Shareholders of London-listed Eurasian Natural Resources Corporation will meet on Friday 28 December to vote on a $550 million deal aimed at buying out its main copper-and-cobalt mining partner in the Democratic Republic of Congo.[i] A representative of Global Witness, holding one share in the FTSE100 company, will vote against it because of fears over corruption risks.[ii]
ENRC has timed the meeting to occur between Christmas and New Year’s Day, which is likely to help keep attendance at a minimum level, despite the importance of this deal for the company and, indeed, for Congo. The vote is unlikely to go against ENRC, particularly in light of the fact that the three founding shareholders - who own no less than 43.77 per cent of the company - gave their “irrevocable undertakings” that they would vote in favour of the deal back in early November.[iii]
Global Witness will seek assurances from ENRC that investors have no cause to be worried over possible corruption in its dealings with Dan Gertler, a middleman whose companies have been discussed in previous Global Witness publications (including a detailed memo published at the time of ENRC’s AGM in June: see http://bit.ly/V3B9pT). We have now sent ENRC over 100 questions relating to corruption risks at the company and have not received a reply to a single one of them, beyond a stock paragraph in which ENRC said that it “welcomes a robust debate on corporate governance and takes its responsibilities very seriously”.
Global Witness believes there are a number of possible corruption risks related to Mr Gertler’s business in Congo, particularly over how his secretive offshore firms have repeatedly obtained mining and oil assets at small fractions of estimated values,[iv] with the deals usually going unannounced, in the absence of any public tender. Global Witness is concerned that Mr Gertler could have gained favourable access to Congo’s mining riches because of his friendship with the Congolese president, Joseph Kabila. We also believe there is a risk that the deals could have benefited unknown corrupt Congolese government officials.[v] Mr Gertler’s companies have on several occasions obtained assets that had been confiscated by state authorities from rivals in questionable circumstances, a factor that Global Witness believes has increased the corruption risks.
ENRC has paid hundreds of millions of dollars since 2009 to companies associated with Mr Gertler to acquire mining assets in Congo.[vi] Given the concerns outlined above there is a risk, in Global Witness’s opinion, that ENRC may have poured money into corrupt transactions. The planned $550 million deal would only heighten those risks.
Mr Gertler and ENRC have denied any wrongdoing. ENRC has said that it “is resolutely opposed to bribery and corruption in whatever form it may take” and will take appropriate action to address corruption concerns. Mr Gertler’s spokesman has said he has always operated with the “utmost honesty, integrity and fairness” and that the beneficiaries of offshore companies associated with Mr Gertler are limited to his family members.
ENRC has also said that its discussions with the UK’s Serious Fraud Office about its activities in Congo and Kazakhstan are “entirely normal practice for a major company”.[vii] In the summer of 2011 ENRC had agreed with the SFO to commission investigations into allegations surrounding its “operations and assets in, and transactions involving, Kazakhstan and Africa (in particular, the DRC)” (see “Notes to editors”, below).
ENRC must be aware that the International Monetary Fund said on 3 December this year that it had stopped a major loan agreement with Congo worth over $500 million because of the country’s failure to publish a contract between the state miner Gecamines and the offshore company Straker.[viii] Similar issues had led the IMF to suspend loans in 2011, with the IMF’s Africa head, Antoinette Sayeh, saying that it was not sure whether cash from mineral deals was going to the state, according to Bloomberg.[ix] The IMF rarely, if ever, explicitly talks about specific corruption risks. However, the nature of its concerns suggests that it was worried about possible corruption linked to the Straker deal, and potentially other such deals involving Straker’s owner, who we now know is Mr Gertler.[x]
How is it, then, that just six days after the IMF made its announcement, ENRC can go ahead and announce a deal of over half a billion dollars that includes buying Straker - the very company at the heart of the dispute? And should ENRC not have waited for matters to be resolved with the Serious Fraud Office regarding its Congolese activities, before proceeding with another large deal with Mr Gertler?
