BARRY FITZGERALD AND MATHEW MURPHY
Sydney Morning Herald
April 22, 2010
BHP BILLITON'S blue-chip reputation has been tarnished by a foreign bribes scandal, believed to involve the group's abandoned bauxite exploration project in Cambodia where the payment of ''tea money'' to gain access to exploration ground is rife.
The scandal has been under investigation by the US Securities and Exchange Commission since August but only became ominous for BHP in a reputational sense yesterday when the Australian resources giant admitted the bribery claims could have merit.
BHP disclosed that its own internal investigation - a response to inquiries from the SEC - had uncovered evidence ''regarding possible violations of applicable anti-corruption laws involving interactions with government officials''.
It did not name the country or the now abandoned projects involved. While Cambodia was the popular tip by the non-government organisations that monitor the behaviour of the global miners in Third World countries, a nickel project in the Philippines was also mentioned by the organisations.
Either way, the revelations are a blow to BHP Billiton's need to maintain a squeaky clean corporate image while waiting on clearance from global regulators for its $US115 billion ($123 billion) iron ore production joint venture with Rio Tinto, a proposed deal that has angered the Chinese steel industry, the world's biggest. It was notable that while BHP would not name the country at the heart of the bribery scandal, it was prepared to volunteer that it was not China.
''We are limited in what we can comment on as the matter is still under investigation,'' it said.
''However, we can confirm that the SEC's requests for information primarily relate to certain terminated minerals exploration projects and not any activity in China, BHP Billiton's marketing activities or the sale of any of the company's products.''
Rio itself has suffered damage to its reputation in recent weeks. Last month China jailed four iron ore traders, including the Australian citizen Stern Hu, for accepting bribes and stealing commercial secrets. They were sentenced to between seven and 14 years' jail.
BHP is being assisted in the investigation by the New York law firm Davis Polk & Wardell. BHP would not comment on whether any of its employees had been stood down pending completion of the inquiry.
The bombshell was contained on the third page of an exploration and development report to the stock exchange for the March quarter.
BHP believes it was not obliged to make an earlier disclosure on the SEC investigation. But it now considers it relevant information - at least in the context of announcing in the exploration and development report - following its more recent discovery of possible anti-corruption violations.
''The company is co-operating with the relevant authorities including conducting an internal investigation, which is continuing. It is not possible at this time to predict the scope or duration of the investigation or its likely outcome,'' BHP said.
Under the US Foreign Corrupt Practices Act, BHP could be fined up to $US2 million while ''officers, directors, stockholders, employees, and agents are subject to a fine of up to $US100,000 and imprisonment for up to five years''.
The laws were introduced in the 1970s after more than 400 US companies admitted making questionable or illegal payments to foreign government officials to secure favourable treatment.
In a report by the British advocacy group Global Witness, published in February last year, the group cites a 2007 article in The Cambodian Daily which says that Cambodia's Minister for Water Resources, Lim Kean Hor, told the National Assembly BHP had paid $US2.5 million to the government to secure a bauxite mining concession.
''Lim Kean Hor is reported to have described this payment as 'tea money', an unofficial payment in Cambodia,'' the report says.
BHP rejected the claim in a letter in November 2008 to Global Witness saying the money was used for a social development program. ''In … terms of the minerals exploration agreement with the Cambodian government, which granted BHP Billiton and Mitsubishi the right to explore for bauxite, an amount of $US1 million was formally paid to the Cambodian government in September 2006,'' BHP wrote.
''If the money appears elsewhere … it is not clear where,'' the Global Witness report said. ''This raises questions as to where BHP Billiton's $US1 million payment made in September 2006 has gone.''
-----------------------------------
BHP dawdles to reveal SEC probe
Sydney Morning Herald
April 22, 2010
BHP Billiton learned last August that its acquisition of exploration rights in Asia years earlier was the subject of a US Securities and Exchange Commission investigation, and it found out because the SEC told it so.
BHP sat on that information until yesterday, when it used a routine quarterly announcement to reveal that it had checked out the matter, had found evidence pointing to ''interactions'' with government officials that may have breached anti-corruption laws, and had passed that information on to the authorities.
The questions raised by this are: why didn't BHP brief the markets last August; and why did it choose not to announce the probe separately yesterday.
And the short-term answers are: BHP didn't reveal the SEC investigation last August because its legal advice was that under its continuous disclosure obligations it did not need to; and it revealed the investigation yesterday inside another, regular announcement because it believed the matter did not warrant immediate, separate disclosure.
As unsatisfying as those answers might be, they suggest one thing: BHP at this stage is confident that it is not headed into the same kind of nightmare that Rio Tinto has been in for more a year since the detention, charging and conviction of four of its Shanghai-based executives for taking bribes and obtaining commercial secrets about China's steel industry. That confidence is going to be tested as the facts emerge.
BHP was precise and sparing with what it said yesterday in a single paragraph at the bottom of page three of its March-quarter exploration and development report.
