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Guinea: Steinmetz $9 Billion Fortune at Risk in Soros-Backed Probe


Bloomberg.com

By Matthew Campbell, Jesse Riseborough & Franz Wild – May 9, 2013

Lansana Conte, the former dictator of Guinea, once held sway over an asset that mining companies craved: the world’s largest undeveloped iron ore deposit, valued today at as much as $50 billion.

BSG Resources Ltd., the diamond producer controlled by Israeli billionaire Beny Steinmetz, was among those firms that came calling starting in 2005. The perks allegedly offered: A gift of a $60,000 diamond-studded gold watch and the promise of a $2.5 million commission to Conte’s wife if BSGR got the mining license. In 2008, BSGR was awarded the license.

Today Conte is dead, three people are under arrest and Steinmetz’s $8.9 billion fortune is threatened. U.S. prosecutors are probing whether a man linked to BSGR paid Guinean officials as much as $12 million in bribes for obtaining mining rights to a portion of the site. Citing similar suspicions, the new Guinean government has said it might strip Steinmetz’s company of the license — putting at risk a $2 billion payment he’s due and the reputation of a key figure in the global trade in high-end diamonds.

“As a scion from a notable traditional diamond family, he grew up knowing that what makes a man is his reputation,” said Chaim Even-Zohar, the author of “The Steinmetz Diamond Story,” a book on the billionaire’s business. “My guess would be that he is deeply hurt.”

Payoff Report

The allegations of payoffs are detailed in a 28-page report, obtained by Bloomberg, prepared by U.S. law firm DLA Piper. The firm was hired by Guinea at the recommendation of hedge fund billionaire George Soros, 82, who’s advising the government through his foundations. Soros, who regularly backs young democratic governments in eastern Europe and Africa, funded the initial DLA Piper investigation, said a person familiar with the matter who asked not to be identified discussing a private issue. His aim was to provide legal counsel to the government that could match the resources of big mining companies, the person said.

Steinmetz and BSGR, based in Guernsey, deny wrongdoing in Guinea and describe themselves as victims of a conspiracy by current Guinea President Alpha Conde and Soros to revoke the firm’s mining license.

BSGR “became the victim of numerous extortion attempts by individuals who were seeking economic gains,” it said today in an e-mailed statement. “The modus operandi of these attempts involved at times the use of forged documentation, blackmail and harassment. BSGR is confident that its activities and position in Guinea will be fully vindicated.”

Better Terms

The 57-year-old Steinmetz’s troubles show the high stakes for resource firms as increasingly assertive African countries, backed by Western donors and governments, re-open mining contracts to hunt for past impropriety and win better terms for citizens. The probes have slowed development of the Guinea site, known as Simandou, whose mining rights are also held by companies including Rio Tinto Group (RIO) and Vale SA. The mountain-top site contains an estimated 26.5 billion metric tons of iron ore resources, said Paul Gait, a mining analyst at Sanford C. Bernstein Ltd. in London.

“This is the most prospective, highest-grade deposit of as yet undeveloped iron ore in the world,” Gait said.

Born in Israel, Steinmetz grew up in the family diamond business, Steinmetz Diamond Group, founded by his father in 1940. The closely held company specializes in the largest and most valuable stones, among them the 203-carat Millennium Star Diamond unveiled by De Beers SA to mark the year 2000. New York-based Tiffany & Co. (TIF) loaned BSGR $50 million in 2011 to expand a mine in Sierra Leone. Steinmetz also supplies diamonds to New York-based Sotheby’s Holdings Inc. for the auction house’s product line.

‘Hard-Nosed’

The diamond group is valued at about $3 billion, accounting for the biggest portion of Steinmetz’s wealth, according to the Bloomberg Billionaires Index. The family’s other interests include mining, oil, gas and real estate.

“In business he is very hard-nosed, maybe bordering on the ruthless — but always legitimate and fair,” said Even-Zohar of Steinmetz, whom he counts as a “good friend.”