What, moreover, of ENRC’s own internally-commissioned audit by the law firm Dechert into its Congo dealings? Why has that not been completed and are Dechert still responsible for it? Will ENRC publish this audit, in accordance with its own pledges of transparency? What have the findings been so far? ENRC must provide satisfactory answers to these questions if it is to justify signing a deal to buy Straker and half of Camrose from Mr Gertler (which would give ENRC 100 per cent of Camrose in total, should the deal be approved by shareholders).
Global Witness and doubtless other investors would be interested in hearing ENRC’s answers on 28 December, given the contents of a Suspicious Activity Report filed by ENRC two years ago to the UK’s Serious Organised Crime Agency, in order to obtain clearance for purchasing the first half of Camrose. The Suspicious Activity Report, published by the American website 100Reporters, said that it was not possible to completely discount corruption questions surrounding Mr Gertler. ENRC and its lawyers Herbert Smith told UK law enforcement that “there is a risk that the assets of the Highwind Group [another Gertler group of companies] may have been obtained by corruption and the Transaction [the purchase of half of Camrose] may facilitate the acquisition, retention, use or control of criminal property by the Highwind Group/Dan Gertler and others and/or may result in corrupt payments being made to public officials” (see the article, which links to the entire Suspicious Activity Report, at http://100r.org/2012/06/fast-track-past-red-flags/). [xi]
When this information was published, ENRC reacted not by “welcoming a robust debate” but by sending legal threats to journalists in the UK and the US. The one British publication that had dared mention the Suspicious Activity Report was pressured into taking the article off its website but the American news service 100Reporters published the whole Suspicious Activity Report, together with the threat from law firm Jones Day.
Global Witness expects ENRC’s board to explain whether its opinions regarding Mr Gertler have changed since it filed the Suspicious Activity Report in August 2010 and, if so, why.
ENRC Chairman Mehmet Dalman should also explain at the General Meeting why he has said that he expects an “amicable conclusion” with the Serious Fraud Office in the first quarter of next year.[xii] He should also explain why he believes a “worst case scenario” with the SFO would have no effect on the company’s operations.[xiii]
It is not entirely clear how ENRC can engage in frank debate and freely discuss with the UK authorities any concerns it has over its Congo deals, when it has signed up to not saying anything prejudicial about Mr Gertler to government entities or journalists (there are certain exceptions for disclosure and investigations but this does not entirely clear matters up - see “Notes to editors” for the full provisions). In its 7 December 2012 agreement with Camrose, seen by Global Witness, ENRC promised not to criticise or “make any statement which is reasonably likely to be materially adverse or materially prejudicial” about Dan Gertler or his companies to (i) any Government Entity and (ii) publicly or to any journalists or others likely to publish. ENRC has also pledged not to “take any other action” relating to the activities of Dan Gertler or his companies “that is reasonably likely to cause [him or his companies]… being held in disrepute or losing any material goodwill”.
ENRC should also tell shareholders who were the owners of Legacy Industries Limited, the company from which it bought the Dezita mine for $195 million last year. Legacy Industries had not been heard of before it was mentioned in ENRC’s recent circular.
Global Witness is also calling on ENRC to state whether it envisages selling its Africa assets on to another company. In particular, could this latest deal help clear the way for Glencore to buy up ENRC’s Congolese mines? Glencore has declined to comment but at this stage shareholders should not be kept in the dark.
Global Witness urges ENRC to address these questions openly at the upcoming General Meeting. The company is important to the health and reputation of the London Stock Exchange and it counts a huge number of UK citizens among its shareholders. Investors and the public should be assured that ENRC has had no truck with possibly corrupt deals in one of the world’s most troubled nations, and be given all the necessary information to reach a properly informed judgment over the firm’s next Congo deal.
