avenue. He also has use of a vacation home in Duchess County, New York worth millions. Although he says the Duchess County mansion belongs to a friend, the November 2010 deed lists his Manhattan address, is signed by his wife and the couple are listed as the owners on renovation permits.
Today, Thiam’s fortunes appear to have reversed. Liens have been filed against him, including one from the construction company he hired to renovate the Duchess County mansion. His $1.5 million condo was slapped with a federal lien in February 2013. He was also listed as one of the top 250 New York state tax delinquents, owing more than $11 million in state and federal taxes. Thiam says the tax shortfall resulted from an Internal Revenue Service review of his accounts prompted by a voluntary disclosure he filed in 2011, admitting that he had not filed his taxes accurately while he was mining minister “because we were under international sanctions and making certain disclosures would [have] frozen my assets, putting my family in danger.”
Thiam says he has not been contacted by the F.B.I. or Justice Department, but that investigators dug through his trash for evidence in the Simandou case. He suggests that if he had broken any laws, he would not be “walking around free today, four years later.”
Thiam acknowledged that governments nowadays are beginning to examine what companies did under previous regimes. He’s learned the hard way, due to international scrutiny, that the past is never far behind.
Taking this wisdom, he counsels businesses working in developing countries to mitigate risk by following the rules. “If you cut corners you will get in most likely faster than your neighbor,” he told an audience at Columbia University’s Africa Forum in November 2013. “But it’s a matter of time before a government comes and decides to enforce the laws and then go after you. You have no defense because you violated the laws in the first place.”
Today, Thiam has seen most of his work unraveled. Many of the multi-billion dollar mining deals the Guinean government struck just a few years ago have stalled amid investigations and the regime change. Touré says the C.I.F. agreement “has not been implemented since a democratic government was elected,” and that Guinea’s new national mining company is 100 percent owned by the state.
In April 2014, the Guinean government stripped the BSGR and Vale joint venture of the Simandou concessions. Touré says that the Simandou investigation is “a great example of what international cooperation can achieve in the fight against corruption.” BSGR insists it will “protect its significant investment in the country which will, ultimately, benefit the people of Guinea.”
A month after BSGR lost rights to the northern half of Simandou, Rio Tinto and Chinalco, the Aluminum Corporation of China, signed an agreement to increase their investment to $20 billion to develop the southern half. The Guinean government has barred BSGR from bidding on developing the northern half but cleared Vale to bid, claiming the company was not directly involved in any corruption.
Thiam calls himself “collateral damage” and said he is caught in a power struggle between the country’s newest president and Steinmetz, vying for over half of the country’s untapped iron ore.
Thiam insists that he would never go work for government again. “I did some good things and I do not regret it,” he says “But I would not go back.”
Support for this project was provided by the Stabile Center for Investigative Journalism.