The Simandou controversy traces back to 1997, when London-based Rio Tinto was granted a government license to explore the iron ore mine. In 2008, a few months before he died, Conte stripped Rio of half its license, claiming that it wasn’t developing the site quickly enough. The government then awarded it to BSGR for free, which is typical in the industry. The company began spending $160 million preparing the remote site for mining.

Vale Stake

After 18 months, in 2010, BSGR agreed to sell 51 percent of the stake to Brazil’s Vale for $2.5 billion. Vale paid $500 million upfront and the two firms set up a joint venture to develop the site. The remaining $2 billion has not been paid.

“It was an extraordinary deal given its scale,” said John Meyer, an analyst with London-based SP Angel Corporate Finance LLP.

Vale has said it’s not implicated in the investigations.

New York grand jury started its probe earlier this year into whether BSGR violated the Foreign Corrupt Practices Act by delivering bribes, according to prosecutors. The law bars companies with American links from engaging in bribery abroad. A portion of the alleged payments were sent to the U.S., prosecutors said.

On April 25 the grand jury indicted Frederic Cilins, a French citizen, on charges of witness tampering and obstructing the Guinea investigation. Cilins was described by Guinean Justice Minister Christian Sow as an “agent” of BSGR.

Widow Informant

In March he had met in Jacksonville, Florida, with a woman who was wearing a wire, and offered her more than $1 million in exchange for help burning documents related to the BSGR deal, according to the federal complaint.

The woman was Mamadie Toure, a widow of former president Conte who turned FBI informant in the hopes of reducing her own charges, according to a person familiar with the investigation.

The DLA Piper report described Cilins as an intermediary for payments from BSGR to Conte’s wives and for “gifts” to members of the president’s family and government officials. Cilins denies wrongdoing. BSGR today said it sought to work with Cilins and two other men, through a company called Pentler Holdings, from 2006 because BSGR lacked a “permanent presence in Guinea.”

Pentler took a 17.7 percent stake in BSGR’s Guinea unit in March 2006 before it was bought out by BSGR two years later, which is when the arrangement with Cilins ended.

In U.S. federal prosecutions, lower-ranking defendants are often offered lighter sentences in exchange for agreeing to testify against figures more central to alleged crimes.

License Review

The Guinean government began reviewing the Simandou license soon after Alpha Conde took office in 2010 as the country’s first freely elected president. Based on the DLA Piper report and its own investigation, the government last month arrested two BSGR employees in connection with the probe: Ibrahima Sory Toure, Mamadie Toure’s brother who was director of external relations, and Issaga Bangoura, a security official. Both men have denied wrongdoing.

BSGR has fought back vigorously. It’s taken aim at Soros, Conde and Rio Tinto, which it says established a “covert special project group dedicated to committing espionage” and harassed its workers by buzzing them with low-flying helicopters.

Public Relations

BSGR has also sued its former public relations adviser, FTI Consulting, accusing it of abetting a “smear campaign” directed by Soros. Soros is “determined to ensure” that the mining license “was withdrawn/canceled” by the government of Guinea, according to the lawsuit. It cited alleged comments by FTI executives that Soros had a “personal obsession” about BSGR.

Soros rejects the claim that he engaged in a smear campaign and that he conspired to strip Steinmetz’s license, a spokesman for Soros Fund Management LLC said in an e-mailed statement.

FTI and Mark Malloch-Brown, its chairman for Europe, the Middle East and Africa, deny working against BSGR and said they will contest the claim. Rio Tinto declined to comment.

Conde, who took office promising to root out corruption, has attracted significant foreign backers. Soros’s Revenue Watch Institute, an offshoot of his Open Society Foundations, advised Conde on a new mining code and anti-corruption measures, the person familiar with his activities said. Global Witness, an anti-corruption group whose advisory board includes Soros’s son Alexander and which he funds, chronicles alleged wrongdoing in Guinea.

‘Personal Relationship’

And former British Prime Minister Tony Blair established a relationship with Conde through his African Governance Initiative, which set up an office in Conakry, Guinea’s capital, to assist his presidency. Conde last year secured $2.1 billion in debt relief from the International Monetary Fund and World Bank, a recognition of his move to civilian rule.