Contact: Daniel Balint-Kurti, Campaign Leader, DRC: +44 7912 517 146; firstname.lastname@example.org
Notes to editors:
1. “Non-disparagement covenant”. Global Witness has viewed the Sale and Purchase Agreement between Cerida Global Limited, Fleurette Properties Limited, ENRC Congo BV and ENRC PLC. The Agreement includes a “non-disparagment covenant”, as follows:
9.1: For a period of three (3) years from the date of this Agreement, the purchaser and ENRC PLC shall procure that no member of the ENRC Group shall (nor shall any of them instruct, or direct, or expressly permit any of their respective directors, officers, employees, agents, advisers or representatives to):
9.1.1: criticise or make any statement which is reasonably likely to be materially adverse or materially prejudicial to the interests of the seller or any member of the Seller’s Group, or Dan Gertler or their respective directors, officers, businesses or operations (the “seller group interests”) whether formally, informally, in writing or orally, directly or indirectly (i) to any Governmental Entity or any person representing any Governmental Entity (except in each case where the making of such statement, criticism or disclosure is required by Applicable Laws, any applicatory regulatory guidance, or is made as part of an Investigation, Self-Report or Self-Report Investigation as defined in ENRC PLC’s Directors and Officers Liability and Corporate Reimbursement Insurance Policy in force as at the date of this Agreement, provided that such statement, criticism or disclosure is true, accurate and not misleading and based on relevant facts); or (ii) publicly or to any journalist, member of the press or other person reasonably likely to publish such statement or criticism.
9.1.2: take any other action relating to the activities of the seller or any member of the seller’s group or Dan Gertler or the Camrose Group of Companies that is reasonably likely to cause or contribute to the seller or any member of the seller’s group or any of sellers group interests being held in disrepute or losing any material goodwill;
9.2: ENRC PLC undertakes that, as soon as practicable after entry into this Agreement and in any event prior to Completion, it will notify the Agreed ENRC Persons of the obligations of ENRC PLC pursuant to clause 9 above by sending a notice in the agreed form. ENRC PLC will use its reasonable endeavours to obtain a signed acknowledgement of such obligations as soon as practicable following the dispatch of such notice and shall, at the written request of the seller, report to the seller in writing as soon as possible identifying which of the Agreed ENRC Persons has and has not signed and returned such acknowledgement.
9.3: ENRC PLC shall take such steps as are reasonable in the circumstances to ensure that for the duration of any obligations under clause 9, each director of ENRC PLC and each director, employee, Affiliate, agent or representative of any member of the ENRC Group who is reasonably likely to make any public comment or statement relating to the seller group interests purportedly on behalf of ENRC PLC or any member of the ENRC group:
9.3.1: is aware of the obligations of the purchaser and ENRC PLC pursuant to clause 9 above; and
9.3.2: does not take any actions which would result in a breach of the obligations of the purchaser or ENRC PLC pursuant to clause 9.
2. There is a further interesting clause in the above Agreement, which obliges the Gertler-related companies to refrain from seeking to influence officials to seize ENRC assets:
11.3.2: four (4) years and six (6) months from the date of Completion, the Seller and Seller’s Guarantor shall not and the Seller and Seller’s Guarantor shall each procure that no member of the Seller’s Group, no Additional seller and no Seller-Related Party shall (nor shall any of them instruct, direct or permit any of their respective directors, officers, employees, agents or representatives to) initiate any action, or procure, facilitate, solicit or encourage any action to be taken by any Governmental Entity, which results in any Relevant Asset being confiscated, seized or impounded, and-or the validity of or the title to or terms of any Relevant Asset being rescinded, withdrawn, revoked, cancelled or materially and adversely modified, varied, altered, amended or affected.
3. ENRC’s 7 December 2012 Circular to shareholders detailing the $550 million deal contains pertinent information relating to the legal and regulatory issues that the company faces (go to link on ENRC website: http://www.enrc.com/Media/press-releases). Of particular interest are the updates regarding the Serious Fraud Office and the UK Listing Authority. Here are a few excerpts (bold formatting by Global Witness):
Operational review of the Camrose Group
A firm of forensic accountants began a review of the books and records of various companies within the ENRC Group including Comide in May 2011. The books and records review identified a number of issues with the companies’ accounting systems, processes, approvals, records and controls for transactions and payments.
