INTERNATIONAL mining giant BHP Billiton has announced that it is conducting an internal investigation of corruption allegations prompted by the United States securities and exchange commission (SEC) in a case that may be linked to a Cambodian mining concession.
In its quarterly Exploration and Development report, posted on its website on Wednesday, BHP said evidence of impropriety arose after the SEC requested information “as a part of an investigation relating primarily to certain terminated minerals exploration projects”.
“The Company has disclosed to relevant authorities evidence that it has uncovered regarding possible violations of applicable anti-corruption laws involving interactions with government officials,” the report said. It added that BHP has opened its own investigation
BHP and Mitsubishi Corp signed an agreement with the Cambodian government in 2006 securing rights to a 996-hectare mining concession in Mondulkiri province that was hoped to yield bauxite, an unprocessed aluminum ore.
The companies abandoned the concession last year, saying that a feasibility study had determined that large-scale mining operations there would not be cost-effective.
Amanda Buckley, a BHP spokeswoman in Australia, confirmed on Thursday that the investigation was not related to the company’s marketing or product sales, nor its operations in China. Rio Tinto, another Australian mining corporation, was ensnared in scandal last year when four of its employees in China were arrested for bribery and espionage, receiving lengthy prison terms in March.
Buckley declined to answer questions about the firm’s operations in Cambodia, saying she could not comment on “any expired minerals-explorations projects”. An SEC spokesman said it was “firm SEC policy that we don’t comment on any ongoing, potential or past investigations”.
Although BHP has not named the country in which the alleged violations took place, speculation has focused on Cambodia and the Mondulkiri concession. The Australian newspaper reported Thursday that it had learned that the case was focused on the Kingdom, though no source was cited.
Suspicions have arisen in part due to comments in 2007 by Minister of Water Resources Lim Kean Hor that were included in a 2009 report on Cambodia by watchdog group Global Witness. The report said the minister told the National Assembly that BHP had paid US$2.5 million to secure a mining concession, describing the payment as “tea money”, or an off-the-books fee.
In response to Lim Kean Hor’s comments, Global Witness wrote to BHP in 2008 to inquire about the payment. BHP said the $2.5 million had been earmarked for a “social development fund” focused on health and education projects in Mondulkiri and overseen by BHP.
“BHP Billiton has never made a payment to a Cambodian Government official or representative, and we reject any assertion that the payment under the minerals-exploration agreement is, or the amounts contributed to the Social Development Projects Fund are, ‘tea money,’” the company told Global Witness. The company also said it had paid $1 million to the government in 2006 as part of the formal concession agreement.
Global Witness subsequently found that in the Ministry of Economy and Finance’s accounting figures for 2006, only $443,866 in non-tax revenue from mining concessions was reported, raising questions about what happened to BHP’s $1 million payment but not necessarily implicating BHP in mismanagement.
Morihiko Kondo, Mitsubishi’s general manager for its Cambodia office, said his company had paid nothing to the government for its part in the joint venture beyond payments included in the formal agreement and the social development fund.
“For the project with BHP Billiton, we just gave the social contribution, and it is clearly mentioned in the agreement,” Morihiko said, adding that so-called “tea money” payments were strictly prohibited by his company.
“Even I stopped giving the Khmer New Year gifts to government officials,” he said.
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Global Witness campaigner Eleanor Nichol said Thursday that she had heard anecdotally that BHP funding had, as the company said, supported social development projects in Mondulkiri, and Kaun Deyoun, office manager at the Mondulkiri office of the health NGO Nomad RSI, said the same.
Council of Ministers spokesman Phay Siphan said he was unfamiliar with the case, but he pointed to the March passage of the Anticorruption Law as evidence of a commitment to “highlight transparency”.
Under the US’s Foreign Corrupt Practices Act, if found guilty by the SEC of making illegal payments, BHP could be fined “up to twice the benefit that [it] sought to obtain by making the corrupt payment”, and the employees implicated could face up to five years in prison.
Nichol noted that there is no proof at this point that Cambodia is involved in the BHP inquiry, but she said that even ostensibly legal payments made within the Kingdom’s highly corrupt extractive industries deserve scrutiny.
“I think there’s a question mark about BHP here, generally,” she said. “Any payments made to a government like Cambodia’s, which we know is highly corrupt and is essentially a captured state ... when you’re dealing with a state like that, what safeguards do you put in place?”
Additional reporting by May Kunmakara