“The personal relationship between Mr. Soros, Mr. Blair, and Mr. Conde is really important, and has an impact in terms of reassuring leaders that we are going in the right direction,” Guinean Finance Minister Kerfalla Yansane said by phone. “At this juncture we need big support to challenge these companies, who can hire lawyers and PR firms and have resources we don’t.”

Guinea isn’t the only African state where deals with middlemen have led to controversy for international mining groups. Eurasian Natural Resources Corp., a London-based, Kazakh-backed mining firm, is being probed by U.K. prosecutors into allegations it paid bribes to win business in Kazakhstan and Africa. The company said on April 25 that it is cooperating with authorities. And countries including Ghana and Zambia are driving a harder bargain with mining firms, reviewing taxation and state-ownership clauses.

High Stakes

The stakes for getting Simandou mined are high for Guinea, whose population is about 11 million. It ranks 178th out of 187 nations on the UN Human Development Index, which measures indicators of poverty and health.

“The economic growth profile of the country is expected to completely be changed” by the mine, Yansane said.

Rio Tinto CEO Sam Walsh has said the company, which says it has spent $2.3 billion at the site, is committed to developing its portion of Simandou. It predicted production would start in 2015.

BSGR has also said it’s committed to developing Simandou, and remaining in Guinea despite the corruption allegations.

The government realizes the Steinmetz controversy may spook the investors it needs to raiseliving standards, Yansane said. For that reason, “We want this problem resolved as quickly as possible,” he said. “We don’t want the name of the country to be on the front page of newspapers all the time.”

To contact the reporters on this story: Matthew Campbell in London atmcampbell39@bloomberg.net; Jesse Riseborough in London at jriseborough@bloomberg.net; Franz Wild in Johannesburg at fwild@bloomberg.net

To contact the editors responsible for this story: Jacqueline Simmons atjackiem@bloomberg.net; John Viljoen at jviljoen@bloomberg.net

UN lifts lid on incompetent, abusive and corrupt peacekeepers


Times

Apr 19, 2013 | Sapa-AP

The chief procurement officer in the UN peace-building mission in Sierra Leone signed three contracts worth more than $2.7 million in total, way in excess of his $50 000 per contract limit.

UN Flag. File photo.

Photograph by: Ralph Orlowski/ Getty Images

A staff member in the UN peacekeeping mission in Congo used a UN vehicle without authorisation to transport sacks of a precious mineral into a neighbouring country. The UN mission in Liberia was unable to account for 70 vehicles.

Those were just three of the examples fraud, bribery, financial and procurement misconduct and incompetence cited in the annual report of the UN’s internal watchdog, which circulated Thursday.

Since the oil-for-food scandal in Iraq that blew up after the US-led invasion, the UN has sought to strengthen oversight of its peacekeeping, which is its largest operation, both in personnel and cost. The UN has more than 100 000 peacekeepers.

The Office of Internal Oversight Services completed 42 investigations of sexual exploitation, abuse involving minors or rape.

In the peacekeeping mission in Haiti, for example, OIOS said it received a report that one or more police officers had sexually exploited a 14-year-old boy. An investigation produced clear evidence, including a handwritten admission by the officer, who was dismissed and sentenced to one year of “rigorous imprisonment,” the report said.

While the officer was punished, OIOS expressed regret “that the sexual exploitation and abuse of the boy had likely occurred over a three-year period but had remained undetected until 2012.”

The report did not specify the outcome of all of the 42 sexual abuse cases.

“Sexual exploitation and abuse remains a significant area of concern, with the greatest number of such offences being committed by uniformed personnel,” there report said.

The office urged stepped up efforts to prevent sexual abuse, saying the continuing allegations “reflect a failure to create and sustain an environment that deters such behaviour.”

Several cases of sexual abuse were also reported in Congo.

Also in that African country, the OIOS said local authorities arrested a staff member transporting sacks of precious minerals on suspicion of mineral trafficking. He was convicted of rebellion, attempted fraud, illegal ownership and transport of minerals, and is currently in prison.