The review in respect of Camrose was limited to Comide and the forensic accountants recommended, in addition to a number of system and process based recommendations, that a further review be undertaken in respect of Comide and that reviews also be undertaken in respect of Swanmines, Metalkol and the Canadian registered companies that report to Camrose. The further review process is ongoing, is not anticipated to be completed prior to Completion and may lead to further issues being identified.
Serious Fraud Office
The Company is involved in a reporting process with the Serious Fraud Office (“SFO”), which followed a number of public allegations made in the summer of 2011 in relation to the First Quantum litigation. The SFO invited the Company to a meeting, following which it was agreed that the Company would undertake investigations into certain matters including in respect of allegations around its operations and assets in, and transactions involving, Kazakhstan and Africa (in particular, the DRC). In respect of Africa, the Company has agreed the initial scope for an investigation with the SFO.
The Company is undertaking investigations as a result of the SFO process as well as the Company’s own internal reporting processes. The investigations are being managed by external legal counsel.
The investigations are ongoing and there can be no certainty as to the outcomes. It is additionally possible that the scope of the SFO reporting process will be widened and/or that other investigations may be necessary as a result of the findings of the existing investigations.
The outcome of the investigations may raise issues including those regarding compliance by the Company, its directors and employees with applicable laws including those relating to anti-bribery and corruption, sanctions, money laundering and fraud. Potential penalties for violations of such laws include both criminal and civil liability for the Company, its directors and/or employees. There is a risk that directors, senior employees and employees of companies within the ENRC Group (including those relevant to the Camrose Group) may be subject to disciplinary action, including dismissal, as a result of the investigations. There is also a risk that if any offence is found to have been committed by the Company, the relevant enforcement authority would be entitled to recover the property (including cash and other property) which was obtained through that unlawful conduct, under the Proceeds of Crime Act 2002 (as amended).
The Company also notes that, in the event that any offence is found to have been committed in effecting the 2010 Acquisition, there is a risk that the Acquisition may be considered to be a furtherance of such offence.
UK Listing Authority
On 25 April 2012, the Company was contacted by the Financial Services Authority (“FSA”) in its capacity as the UK Listing Authority (“UKLA”). The letter stated that the UKLA was conducting a preliminary review of the Company’s compliance with the Listing Rules on a group wide (rather than Camrose) basis and, in particular, LR10 and LR11. The Company has been assisting the UKLA with these enquiries. Recognising the complexity of its related party issues, in May 2012, the Company engaged a major advisory/risk management firm to assist it in identifying any enhancements that could be made to its related party systems and procedures. In responding to UKLA requests in relation to Camrose and its subsidiaries, the Company identified certain issues. Accordingly, the Company instructed an advisory/risk management firm (via external legal counsel) to carry out an immediate additional review of transactions undertaken by the Camrose entities from a LR11 perspective, with the intention that any further relevant matters will be brought to the UKLA’s attention.
This review of related party transactions is ongoing. The UKLA has considered the Company’s various responses and replied instructing the Company to appoint a sponsor to carry out a diagnostic review of current and/or former Listing Rule 10 of the Listing Rules (Significant Transactions: Premium Listing) and Listing Rule 11 of the Listing Rules (Related Party Transactions: Premium Listing) analyses of certain transactions, including of the original purchase of 50.5 per cent. of Camrose (including all ancillary agreements, such as loans etc) and the transaction entered into with First Quantum (further details of which are set out in paragraph 4(e) of Part V of this document). Further issues may still arise beyond those which have currently been notified to the UKLA. The UKLA have not presently referred the matter to an enforcement team but the conclusions of the sponsor review which they have requested, or the UKLA’s independent conclusions on the Company’s wider compliance with the Listing Rules, may result in enforcement action against the Company by the UKLA or an agreed settlement in respect of the issues identified (either of which may include a combination of a public censure, a private warning, the payment of a fine and/or formal or informal agreements to improve systems and processes).