It said that the SEC had requested information as part of an investigation into ''certain terminated minerals exploration projects'' and that as a result it had uncovered evidence of possible violations of anti-corruption laws involving ''interactions'' with government officials. The group said it was co-operating with the investigation while continuing its own examination, and said it could not predict where the affair was headed, or how long it would take it to get there.
Separately, a spokesman created distance from the Rio debacle, saying that the investigation did not relate to any activity in China, or the sale and marketing of BHP products.
It is believed that the SEC is looking mainly at the $US1 million acquisition of bauxite mineral rights in Cambodia in 2006 by a consortium led by BHP and Mitsubishi. The purchase of mineral rights in the Philippines may also be a focus.
A British anti-corruption advocacy group, Global Witness, reported in February last year that the $US1 million payment seemed not to have been booked by the Cambodian government, which recorded revenue of only $US443,866 from mining concessions that year.
BHP defended the deal at that time as being above board, and in an interview Global Witness director Gavin Hayman congratulated the mining group for being ''transparent'' and responding to inquiries.
Last August, however, BHP was contacted by the SEC and asked to use its own resources to inquire into the Cambodian deal. BHP took the position that the SEC's approach was not material, and its own investigation was complicated by the fact that the projects had already been shut down after being rated as non-goers commercially. But what it found raised enough questions about how BHP gained mineral rights for it to make renewed contact with the SEC.
Even then, however, BHP waited a short time before announcing the SEC probe, and its discovery of possible breaches of anti corruption laws. The group's position is that its
re-examination of the payments has raised questions about them, rather than revealed them to have been illegal, something that would have required immediate disclosure.
Despite BHP's apparent confidence, news of the probe comes at a challenging time for the mining group. It is in the midst of attempting to persuade competition regulators in Australia, Europe and the US to approve its proposed Pilbara iron ore merger with Rio, and it is also preparing for the imminent release of a tax report from Ken Henry that will almost certainly recommend a new tax on mining company super-profits.
The issues it potentially faces are similar to those Rio is dealing with in the wake of the Chinese court's finding that four of its employees obtained commercial secrets.
Regulatory inquiries are under way in the US, Australia and Britain to determine whether Rio should bear some responsibility for what the Chinese court says happened. If the SEC concludes that anti-corruption laws were breached as BHP and its partners acquired minerals rights, similar questions will be asked of BHP about whether the breaches were renegade acts, or sanctioned.
At the very least it looks as though the auditing trails that support BHP's comprehensive ban on preferential payments will need to be overhauled. The group's code of conduct expressly forbids improper payments, and defines them exhaustively. There are already enough doubts about what happened to suggest that its policing of those rules failed.
mmaiden@theage.com.au
Sydney Morning Herald
April 22, 2010
BHP BILLITON'S blue-chip reputation has been tarnished by a foreign bribes scandal, believed to involve the group's abandoned bauxite exploration project in Cambodia where the payment of ''tea money'' to gain access to exploration ground is rife.
The scandal has been under investigation by the US Securities and Exchange Commission since August but only became ominous for BHP in a reputational sense yesterday when the Australian resources giant admitted the bribery claims could have merit.
BHP disclosed that its own internal investigation - a response to inquiries from the SEC - had uncovered evidence ''regarding possible violations of applicable anti-corruption laws involving interactions with government officials''.
It did not name the country or the now abandoned projects involved. While Cambodia was the popular tip by the non-government organisations that monitor the behaviour of the global miners in Third World countries, a nickel project in the Philippines was also mentioned by the organisations.
Either way, the revelations are a blow to BHP Billiton's need to maintain a squeaky clean corporate image while waiting on clearance from global regulators for its $US115 billion ($123 billion) iron ore production joint venture with Rio Tinto, a proposed deal that has angered the Chinese steel industry, the world's biggest. It was notable that while BHP would not name the country at the heart of the bribery scandal, it was prepared to volunteer that it was not China.
''We are limited in what we can comment on as the matter is still under investigation,'' it said.
''However, we can confirm that the SEC's requests for information primarily relate to certain terminated minerals exploration projects and not any activity in China, BHP Billiton's marketing activities or the sale of any of the company's products.''
Rio itself has suffered damage to its reputation in recent weeks. Last month China jailed four iron ore traders, including the Australian citizen Stern Hu, for accepting bribes and stealing commercial secrets. They were sentenced to between seven and 14 years' jail.
BHP is being assisted in the investigation by the New York law firm Davis Polk & Wardell. BHP would not comment on whether any of its employees had been stood down pending completion of the inquiry.
The bombshell was contained on the third page of an exploration and development report to the stock exchange for the March quarter.
BHP believes it was not obliged to make an earlier disclosure on the SEC investigation. But it now considers it relevant information - at least in the context of announcing in the exploration and development report - following its more recent discovery of possible anti-corruption violations.
''The company is co-operating with the relevant authorities including conducting an internal investigation, which is continuing. It is not possible at this time to predict the scope or duration of the investigation or its likely outcome,'' BHP said.
Under the US Foreign Corrupt Practices Act, BHP could be fined up to $US2 million while ''officers, directors, stockholders, employees, and agents are subject to a fine of up to $US100,000 and imprisonment for up to five years''.
