Former Middleman For Beny Steinmetz Gets Two Years In Jail In African Mining Case

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Mining middle man Frederic Cilins was sentenced yesterday to two years in prison by a New York Judge, District Judge William H. Pauley III, for obstruction of justice in a case relating to the awarding of mining rights to potentially massive iron ore deposits in the remote Simandou Region of the Republic of Guinea in West Africa.

In 2008 the concession for part of the Simandou region was awarded to international mining company BSG Resources, the controlling shareholder of which is a trust established for the benefit of Israeli diamond magnate Beny Steinmetz.

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Prosecutors had alleged that Cilins had attempted to bribe Mamadie Toure, who was the fourth wife of Guinea’s late President Lansana Conte, and encouraged her to destroy evidence and lie to U.S. investigators, as international examination of allegations concerning the award of the concession in the northern segment of the Simandou deposit to BSGR had been instituted by the Republic of Guinea after its Presidency and government had changed in 2010.

On Friday Judge Pauley agreed with the prosecution, and even said Cilins was a “Jekyll and Hyde” character, somebody who even led his children to give away some of their toys to African children, while also trying to simultaneously abort the investigation by the Government of Guinea into the award of the concession to BSGR, alleging that it had been effected corruptly.

In 2008 the Government of then President Lansan Conte had stripped Rio Tinto of half its rights in the Simandou region alleging it had failed to develop the property after many years holding rights as a sole concessionaire.

Instead the northern half of the concession was then transferred by the Republic of Guinea to BSGR, who later entered into a joint venture with giant Brazilian mining company Vale. Vale promised to pay BSGR up to US$2.5 billion ultimately, for a 51% interest in the project. Of this amount only US$500 million was paid by Vale before the deal ended up mired in controversy and litigation.

At the time though Steinmetz’s BSGR had itself invested just some US$160 million to that point, so the company still came out ahead – before the ongoing litigation costs that is, which will not be small change by any means. BSGR was finally, in its turn, formally stripped of its mining concession in northern Simandou in April of 2014, by the Government of Guinea led by its current President, President Alpha Condé, who was elected to office in 2010 and who subsequently instituted a reexamination of the country’s mining policies and approach to mining concessions and their development.

Currently Rio Tinto are now suing both BSGR and Vale, alleging their own rights to the northern part of Simandou had been, essentially, stolen in 2008 and also alleging that bribes were paid to Guineas’s former Minister of Mines. For its part BSGR denies this and has itself now instituted proceedings, through international arbitration, against the Government of Guinea seeking return of the mining rights which it claims have been unlawfully taken away from it.

In the sentencing of Cilin on Friday in New York, no affirmation of wrong doing by Steinmetz or BSGR itself was made by the Judge. On the other hand prosecutors in the case did earlier allege that Cilins had a “very close personal relationship” with Steinmetz, and had also alleged when Cilin was first arrested at an airport in Florida in April of 2013, that he was negotiating with Toure on behalf of BSGR and Steinmetz.

The basis for hearing the the Cilin case in the United States at all, for actions relating to such a far away country as Guinea, has been that the US Foreign Corrupt Practices Act permits the United States authorities to charge people and companies doing business in the United States with corruption elsewhere in the world.

Back in March Cilin pleaded guilty to one count of obstruction of justice, leading to Friday’s sentencing proceedings. BSGR has so far successfully distanced itself from claims of direct involvement in any such schemes Cillin was alleged to have been party to. This despite any assertions to the contrary Cilin may have made in official transcripts of wiretapped conversations between Cilin and Mamadie Toure, who herself cooperated with US investigators.

Despite having utilized Cilin’s services as an intermediary from time to time, clearly BSGR’s position would be that in this instance he was acting on his own as a rogue individual, and that there is no substantive evidence of any kind to support a different conclusion.