4. Global Witness wrote to ENRCon the morning of 20 December 2012, with the following questions. Global Witness will update its website should it receive answers to any of these questions beyond the stock response cited in the main text.
- Is ENRC aware of the IMF’s decision to stop its loan programme with the Democratic Republic of Congo and the fact that IMF officials have said this was triggered by the country’s failure to publish the contract for Gecamines’ sale of its 25 per cent stake in Comide to Straker?
- Just six days after the IMF announced that it was stopping its loan programme, ENRC announced a deal that involved buying Straker, the company at the heart of the dispute between Congo and the IMF? Why did the IMF decision not prompt ENRC to forego the deal?
- Would it not have been sensible for ENRC to wait until it had concluded its discussions with the Serious Fraud Office over its Congo dealings before going ahead with this deal?
- On November 2, the three founding shareholders of ENRC, who hold 43.77 per cent of the company, gave irrevocable undertakings to vote in favour of the approval resolution. Why did ENRC wait until the evening of Friday December 8 to announce the deal?
- Is the internally-commissioned audit into ENRC’s activities in Congo still ongoing?
- Is it still being conducted by the law firm Dechert?
- Will you be filing, or indeed have you already filed, a Suspicious Activity Report on the new deal over Camrose and Straker?
- Why did Mr Dalman say in ENRC’s last conference call that he expects an “amicable conclusion” with the Serious Fraud Office?
- How does ENRC’s pledge in its deal with Camrose not to “make any statement which is reasonably likely to be materially adverse or materially prejudicial” about Dan Gertler or his companies” to journalists or “any Government Entity” square with: (a) your commitment to a robust debate on corporate governance and (b) your relations with legal and regulatory authorities, notably the Serious Fraud Office and the Serious Organised Crime Agency?
- Are ENRC or its affiliates planning on selling any of their assets to Glencore, or are they in discussions to this effect?
- If there are no concrete plans of a deal with Glencore, are there discussions on this?
- Who owned Legacy Industries Limited at the time ENRC bought the Dezita mine in Congo last year for $195 million?
5. ENRC has not yet replied to the above questions. Here, however, is ENRC’s 11 June 2012 reply to earlier questions:
ENRC welcomes a robust debate on corporate governance and takes its responsibilities very seriously. ENRC is committed to upholding the highest standards of corporate governance. Through our Group Code of Conduct we instil the values of integrity and honesty across the Company, and expect all of our employees to act to the highest ethical standards.
The company's M&A policy is the responsibility of the M&A committee, reporting directly to the Board. Every investment made by the Company is subject to thorough due diligence.
ENRC has a zero-tolerance policy to bribery and corruption, which extends to all of our business dealings, across all of our operations. The Board has been working extremely hard to ensure that its policies are adopted and procedures adhered to, with serious consequences for any breach of these policies and procedures.
Following a comprehensive review, completed in September 2011, ENRC has established a new set of governance structures and practices to ensure that the Group is run responsibly, in the best interests of its stakeholders. Notably, the Nomination Committee has taken a new range of responsibilities and is now known as the Nomination and Corporate Governance Committee.
The Group has a clear policy on combatting bribery and corruption, and has been liaising with the appropriate regulators, including the SFO. This is entirely normal practice for a major company that is serious about investigating all allegations properly and striving to meet corporate governance best practice and we draw your attention to quotes by the SFO in the Financial Times in the Financial Times on 12th December 2011 "We have not opened an investigation into ENRC. We encourage all companies within the scope of the Bribery Act to be looking at their corporate culture and their adequate procedures. The door of the SFO is always open to all companies that want to discuss these issues”.