The laws were introduced in the 1970s after more than 400 US companies admitted making questionable or illegal payments to foreign government officials to secure favourable treatment.
In a report by the British advocacy group Global Witness, published in February last year, the group cites a 2007 article in The Cambodian Daily which says that Cambodia's Minister for Water Resources, Lim Kean Hor, told the National Assembly BHP had paid $US2.5 million to the government to secure a bauxite mining concession.
''Lim Kean Hor is reported to have described this payment as 'tea money', an unofficial payment in Cambodia,'' the report says.
BHP rejected the claim in a letter in November 2008 to Global Witness saying the money was used for a social development program. ''In … terms of the minerals exploration agreement with the Cambodian government, which granted BHP Billiton and Mitsubishi the right to explore for bauxite, an amount of $US1 million was formally paid to the Cambodian government in September 2006,'' BHP wrote.
''If the money appears elsewhere … it is not clear where,'' the Global Witness report said. ''This raises questions as to where BHP Billiton's $US1 million payment made in September 2006 has gone.''
-----------------------------------
BHP dawdles to reveal SEC probe
Sydney Morning Herald
April 22, 2010
BHP Billiton learned last August that its acquisition of exploration rights in Asia years earlier was the subject of a US Securities and Exchange Commission investigation, and it found out because the SEC told it so.
BHP sat on that information until yesterday, when it used a routine quarterly announcement to reveal that it had checked out the matter, had found evidence pointing to ''interactions'' with government officials that may have breached anti-corruption laws, and had passed that information on to the authorities.
The questions raised by this are: why didn't BHP brief the markets last August; and why did it choose not to announce the probe separately yesterday.
And the short-term answers are: BHP didn't reveal the SEC investigation last August because its legal advice was that under its continuous disclosure obligations it did not need to; and it revealed the investigation yesterday inside another, regular announcement because it believed the matter did not warrant immediate, separate disclosure.
As unsatisfying as those answers might be, they suggest one thing: BHP at this stage is confident that it is not headed into the same kind of nightmare that Rio Tinto has been in for more a year since the detention, charging and conviction of four of its Shanghai-based executives for taking bribes and obtaining commercial secrets about China's steel industry. That confidence is going to be tested as the facts emerge.
BHP was precise and sparing with what it said yesterday in a single paragraph at the bottom of page three of its March-quarter exploration and development report.
It said that the SEC had requested information as part of an investigation into ''certain terminated minerals exploration projects'' and that as a result it had uncovered evidence of possible violations of anti-corruption laws involving ''interactions'' with government officials. The group said it was co-operating with the investigation while continuing its own examination, and said it could not predict where the affair was headed, or how long it would take it to get there.
Separately, a spokesman created distance from the Rio debacle, saying that the investigation did not relate to any activity in China, or the sale and marketing of BHP products.
It is believed that the SEC is looking mainly at the $US1 million acquisition of bauxite mineral rights in Cambodia in 2006 by a consortium led by BHP and Mitsubishi. The purchase of mineral rights in the Philippines may also be a focus.
A British anti-corruption advocacy group, Global Witness, reported in February last year that the $US1 million payment seemed not to have been booked by the Cambodian government, which recorded revenue of only $US443,866 from mining concessions that year.
BHP defended the deal at that time as being above board, and in an interview Global Witness director Gavin Hayman congratulated the mining group for being ''transparent'' and responding to inquiries.
Last August, however, BHP was contacted by the SEC and asked to use its own resources to inquire into the Cambodian deal. BHP took the position that the SEC's approach was not material, and its own investigation was complicated by the fact that the projects had already been shut down after being rated as non-goers commercially. But what it found raised enough questions about how BHP gained mineral rights for it to make renewed contact with the SEC.
Even then, however, BHP waited a short time before announcing the SEC probe, and its discovery of possible breaches of anti corruption laws. The group's position is that its
re-examination of the payments has raised questions about them, rather than revealed them to have been illegal, something that would have required immediate disclosure.
Despite BHP's apparent confidence, news of the probe comes at a challenging time for the mining group. It is in the midst of attempting to persuade competition regulators in Australia, Europe and the US to approve its proposed Pilbara iron ore merger with Rio, and it is also preparing for the imminent release of a tax report from Ken Henry that will almost certainly recommend a new tax on mining company super-profits.
The issues it potentially faces are similar to those Rio is dealing with in the wake of the Chinese court's finding that four of its employees obtained commercial secrets.
Regulatory inquiries are under way in the US, Australia and Britain to determine whether Rio should bear some responsibility for what the Chinese court says happened. If the SEC concludes that anti-corruption laws were breached as BHP and its partners acquired minerals rights, similar questions will be asked of BHP about whether the breaches were renegade acts, or sanctioned.
At the very least it looks as though the auditing trails that support BHP's comprehensive ban on preferential payments will need to be overhauled. The group's code of conduct expressly forbids improper payments, and defines them exhaustively. There are already enough doubts about what happened to suggest that its policing of those rules failed.
mmaiden@theage.com.au
No comments:
Post a Comment