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As Beny Steinmetz awaits the judges' verdict, we probe the prosecution's accusations of money-laundering and grand corruption
It was dubbed the 'deal of the century' – an operation to obtain rights to the world's biggest iron ore deposit – but became a quagmire, sucking its protagonists into a corruption scandal and now Switzerland's first ever international bribery trial.
On Friday, 22 January, mining magnate Beny Steinmetz and two of his colleagues learn the decision of Geneva's Correctional Tribunal on whether or not they bribed the wife of Guinea's president to get their hands on the Simandou iron ore 13 years ago. They were also charged with money-laundering, constructing a web of false paperwork to hide their criminality – details of which Africa Confidential can now reveal, along with an exclusive look at the Swiss criminal investigation.
Steinmetz faces up to five years in prison if the panel of three judges finds him guilty, although he can appeal. If found innocent, he will still have to fight off similar allegations in civil courts, notably against Brazil's Vale, the world's second-biggest iron ore miner.
Our revelations show how top officials in Beny Steinmetz's corporate network, the BSGR group, and their long-standing middlemen are tied by emails and testimony to the alleged money-laundering. While several of the disguised transactions were intended for bribes, say the prosecutors, one payment may have had another purpose: to hire a cyber security company to investigate the philanthropist George Soros (See Box, The money-laundering allegations against Steinmetz, for details of the alleged sham transactions ). For years since the scandal first broke in 2012, Steinmetz's legal and public relations strategy has been to portray Soros as the architect of his woes.
The result of this case will be of great significance in global attempts to tackle high-level bribery. Switzerland has long been a haven for dirty money because of its low taxes and banking secrecy, and its justice system has traditionally trodden warily in corruption cases, many of them ending only in fines or confiscations.
But public prosecutor Yves Bertossa, the 45-year-old head of Geneva's 'section of special affairs' – its anti-fraud and bribery unit – has pledged that 'we have to stop helping criminals and potentates'. Now, he is putting that promise to the test.
Aside from Steinmetz himself – a 64-year-old Israeli who built his fortune on his family's diamond-trading business – Bertossa and fellow prosecutor Caroline Babel Casutt had two other defendants in their sights: Frenchman Frédéric Cilins, a middleman who has already served a two-year sentence in the United States for obstruction of justice; and Sandra Merloni Horemans of Belgium, who worked as a company administrator for Steinmetz, and his father before him, since 1989 (AC Vol 55 No 8, Beny fights on).
Each has a different defence. Despite the give-away name of Beny Steinmetz Group Resources (BSGR), Steinmetz says he is no more than an adviser and roving ambassador for the company, and knew nothing about the details, including which fixers were being employed and for what.
Cilins – one of a trio of key middlemen for BSGR – denies any bribery, and claims he was acting on his own personal initiative when he repeatedly travelled to Jacksonville, Florida, in 2013 to see Mamadie Touré, the wife of the late Guinean President Lansana Conté (AC Vol 54 No 9, The fight for Mount Simandou). Cilins promised her up to $11 million to destroy incriminating contracts, and to lie if called to testify to a US grand jury inquiry into whether BSGR bribed her, while he was secretly recorded by the FBI. 'Everything that I am telling you comes directly from Beny,' he told her. 'He told me "I want you to tell me, Frédéric, I want you to tell me that you have destroyed those papers."' Cilins told the Swiss judges that 'I just said that to charm her'.
Sandra Merloni-Horemans, the third defendant, who now earns barely €1,000 a month running a children's playground in Italy, is listed as a director on myriad companies in BSGR's sprawling empire but says she was in no way a decision-maker, and simply processed documentation on instructions from company executives.
The trial is the latest of a series of travails for the defendants. Not only was Cilins imprisoned in the US, but in April 2019 Brazil's Vale won a $2bn judgment against its erstwhile partner BSGR in the London Court of International Arbitration. That tribunal ruled that BSGR had indeed bribed Touré to obtain its Guinean mining licences, saying it could not 'accept bribery as a fact of life in some countries and keep eyes shut when faced with allegations of corruption'.
Bertossa categorised the defendants' arguments as 'a collection of evasions to justify the unjustifiable'. Touré 'got about $10 million and no one's responsible? That's the theory of magical corruption', he told the court.
The defence, spearheaded by Steinmetz's flamboyant lawyer Marc Bonnant, who as a pastime performs imaginary 'speeches for the defence' for the French 18th century philosophers Voltaire and Rousseau, has said the trial is 'impossible' because of the failure of any of the 11 witnesses to attend amid the coronavirus epidemic.