Under ENRC’s ‘Overarching Principle’, employees should act with integrity and honesty and to the highest ethical standards. The Code of Conduct is explicit that ENRC is resolutely opposed to bribery and corruption in whatever form it may take and all Employees are required to ensure ENRC’s opposition is made clear in all circumstances. The Code of Conduct applies to every employee within the ENRC Group and to associated persons who, whilst not necessarily being employees of the ENRC Group, are conducting business on behalf of ENRC.
As part of our upgraded governance structures, the first stage of ethics training, was recently delivered by an independent, internationally-recognised ethics training provider. This incorporated training hundreds of senior managers face-to-face, with additional extensive training delivered online.
ENRC also has an established whistleblowing hotline, independently administered by the same ethics training provider, which operates 24 hours a day, 365 days a year, in five languages. We have a robust investigations policy and established procedures to effectively and thoroughly investigate whistleblowing reports and other issues and take appropriate corrective action.
ENRC has at all times strived to uphold the highest standards expected of an international mining company listed on the London Stock Exchange.
[i] For news on the deal see: Reuters, “Miner ENRC buys out Gertler in $550 million Congo deal”, 8 December 2012, http://uk.reuters.com/article/2012/12/08/enrc-congo-idUKL5E8N80OT20121208; and Bloomberg, “ENRC Offers $550 Million to Buy Gertler Out of Congo Unit”, December 8 2012, http://www.bloomberg.com/news/2012-12-08/enrc-offers-550-million-to-buy-gertler-out-of-congo-unit.html.
[iii] The irrevocable undertakings are referenced on page 16 of the December 2012 Circular to shareholders describing the deal (linked to at http://www.enrc.com/Media/press-releases). Global Witness has reviewed the original documents at the offices of the law firm Jones Day in London. They are signed by the three ENRC founders: Alijan Ibragimov, Patokh Chodiev and Alexander Machkevitch.
[iv] Some of the clearest cases of companies associated with Mr Gertler buying assets at small fractions of their commercially estimated values are those of Kolwezi, Frontier and Lonshi, all of which were confiscated from the Canadian mining company First Quantum by the Congolese authorities. ENRC announced in statements on August 20 2010 that the four offshore companies that obtained 70 per cent of Kolwezi in January 2010 were associated with Mr Gertler. The licences for the Frontier and Lonshi mines were later also confiscated from First Quantum and sold to another three offshore companies. In a December 2012 feature, Bloomberg described the companies that gained control of Frontier (and thus also Lonshi, as the two licences wrapped up together) as “Gertler’s joint-venture”, confirming his link to the companies that had previously been a matter of speculation.
The offshore companies Sandro Resources Ltd , Garetto Holdings Ltd. (both British Virgin Islands-registered) and Fortune Ahead (Hong Kong-registered) obtained the confiscated Frontier and Lonshi mines for $60 million, which was roughly 3.8% of the average of commercial valuations obtained by Global Witness.
Our calculations are as follows. The average of the four Frontier valuations obtained by Global Witness is ($1.4 billion + $1.65 billion + $1.06 billion + $1.95 billion)/4 = $1.51 billion. The average of the two Lonshi valuations obtained by Global Witness is ($250 million +$392 million)/2 = $321 million.
The equipment at Frontier was, however, not part of the deal. In August 2010, First Quantum put the “carrying cost” of its equipment at Frontier at $254 million (there was no equipment relevant to Lonshi). If we subtract this from the average for Frontier, it leaves us with $1.256 bn for that mine and $321 million for Lonshi. Thus, the average valuation we will use for both mines is $1.577
The $60 m salesprice to the BVI/Hong Kong companies for Frontier and Lonshi was, on the basis of these calculations, 3.8% of the average of commercial valuations. Further details regarding the origin of the valuations we cite, from a mix of public and confidential sources with major financial institutions, can be found in Global Witness’s memo to ENRC shareholders of 12 June 2012 (http://bit.ly/PMCBzX).
