BHP probes Asian graft after US regulator's queries
- From: The Australian
- April 22, 2010
BHP Billiton's proposed $US116 billion iron ore merger with Rio Tinto faces a fresh threat after BHP yesterday admitted it had uncovered possible corruption in dealings with government officials over the acquisition of offshore mining interests.
The Australian understands the admission relates to bauxite exploration ground in Cambodia that BHP exited about a year ago, and possibly ground in other countries.
BHP outed itself yesterday, saying an internal investigation, spurred by queries from the US Securities and Exchange Commission, had made the findings.
"The company has disclosed to relevant authorities evidence that it has uncovered regarding possible violations of applicable anti-corruption laws involving interactions with government officials," BHP said in a short statement at the end of its quarterly development and exploration report.
Yesterday, BHP refused to say where the potential violations had taken place, but stressed it was not in China and that the area had been exited about a year ago on commercial grounds. It is also understood it is not in the US.
The revelations come three weeks after Rio Tinto said it would terminate the employment of jailed iron ore executive Stern Hu and three other Shanghai employees after they admitted they had taken bribes. It is unclear what the BHP violations involve.
But BHP's exit from Cambodia came after a report from Nobel Prize-nominated human rights group Global Witness drew attention to $US3.5 million of BHP payments that the Cambodian government had said were in return for exploration rights to 100,000 hectares of bauxite exploration ground in Mondulkiri Province.
According to the February 2009 report, Cambodian Water Minister Lim Kean Hor reportedly told the National Assembly that BHP had paid $US2.5 million to secure the concession.
He described the payment from BHP as "tea money" -- a customary Cambodian term for an unofficial payment. In a letter to Global Witness, BHP rejected the report, saying the $US2.5 million payment had been to set up a social development fund.
"BHP Billiton has never made a payment to a Cambodian Government official or representative and we reject any assertion that the payment under the minerals exploration agreement is, or the amounts contributed to the Social Development Projects Fund are, `tea money'," BHP said in the letter.
BHP also confirmed it and partner Mitsubishi had made an additional $US1 million official payment to the Cambodian government to secure access to the minerals concession.
But according to the Cambodian Ministry of Finance total non-tax revenue from mining concessions was $US443,866, the report said.
"This raises questions as to where BHP Billiton's $US1m payment, made in September 2006, has gone," Global Witness said.
The revelations come as BHP Billiton and Rio Tinto try to convince regulators in Europe, Australia and Asia to sign off on a $US116bn merger of their iron ore operations.
"It is absolutely despicable timing," said Pengana Capital fund manager Tim Schroeders. It was human nature that the disclosure would have some influence on authorities deciding on the massive iron ore joint venture.
Other analysts said that because of the small size of the apparent payments and the fact BHP had left the ground involved, it was unlikely there would be material repercussions for the miner.
"But it could damage BHP's reputation, and depending on what is uncovered, have an impact on regulatory approval of the iron ore joint venture," said one analyst at a major broking firm.
The EU's competition watchdog, the European Commission, is investigating the iron ore tie-up planned by BHP and Rio, amid opposition from European and Asian steelmakers.
The steelmakers are expected to use any evidence of wrongdoing by the miners in their arguments.
BHP would give no indication of when more information might be revealed.
"The company is co-operating with the relevant authorities including conducting an internal investigation, which is continuing," BHP said.
"It is not possible at this time to predict the scope or duration of the investigation or its likely outcome."
ADDITIONAL REPORTING: AAP
-------------------------------------
BHP faces investigation into $2.7m Cambodia graft claim
* Matt Chambers and Matthew Stevens
* From: The Australian
* April 22, 2010
BHP Billiton yesterday joined Rio Tinto in battling graft allegations, saying it had uncovered evidence of possible corruption by employees on an overseas project.
The Australian understands the conduct, now under investigation by the powerful Securities and Exchange Commission in the US, relates to a bauxite exploration project in Cambodia.
BHP has admitted making a $US2.5 million ($2.7m) payment to the community near the bauxite project, in the northeastern Cambodian province of Mondulkiri, near the Vietnamese border.
A Cambodian government minister described the payment as "tea money", a local term for unofficial payments to government officials.
BHP has rejected this, saying the money was put into a development fund investing in local social welfare programs. The company said it had paid $US1m in September 2006 to the Cambodia government for bauxite exploration rights.
BHP yesterday declined to reveal where the alleged corruption occurred, stressing only that it was not China. It would not comment on what the behaviour involved and whether employees had stood down or been fired but it said the activities involved mineral exploration, not marketing its products.
Last month, Rio sacked four workers, including Australian Stern Hu, after they were convicted of bribery and stealing commercial secrets related to deals to sell iron ore to Chinese steel mills. Rio has introduced sweeping changes to its Chinese operation and is conducting a review to avoid a repeat of the scandal.
Yesterday, BHP said the alleged corruption was uncovered after the SEC queried it during an investigation into mineral exploration projects.
"The company has disclosed to relevant authorities evidence it has uncovered regarding possible violations of applicable anti-corruption laws involving interactions with government officials," BHP said yesterday in a statement.
According to a report in The Cambodia Daily in July 2007, the nation's National Assembly was told BHP had paid $US2.5m to the government to secure exploration rights to a bauxite deposit in Mondulkiri with Japanese industrial giant Mitsubishi.
The claim was made by the then water minister, who described the payment as "tea money".
The minister's comments informed a report into Cambodian corruption by the non-government organisation Global Witness. The report, Country for Sale, details the claims and BHP's rejection of them.