The scandal centres around how BSGR managed to get hold of blocks 1 and 2 of the Simandou concession in south-eastern Guinea in December 2008, just before the death of long-time ruler President Lansana Conté. Considered to be the world's largest undeveloped iron ore site, all four blocks of Simandou were until then controlled by Rio Tinto, the largest iron ore producer. According to the prosecution, BSGR, aided by Cilins and his fellow fixers, struck up a relationship with Touré, one of Conté's four wives. It claims they plied her with cash to persuade her husband to take the rights from Rio and hand them to BSGR, and continued paying her after she successfully completed her mission.
BSGR's winnings were huge. It paid nothing for the rights – although says it subsequently invested $160m – and sold a 51% stake for $2.5 billion to Vale. That was twice Guinea's entire national budget at the time.
The deal immediately raised suspicions, and when long-time opposition leader Alpha Condé became Guinea's first democratically elected president in 2011, he opened a review of mining contracts issued under previous presidents (AC Vol 53 No 4, The gamble for Simandou). The review committee examined evidence that BSGR had bribed Touré and others to obtain its licences to Simandou 1 and 2 and the nearby mine of Zogota.
In April 2014 it concluded that BSGR's 'corrupt practices nullify the mining titles' and the government cancelled the Vale-BSGR joint venture's rights, triggering a storm of litigation, as well as criminal investigations in the US, Israel and Switzerland.
The evidence of bribery is abundant, and includes at least eight contracts detailing the corrupt arrangements, signed between Touré and BSGR or its intermediary Pentler, whose directors were Cilins and two associates, Avraham Lev Ran and Michael Noy.
BSGR has said that the three contracts in which it promises Touré 5% of its Guinean licences and millions of dollars are forged. It claims 'no first-hand knowledge' of the contracts between Touré and Pentler. Noy has previously acknowledged these contracts as genuine in arbitration hearings, testifying to having agreed to give Touré a shareholding in Pentler and to pay her $10m.
Cilins, despite his US conviction for obstruction of justice, repeatedly implied that the contracts were fake. But under cross-examination by Babel Casutt, reports Swiss newspaper Le Courrier, he acknowledged that at least one of them was genuine. 'In recognising the veracity of just one of them, Mr Cilins has confirmed the authenticity of the others,' she told the court.
Not even BSGR disputes that after the contracts were allegedly signed, there were many millions in bank transfers from Cilins, Lev Ran and Noy to Touré. But Cilins said many of those payments were nothing to do with Simandou, and were rather pre-financing of a joint business between her and the trio of fixers, dealing in sausages, chicken tails and tomato sauce.
BSGR officials even argue that Touré was not the wife of President Conté, but rather a mistress, and that she had no influence over him. But their explanations of her involvement in the Simandou affair are contorted, and Touré's own passport from the time described her position as épouse PRG (wife of the President of the Republic of Guinea).
The Swiss indictment lays out the details of $10m in alleged bribery payments to Touré, describing the precise routes the money took in 15 payments, most of which were channelled either through BSGR's trio of fixers (Cilins, Lev Ran and Noy) or via a Lebanese businessman called Ghassan Boutros.
Another individual features heavily in the chain of payments: Ofer Kerzner, a Ukrainian-Israeli property investor and former friend and business partner of Steinmetz. Africa Confidential has examined the detailed minutes of meetings in 2018 in Geneva, where then public prosecutor Claudio Mascotto – who started the investigation and led it for six years - questioned Kerzner and Steinmetz together. The former partners gave widely differing accounts of the business transactions at the heart of the Swiss prosecution's case, and attacked each other in the process.
'Ofer Kerzner is mentally ill,' Steinmetz told Mascotto. 'You have to ask him how many pills he takes. You have to ask him about his past. You have to ask him why he lies.'
Kerzner at one point remarks of Steinmetz: 'I don't know if he's more a billionaire or a liar.'
The transactions do show that Kerzner received $12.5m from Steinmetz in a Swiss account in 2009, which the prosecution claims was the founding act of a money-laundering operation. That account was then used to make payments to BSGR's trio of fixers, who in turn paid Touré. Kerzner also paid Boutros, who has himself told prosecutors that he was a cut-out for payments to Touré. The various payments are well documented in emails, bank documents and contracts seen by Africa Confidential.
The prosecutors claim that Kerzner held the $12.5m purely on Steinmetz's behalf, and made the transfers solely on his instructions—to pay out bribe money and for other reasons, including to pay a cyber security company to, in Kerzner's words, 'carry out investigations into George Soros'.
