In FCPA Enforcement Sometimes Truth is Stranger than Fiction – The Cilnis Complaint

 I often marvel at some of the stories which come up in the context of Foreign Corrupt Practices Act (FCPA) investigations and enforcement. If you made up some of the things which are reported, I fear that people might find you simply crazy. One of these stranger than fiction stories now appears to be playing out in the US District Court for the Southern District of New York, where a Complaint was recently filed by the US government against one Frederic Cilnis, for obstruction of justice into an ongoing FCPA investigation.

Cilnis was arrested on April 14, 2013 in Jacksonville, Florida and charged with obstruction of justice for attempting to persuade an individual who is a Cooperating Witness (CW), to destroy documents which purport to show the bribery scheme engaged in to obtain mining concessions. In the Complaint filed in the US District Court for the Southern District of New York, a Special Agent with the Federal Bureau of Investigation (FBI) detailed five contracts which Cilnis sought to obtain from the CW and destroy. As reported by the Financial Times (FT), in an article entitled "Contracts link BSGR to alleged bribes", Tom Burgis, Misha Glenny and Cynthia O'Murchu, reported documents related to allegations that "The resources arm of Beny Steinmetz Group agreed to pay $2m to the wife of an African president to help it secure rights to one of the world's richest untapped mineral deposits". The contracts "set out agreements for the company to make payments and transfer shares to Mamadie Touré, wife of the then president Lansana Conté." As the quid pro quo for these commission payments, "Ms Touré would take "all necessary steps" to advance its efforts to win rights to the Simandou deposit, a February 2008 contract says. A further $2m would be dispersed among other people to facilitate the acquisition of the rights."

In the Complaint the CW is only identified as "the former wife of a now deceased high-ranking official in the government of Guinea". Mamadie Touré's former husband, the then president Lansana Conté is now deceased. Cilnis is identified in the Complaint but his business relationship is only identified as "Entity". In an article in the Wall Street Journal (WSJ), entitled "BSGR Confirms Engaging Man in Guinea Charged with Obstruction", Sam Rubenfeld reported that the company BSG Resources, Ltd. now says that it worked with Frederic Cilnis, although Cilnis was never an employee of the company.

The Complaint detailed five separate contracts which are alleged to show the efforts of Cilnis and his business relations to pay bribes and engage in corruption to obtain the mining concession. The Compliant specifies that Cilnis requested the CW produce original copies of the contracts and that he personally witness their destruction. In addition to the five contracts, Cilnis prepared for and had the CW sign an Attestation denying any involvement with him or helping his company obtain the mining rights in Guinea.

Protocol-1

This contract was dated June 20, 2007, and was between the CW and the Guinean subsidiary of the Entity. For her assistance in obtaining permits, the Entity's Guinean subsidiary would transfer 5% of its shares to a company controlled by the  CW.

Protocol-2

This contract was dated February 28, 2008 and stated that the Entity "commits to giving 5% of the shares of stock of blocks 1 and 2 of Simadou [the mining concession]" to the CW.

Commission Contract

This contract is dated February 27, 2008. In this agreement, the CW's company commits to "taking all necessary steps from the authorities the signature for the obtaining of the aforementioned blocks". For this consideration, a $2MM would be made available for the distribution "among persons of good will who may have contributed to facilitating the granting of the blocks".

Engagement Letter

This is an undated document. In it the Guinean subsidiary proposed to allow the CW up to a 5% shareholding stake in the Guinean subsidiary. There would be a further transfer of 17.65% of the capital by the Guinean subsidiary as well.

August 3, 2010 Contract

This is a contract dated August 3, 2010. In it the Entity's holding company agrees to pay to the CW the additional amount of $5MM, in two tranches. The first payment of $2.5MM was to be paid at contract execution and the second to be paid 24 months later. Interestingly, the Compliant stated that this contract "required the CW to conceal the CW's relationship with the Holding Company, reciting that the CW and the CW's company 'commit herewith to make no use of the document, in any manner, directly or indirectly, and not to use this document against the [Holding Company] and/or its partner and/or its associates in Guinea or elsewhere.'"

The Attestation

In addition to the documents that Cilnis sought to have destroyed, he prepared and presented to the CW a document entitled "Attestation". The CW signed this Attestation and copies were made. According to the Complaint, the Attestation was drafted as if it was written and prepared by the CW herself and in it were the following statements:

  1. I have never signed a single contract with the Entity, neither directly or indirectly through anyone else.
  2. I never intervened with Guinean officials in favor of [the Entity]...
  3. I have never received any money from [the Entity], neither directly or indirectly... [The Entity] never gave...any money, neither directly to me nor to anyone else on by behalf. They did not promise to pay me anything, neither to me, nor to anyone else on my behalf.

Destruction of Documents

The Complaint specified that Cilnis told the CW several times that the documents need to be destroyed urgently. Moreover, "they need to find a place to burn all of them, adding that they cannot do it at the CW's house." When the CW suggested that she could destroy the documents, Cilnis repeated that "Cilnis was instructed to see it happen in person and that Cilnis cannot lie when he is asked whether he, Cilnis, saw the papers being burned."

For the destruction of the documents, the Complaint notes that Cilnis offered the CW $1MM. $200,000 of this total would be paid now and "$800,000 at a later date." Further, Cilnis is alleged to have proposed an additional $5MM fee "if the group is not forced out" of Guinea but that the CW will receive "the $1million regardless of the outcome."

I guess Cilnis has nothing on John Connally who once advised President Nixon to burn the White House tapes on the front lawn of the White House, in the full view of the American people. The WSJ article reported that BSGR said that "allegations of any improper conduct relating to how the company obtained a mining license in Guinea "are entirely baseless and motivated by an ongoing campaign to seize the assets" of the company." Then BSGR claimed it is the real victim here as it has become "the victim of extortion attempts by individuals who are seeking economic gains." Further, "The modus operandi of these attempts involved at times the use of forged documentation, blackmail and harassment." No word from BSGR if anyone has asked them to burn documents.

Like I said, in the world of FCPA enforcement, sometimes truth is stranger than fiction.

Visit the FCPA Compliance and Ethics Blog, hosted by Thomas Fox, for more commentary on FCPA compliance, indemnities and other forms of risk management for a worldwide energy practice, tax issues faced by multi-national US companies, insurance coverage issues and protection of trade secrets.

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© Thomas R. Fox, 2013

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