Elsewhere, OIOS said the UN mission in Afghanistan spent about $42 000 to airlift obsolete and damaged equipment from the northern city of Mazar-e-Sharif to the capital Kabul from January 2010 to December 2011 when it could have been transported by road for about $1 400.

The UN mission in Iraq overpaid two contractors a total of $632 992, it said, and at the joint UN-African Union peacekeeping mission in Darfur, a staff member with expired procurement authority approved 87 purchase orders valued at $29.13 million.

In impoverished Liberia, which is emerging from a long civil war, OIOS said the UN peacekeeping mission was unable to account for 70 vehicles “owing to the lack of adequate and effective procedures to safeguard assets.”

It said 20 of 64 closed circuit televisions installed after the theft of four vehicles weren’t operational and data was only stored for a week. It said 12 of 21 heavy vehicles had been in the workshop for over a year, and two others for over three years, because of the lack of spare parts.

OIOS said only two of 25 “quick impact” projects supported by the Liberian mission and designed to provide jobs and spur the economy were completed in the three-month time frame. Thirteen took up to three years to finish, OIOS said.

The OIOS also criticised the UN peace building mission’s management in Sierra Leone, which is trying to rebuild after the end of a civil war in 2002.

The report said the chief procurement officer in Sierra Leone signed off on contracts of $814 834, $1 815 652 and $105 000, even though he only had authority to sign for $50 000. The report did not say what happened to the officer.

The OIOS also said the Sierra Leone mission awarded six contracts without competition to vendors that didn’t meet UN requirements.

When the UN wrapped up its mission in the Central African Republic and Chad, OIOS said $1.1 million worth of equipment and material that was supposed to be shipped to other missions was kept in the port at Douala, Cameroon from July 2011 until July 2012 by the freight contractor.

“As a result, assets depreciated and may have deteriorated in storage if conditions were not optimal,” it said.

Call for African governments to collaborate on procurement reform


Supply Management

15 October 2012 | Anna Reynolds

African governments should work together and pool procurement systems to develop more efficient and transparent public services.

This was the message given to delegates attending the Commonwealth Public Procurement Network (CPPN) conference in Tanzania last week, which examined the reforms taking place in public financial and procurement systems across African Commonwealth countries.

The CPPN was set up by the Commonwealth Secretariat in 2006 to provide a platform for policy makers and regulators to recommend changes to governments to ensure best value delivery of public services.

Marcel Holder Robinson, acting adviser of public expenditure management at the Commonwealth Secretariat, told SM: “Governments can no longer view procurement as an administrative function, but rather a strategic and political one.”

The conference looked at member countries that have implemented new procurement structures, such as in Tanzania where a procurement complaints body and a board of purchasing and supply professionals have been set up under the control of the public procurement policy division in the Ministry of Finance.

The CPPN also identified the constraints and benefits of countries shifting from a largely legal-based procurement system to a more up-to date public procurement system involving performance management and accountability structures, which has taken place in Ghana.

“While embracing the values of a sound procurement system, there was consensus among the delegates on the merits of emerging trends such as a sustainable approach to procurement, e-procurement and collaborative procurement to achieve greater value for targeted segments as well as for society at large,” said Anund Mudhoo, chair of the CPPN.

A review was carried out into what steps are being taken to address green and socially responsible procurement. A panel asked whether countries are becoming a dumping ground for poor quality products and if enough is being done to prevent corruption and abuse of employment and health and safety laws.

Additional areas of discussion were women’s participation in public contracting in South Africa and using IT for improved purchasing processes.

One outcome of the conference has been the development of an online community, which has been built by the Commonwealth Secretariat enabling countries to share information and advice.

The conference also encouraged the benefits of pooled procurement systems in sub-regions. It advised collaboration on areas such as price negotiation, quality assurance and supplier prequalification.

The CPPN called for more current data on member countries’ reforms and has begun working on an initiative to address this matter.

The network is also working to establish relationships with organisations that hold similar interests and collaborate to design programmes to help countries implementing procurement reforms.