Soros, whom Steinmetz paints as his bête noire, advised and provided funds to President Condé's government during the first stages of his presidency from 2011, to help him reform the natural resources sector. Condé's initial popularity with champions of resource transparency has since waned, especially since he followed the path of many an authoritarian leader by changing the constitution last year to prolong his stay in power (AC Vol 60 No 22, Dancing the third-term tango).
Kerzner, who was cooperating with the Swiss and Israeli authorities – who had also opened a bribery investigation – said that he and his wife signed bogus contracts to justify the transactions, and that Steinmetz told him to lie to a Swiss bank’s compliance department.
Kerzner says that he signed a handwritten document over the initial $12.5m transfer with an accountant for Steinmetz, David Barnett, acknowledging that the money was being kept on behalf of Steinmetz.
Barnett told Africa Confidential, 'Mr Steinmetz has never asked or instructed me to sign any fictitious document or be involved in any bogus transaction.'
Other contracts, emails and banking documents appear to show the involvement of more key Steinmetz company officials and intermediaries in Kerzner's alleged money-laundering: a BSGR executive who had been deeply involved in the Simandou project; one of the BSGR group's top financial executives; and one of the middlemen who helped clinch the Guinea deal.
For its part, Steinmetz's defence team denies that any of his business with Kerzner involved constructing fake paper trails. They say Kerzner must have been induced to lie by a pact with the prosecution, promising not to prosecute him.
The judges will now have to decide whom to believe. Whatever the verdict, Steinmetz will remain a free – if embattled – man for a good while yet. If found guilty, he is certain to appeal, a process that could take well over a year and during which he could enter and leave Switzerland, coronavirus restrictions notwithstanding, as he wishes.
But the prosecution's case could falter over Swiss legal definitions, such as whether Touré qualifies as a 'public official' under the country's anti-bribery law. Or, the three judges may feel less certain about the evidence than the panel of arbitrators in London who condemned BSGR's corruption. Even with a not guilty verdict though, Steinmetz and his partners face a slew of civil suits that risks dragging his empire further into the mud.
The money-laundering allegations against Steinmetz
As prosecutors in Geneva seek to jail Beny Steinmetz for directing a friend to launder bribe money, Africa Confidential takes an exclusive look at the allegations.
As well as facing bribery charges at his Geneva trial, mining magnate Beny Steinmetz also stands accused of money-laundering.
The prosecution, led by Yves Bertossa, says that Steinmetz handed $12.5 million to his then-business partner and friend Ofer Kerzner in 2009.
Kerzner allegedly kept all of this on behalf of Steinmetz, and paid the funds out solely on his instructions, for bribes and other purposes, constructing a false paper trail along the way. Not only this, but prosecutors also say he instructed Kerzner to use the documents to mislead a Swiss bank's compliance department.
The initial $12.5m payment was made from a New York property company controlled by Steinmetz, Tarpley Property Holdings Inc., to one of Kerzner's company accounts, under the name Rotweiler, in Switzerland.
Kerzner said Steinmetz asked him to 'keep [the money] for a certain period'.
The prosecution alleges that Steinmetz had Kerzner sign up to a bogus Romanian land deal to provide a false paper trail for the Rotweiler transaction.
'It was a favour that he asked of me, in the friendly sense of the word,' Kerzner told Claudio Mascotto, Bertossa's predecessor, in minutes seen by Africa Confidential. 'Before transferring the money he made me sign a document saying that it was his money and that I would have to give it back to him.'
The one-page document in question, handwritten and dated 12 June 2009, figures in among the prosecution's evidence, much of which Africa Confidential has also examined.
The handwritten document is signed by Kerzner and another individual, identified by Kerzner as David Barnett, a legal counsel to the Beny Steinmetz group of companies. But Barnett told us: 'Mr Steinmetz has never asked or instructed me to sign any fictitious document or be involved in any bogus transaction.'
Steinmetz, questioned by Mascotto, said he had 'never seen or received' the document and also cast doubt on Barnett having signed.
Barnett's name and email address can also be seen in June 2010 email correspondence with Kerzner's accountant, regarding a subsequent loan agreement that Kerzner also claims was bogus and designed to justify a wire transfer on Steinmetz's instructions.
The Swiss indictment describes other payments, including $1.5m of Rotweiler funds being transferred to a company called Gobain in June 2011, and onwards to Mamadie Touré over the following months. Gobain was controlled by BSGR's fixer Frédéric Cilins, according to the prosecution, which has filed email correspondence as evidence. In one email concerning the transaction, one of Cilins's associates writes to Kerzner: 'Following my conversation with Yossi T find attached our invoice'. 'Yossi T' is, according to the Swiss prosecution, Yossie (or Joseph) Tchelet, a 'strategic financial specialist' for the BSGR Group who had served as its Chief Financial Officer.