Global Witness wrote to BHP in October 2008 requesting details of any and all payments made to the Cambodian government.
BHP responded saying it had put $US2.5m into a development fund and it had paid $US1m in September 2006 to the government for bauxite exploration.
"BHP Billiton has never made a payment to a Cambodian government official or representative, and we reject any assertion that the payment under the minerals exploration agreement is, or amounts contributed to the Social Development Projects Fund are, `tea money'," the miner said.
While Global Witness did not draw any negative conclusions about the management of the development fund, it did identify an issue with the $US1m payment to government, although one outside the control of BHP.
But BHP's exit from Cambodia came after a report from Nobel Prize-nominated human rights group Global Witness drew attention to $US3.5 million of BHP payments that the Cambodian government had said were in return for exploration rights to 100,000 hectares of bauxite exploration ground in Mondulkiri Province.
According to the February 2009 report, Cambodian Water Minister Lim Kean Hor reportedly told the National Assembly that BHP had paid $US2.5 million to secure the concession.
He described the payment from BHP as "tea money" -- a customary Cambodian term for an unofficial payment. In a letter to Global Witness, BHP rejected the report, saying the $US2.5 million payment had been to set up a social development fund.
"BHP Billiton has never made a payment to a Cambodian Government official or representative and we reject any assertion that the payment under the minerals exploration agreement is, or the amounts contributed to the Social Development Projects Fund are, `tea money'," BHP said in the letter.
BHP also confirmed it and partner Mitsubishi had made an additional $US1 million official payment to the Cambodian government to secure access to the minerals concession.
But according to the Cambodian Ministry of Finance total non-tax revenue from mining concessions was $US443,866, the report said.
"This raises questions as to where BHP Billiton's $US1m payment, made in September 2006, has gone," Global Witness said.
The revelations come as BHP Billiton and Rio Tinto try to convince regulators in Europe, Australia and Asia to sign off on a $US116bn merger of their iron ore operations.
"It is absolutely despicable timing," said Pengana Capital fund manager Tim Schroeders. It was human nature that the disclosure would have some influence on authorities deciding on the massive iron ore joint venture.
Other analysts said that because of the small size of the apparent payments and the fact BHP had left the ground involved, it was unlikely there would be material repercussions for the miner.
"But it could damage BHP's reputation, and depending on what is uncovered, have an impact on regulatory approval of the iron ore joint venture," said one analyst at a major broking firm.
The EU's competition watchdog, the European Commission, is investigating the iron ore tie-up planned by BHP and Rio, amid opposition from European and Asian steelmakers.
The steelmakers are expected to use any evidence of wrongdoing by the miners in their arguments.
BHP would give no indication of when more information might be revealed.
"The company is co-operating with the relevant authorities including conducting an internal investigation, which is continuing," BHP said.
"It is not possible at this time to predict the scope or duration of the investigation or its likely outcome."
ADDITIONAL REPORTING: AAP
-------------------------------------
BHP faces investigation into $2.7m Cambodia graft claim
* Matt Chambers and Matthew Stevens
* From: The Australian
* April 22, 2010
BHP Billiton yesterday joined Rio Tinto in battling graft allegations, saying it had uncovered evidence of possible corruption by employees on an overseas project.
The Australian understands the conduct, now under investigation by the powerful Securities and Exchange Commission in the US, relates to a bauxite exploration project in Cambodia.
BHP has admitted making a $US2.5 million ($2.7m) payment to the community near the bauxite project, in the northeastern Cambodian province of Mondulkiri, near the Vietnamese border.
A Cambodian government minister described the payment as "tea money", a local term for unofficial payments to government officials.
BHP has rejected this, saying the money was put into a development fund investing in local social welfare programs. The company said it had paid $US1m in September 2006 to the Cambodia government for bauxite exploration rights.
BHP yesterday declined to reveal where the alleged corruption occurred, stressing only that it was not China. It would not comment on what the behaviour involved and whether employees had stood down or been fired but it said the activities involved mineral exploration, not marketing its products.
Last month, Rio sacked four workers, including Australian Stern Hu, after they were convicted of bribery and stealing commercial secrets related to deals to sell iron ore to Chinese steel mills. Rio has introduced sweeping changes to its Chinese operation and is conducting a review to avoid a repeat of the scandal.
Yesterday, BHP said the alleged corruption was uncovered after the SEC queried it during an investigation into mineral exploration projects.
"The company has disclosed to relevant authorities evidence it has uncovered regarding possible violations of applicable anti-corruption laws involving interactions with government officials," BHP said yesterday in a statement.
According to a report in The Cambodia Daily in July 2007, the nation's National Assembly was told BHP had paid $US2.5m to the government to secure exploration rights to a bauxite deposit in Mondulkiri with Japanese industrial giant Mitsubishi.
The claim was made by the then water minister, who described the payment as "tea money".
The minister's comments informed a report into Cambodian corruption by the non-government organisation Global Witness. The report, Country for Sale, details the claims and BHP's rejection of them.
Global Witness wrote to BHP in October 2008 requesting details of any and all payments made to the Cambodian government.
BHP responded saying it had put $US2.5m into a development fund and it had paid $US1m in September 2006 to the government for bauxite exploration.
"BHP Billiton has never made a payment to a Cambodian government official or representative, and we reject any assertion that the payment under the minerals exploration agreement is, or amounts contributed to the Social Development Projects Fund are, `tea money'," the miner said.
While Global Witness did not draw any negative conclusions about the management of the development fund, it did identify an issue with the $US1m payment to government, although one outside the control of BHP.
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