The conference was attended by more than 140 senior procurement officials from over 20 commonwealth countries, including Botswana, Cameroon, Ghana, Lesotho, Malawi, Mauritius, Namibia, Nigeria, Rwanda, Seychelles, South Africa, Sierra Leone, Sri Lanka, St Lucia, Swaziland, Tanzania, The Gambia, Uganda and Zambia, as well as representatives from CIPS Africa, the African Capacity Building Foundation and the Centre for the Development of Enterprise.

Monitoring Findings of the Sierra Leone Coalition for Budget and Procurement Transparency in the Education Sector


Awareness Times Newspaper in Freetown

August21, 2012

TRANSPARENCY INTERNATIONALSierra Leone

20, Dundas Street, Freetown, Sierra Leone, West Africa P.O Box 1312

Press Release

Monitoring Findings of the Sierra Leone Coalition for Budget and Procurement Transparency in the Education Sector

“The Sierra Leone Coalition for Budget and Procurement Transparency in the Education Sector” supported by Open Society Initiative for West Africa (OSIWA) through its monitoring exercises had so far made the following findings.

1. There are established procurement committees with the required membership in all the entities monitored

2. Most of the procurement units monitored were able to produce documentary evidence of procurement committee meetings, bid documents, etc.

3. All the bid openings were done in public

4. Most of the procurement committees work independently without administrative or  political influence

5. Lack of adequate equipment like computers, printers in all the Procurement Units monitored. This will affect there efficiency of the unit and proper storage of records

6. In some entities, there is semblance of administrative/ political interference in public procurement processes. This will undermine the independence of the Unit

7. In all the entities monitored, there is inadequate number of procurement professionals to effectively handle procurement processes especially in big councils like the Freetown City Council. This is one of the factors responsible for flouting procurement regulations.

8. There is in most cases the absence of technical experts in the preparation of bids and the award of contracts. This can lead to the quotation of wrong specifications of goods, works and services required.

9. In most of the councils monitored, there is no documentary evidence of the 5% retention fee for every contract awarded especially works. This makes it  difficult to track contractors who abandon their contracts before completion

10. There is insufficient teaching and learning materials like text books in most of the schools monitored

11. There is delay, and sometimes non-payment of the 5% retention fees

12. In most of the entities monitored contract details including BOQs are not publicly displayed. This makes monitoring of contract performance very difficult

For more information or clarification please contact Transparency International Secretariat 20 Dundas Street Freetown or call Mr. Edward B. Koroma (Project Coordinator) on the following mobile telephone numbers 076-407979/033-445884/077-173936.

© Copyright 2005, Freetown, Sierra Leone.

Kenya: IEBC Tender Team Quits Over Biometric Deal


 

AllAfrica.com

BY MOSOKU GEOFFREY

July 16th, 2012

Uncertainty hangs over the process of awarding the Biometric Voter Registration (BVR) solution kits contract after the IEBC tender committee stepped aside last week. The team quit following weeks of squabbles pitting some IEBC commissioners against its secretariat and they have been tussling over which firm is the most suitable to be awarded the tender.

The Praxedes Tororey-led committee handed in their resignation on Friday, only days after CEO James Oswago appeared to reject their second report for the multibillion-shilling tender award. Oswago had written to the Public Procurement and Oversight Authority (PPOA) seeking guidance on the recommendation to award the tender to Face Technologies of South Africa that emerged third in cost evaluation.

Face Tech, which quoted Sh4.63 billion, was ranked third by the commission’s technical evaluation committee behind 4G Identity Solutions of India and Symphony of Kenya with bids of Sh3.76 billion and Sh3.98 billion respectively. The committee also short-listed OnTrack of Israel which was asking for Sh8.31 billion to carry out the contract of supplying IEBC with the electronic voter registration kits.

Earlier the committee had recommended the award to 4G Solutions of India but the report was returned for reassessment when claims cropped up that the firm had been blacklisted in India. A team of eight officers of the technical committee travelled to India in May on a due diligence mission. The technical team reportedly said that 4G had been cleared of the performance queries.

Sources within the commission now say some commissioners are pushing for Face Tech to be given the tender due to its experience having conducted voter registration in South Africa, Namibia, Mozambique, Sierra Leone, Lesotho and Sri Lanka. Their argument is that even though 4G was the lowest bidder, it has no experience in voter registration, having only been involved in Identity Card registration in India.