The Gobain consultancy invoice was for $1.5m, for work carried out in South Africa. 'This bill corresponds to the amount that Beny asked me to pay,' Kerzner told Mascotto. 'The bill does not correspond to any real service.' Steinmetz responded that he had nothing whatsoever to do with the email.
Tchelet did not respond to emailed questions from Africa Confidential before we went to press, but in his testimony in the Vale arbitration he said all the payments he processed for the BSGR group were verified and legitimate, including those to Cilins and his associates.
Mascotto also questioned Steinmetz and Kerzner about payments from the latter's accounts to a company called LMS, owned by Ghassan Boutros, whose role in the alleged bribery of Touré had first been made public by Guinea's mining review committee in 2014. Then, the committee published testimony from Touré saying she had received a million dollars in bribes through a Lebanese intermediary, along with her invoices for that amount to LMS for a Caterpillar tractor and an excavator, as evidence.
The alleged bribery via Boutros features in the indictment, along with details of a $625,000 payment made to Boutros from a Kerzner account. The controversial payment to another apparent bribe intermediary was, like many of the other transactions, linked to a senior BSGR executive: Asher Avidan, who had headed BSGR's operations in Guinea.
The prosecution's evidence includes a 13 December 2011 email from Avidan to Kerzner's chief accountant, with a $625,000 consultancy contract from LMS attached. The agreement between a Kerzner company, Chaweng Global, and LMS, said the latter would provide services 'including introducing the company to new investment opportunities in Africa'. 'The contract seems to have been prepared by Asher Avidan', the prosecutor says in the minutes.
'Beny said it was necessary to transfer this sum to this person,' Kerzner told the prosecutor. 'Beny told me that it was a respectable businessman, and that it was an authentic transaction.' But the consultancy agreement, he said, 'corresponds to no real service by LMS Sarl for Chaweng'. Steinmetz said he was 'not informed about the contract'.
Avidan did not reply to questions from Africa Confidential before we went to press, but in his testimony to a Paris arbitration case against Guinea, he defended BSGR's transactions in Guinea with Boutros. He also insisted that no bribes were paid to gain the Simandou blocks.
Several of Kerzner's payments, including those to LMS, eventually led to questions from the compliance department of his bank, Julius Baer. 'Who is the beneficiary receiving these funds? What's the background of the transactions?' the bank asked Kerzner's accountant on 19 February 2015.
The allegations of misleading Julius Baer are elaborated on in the minutes. Kerzner says that after receiving questions from the bank about LMS and Gobain, he travelled from Kiev to see Steinmetz in Herzliya, Israel, to discuss how to respond. 'At the meeting, Beny had an idea… to create a structure as if it had existed,' recounted Kerzner. 'Beny said that we had to explain to the bank that he and I had a 70/30 agreement. All that was false.'
'Beny Steinmetz brought me a document in English and said: that's the response that you'll have to give to the bank.' Despite these explanations being fictitious, the responses of Kerzner's accountant to the bank were 'inspired by what Beny Steinmetz asked me to say'.
Steinmetz stood by the allegedly fabricated explanations, but said he 'never gave this document' to Kerzner.
Kerzner alleged that another, $250,000 payment he made through his company Chaweng, on Steinmetz's instructions, was a to a cyber security company. 'During our confrontation at the police in Israel, Beny told the inspectors that it was possible that he asked me to pay [an executive at the company] to do investigations into George Soros, and that he didn't want to pass it by his board'. Asked about this by the Swiss prosecutor Mascotto, Steinmetz said 'It's your hypothesis. I don't have any reply.'
'I myself never benefited from the services' of the company in question, he said. 'On the other hand, the companies in the group, maybe.' The company – which Africa Confidential is not naming for legal reasons – advertises itself as also providing intelligence work.
The $250,000 payment was made via a British Virgin Islands company called Claibury Consulting, and the invoice was labelled 'Information security consulting services at Ukraine'. Claibury's invoice was sent to Kerzner's accountant by the cyber security company itself.
'Claibury was never mandated by Chaweng Global Ltd, myself, or one of my companies, neither did it carry out any services for us,' said Kerzner, adding that the invoice 'does not correspond to any reality.'
Steinmetz's lawyers have adhered to the adage that the best means of defence is to attack. They say Kerzner has been incentivised to lie by the prosecution, because he was promised immunity.
When the verdict is announced on Friday, we will find out who has won this battle of wills.
The Geneva court is due to give its verdict on the charges against Beny Steinmetz and his business associates on 22 January. We will be publishing a detailed analysis of that decision and its wider implications on africa-confidential.com
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