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),
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.
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.
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.
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
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.'"
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:
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
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© Thomas R. Fox, 2013
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