Out of the the 28 firms that bid for the tender, only Face Tech (55m US$), Canadian firm Code (56mUS$), and OnTrack of Israel (99m pounds) had the experience of having registered voters. This is said to have informed the decision to consider Face Tech, which came second in financial evaluation and number one in technical evaluation. OnTrack emerged number one in financial evaluation. However in price quotation, 4G emerged the cheapest.

Procurement expert Dennis Omondi argues that the price of the bidder is not the automatic consideration when awarding a tender but the experience and financial stability of the firm also matter. “If number one or even number two are disqualified for any reason, the Act allows procurement entity to evaluate up to the time they get a contractor who best meets their objectives,” Omondi says.

Omondi argues that the law provides for room in price negotiation before a contract is signed. However, Oswago said the law envisages the lowest bidder be awarded the contract. “You have to look at the law and see what it provides,” Oswago said. He further argued that the tender and evaluation committees are bound by law to work within the budget and available funds for that specific procurement of goods or service.

Section 26 (3) of the Procurement and Public Disposal Act of 2005 states; “All Public Procurement shall be (a) within the approved budget of the procuring entity and shall be planned by the procuring entity concerned through an annual procurement plan.” Oswago told the Star that “IEBC wrote to Treasury and sought Sh3.4 billion which we were provided with as it was within our annual plan and therefore I don’t think the tender committee will work outside this amount. I will defend my officers with my life if their report is within the law”.

The current stalemate is threatening to derail the process ad return the country back to the manual registers that the Johann Krieglar Report condemned for being responsible for the 2007 general election debacle. The IEBC has announced that it will begin a new voter registration exercise next month, and it is not clear which system will be used. Some 19 million eligible voters will be targeted. Yesterday, Oswago said he has not received the tender committee’s resignation letter, and the process will not be affected by the move. “I want to assure Kenyans that come 3rd or 4th of December, the county will have a new voters register using BVR.”

In 2010, Code Inc of Canada was awarded the tender for a pilot project in eight constituencies across the country and although Code was among the 28 initial firms and tendered for 55m US$ (Sh4.6b), it was knocked out by the technical committee.

 

IBM launches new centre in Ghana


Citifmonline.com

International Business Machine (IBM) as part of its 100 years anniversary on Thursday announced the opening of a new procurement centre in Ghana to support IBM’s rapid business growth in the region and lay the foundation for additional industry growth initiatives throughout the continent.

The new Accra centre will serve clients and business partners in Ghana and 16 other African countries including Nigeria, Kenya, Burkina Faso, Chad, Congo Brazzaville, Democratic Republic of Congo, Gabon, Madagascar, Malawi, Niger, Seychelles, South Africa, Sierra Leone, Tanzania, Uganda and Zambia.

The procurement centre opening coincided with the launch of the IBM 2011 “Driving Efficiency” road show. 

In a presentation, the Head of Strategic Lead, Muhammed El Shanawany said storage efficiency expectations continue to rise as information keep doubling from 18-24 months, 20 -40 per cent growth per year with 70 percent of IT budget spent on management systems.

IBM will staff the procurement centre with local talent to help ensure the development of new skills for a modern workforce and to help stimulate economic growth market.

IBM previously announced a collaborative partnership with the University of Ghana. Through this partnership IBM provided educational programming, curricula and technology experts to the university.

Sierra Leone: Timber!


Al Jazeera

A story of corruption that is stripping the west African country bare.
Illegal logging is laying waste to Sierra Leone’s endangered forests. Despite years of laws and bans, its precious timber is still being exported abroad and unless something is done the country’s woodlands will have been destroyed within a decade. So why can the authorities not do more to stop it?

In this edition of Africa Investigates, reporter Sorious Samura exposes the high level corruption that is stripping his homeland bare.
With an undercover team he discovers that an illegal multi-million dollar timber trade is flourishing under the nose of the government and that associates of one of the most powerful politicians in the country are involved.

In response, the government of Sierra Leone has issued a statement promising to investigate the matters raised in this programme. See the video here.

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