If this seems like a very low figure, it is similar to the situation with Kolwezi, 70% of which was acquired by the Highwind Group (later named in ENRC statements as being associated with Dan Gertler) for $60 million. ENRC has, moreover, officially stated that it loaned Mr Gertler’s companies this $60 million signature bonus fee. The average of three valuations for Kolwezi, extrapolated to a 70 per cent stake, was ($2.69 bn + $334 m + $1.58 bn)/3 = $1.53 bn. The machinery at Kolwezi was not part of the deal but even if we were to attribute a generous figure of $530 million for the machinery, this would bring the value of Kolwezi down to $1 billion and the price that the Highwind Group paid would still have been just 6% of the average of the three commercial valuations.
[v] By “beneficiaries” Global Witness means any individuals who may benefit financially from deals and transactions referred to in this briefing, through actual beneficial ownership of shares or through any other financial arrangements.
[vi] See Global Witness’s memo to ENRC shareholders of 12 June 2012 for more details, notably footnote 4: ENRC has paid companies associated with Mr Gertler: $75 million for 50 per cent of SMKK; $175 million in respect of Kolwezi and associated assets (total $250 million) [this figure does not include hundreds of millions of dollars in loans under the first Camrose deal]. According to Global Witness’s calculations ENRC paid companies associated with Mr Gertler a further $120 million for its purchase of CAMEC in September 2009. The memo can be found at http://bit.ly/PMCBzX.
[vii] See the “Notes to editors” in this press statement, point 3, for quotations from official ENRC documentation regarding the SFO discussions. Also, see Reuters for the quote from ENRC: “ENRC denies SFO probing corruption claims”, 11 December 2011, http://www.reuters.com/article/2011/12/11/enrc-probe-idAFL6E7NB0G420111211.
[viii] For the link between the halting of the loan programme and the non-publication of the Comide contract, see: Bloomberg, “IMF Halts Congo Loans Over Failure to Publish Mine Contract”, 3 December 2012, http://www.bloomberg.com/news/2012-12-08/enrc-offers-550-million-to-buy-gertler-out-of-congo-unit.html; and Reuters, “UPDATE 1-IMF halts Congo loan over mining contract concerns”, 3 December 2012, http://www.reuters.com/article/2012/12/03/congo-democratic-imf-idUSL5E8N3F6G20121203. Confirming this, IMF Resident Representative in Congo Oscar Melhado, said in a 21 December 2012 e-mail to Global Witness: “The IMF-supported program was not extended because authorities did not publish sufficient contract information relating to the transfer of Gecamines shares to Straker. You may recall the fourth and fifth reviews under the Fund-supported program were not concluded for similar reasons.”
[ix] See Bloomberg, “Gertler earns billions as mine deals fail to enrich Congo”, 5 December 2012: http://www.bloomberg.com/news/2012-12-05/gertler-earns-billions-as-mine-deals-leave-congo-poorest.html .
[x] On 20 December 2012 Global Witness wrote the following questions to Oscar Melhado, IMF Resident Representative in Congo: “I was also wondering where the IMF stands on the question of corruption in the DRC. Specifically, was the IMF concerned about risks of corruption in this deal? Were there any other mining or oil deals in the DRC that raised concern at the IMF and what were the nature of these concerns?” The response the following day was: “One of the key objectives of the IMF-supported program with the DRC is transparency and good governance in natural resources. This includes providing information on contract transactions and ensuring that the country receives a fair share from sale of its assets. Enhancing governance and transparency in the natural resource sector would ensure that proceeds from the sale of state assets are properly recorded and indeed accrue to the state budget.” Regarding the fact that Straker is associated with Mr Gertler, see the ENRC December 2012 circular, page 45: “Cerida is an indirect, wholly owned subsidiary of Fleurette, whose entire issued share capital is, in turn, indirectly and wholly owned by a discretionary trust for the benefit of the wife and children of Mr. Dan Gertler. Fleurette and its subsidiary, Straker, are associates of Cerida.”
[xi] 100Reporters, “Fast Track Past Red Flags”, 4 June 2012. The piece says that Jones Day “called on 100Reporters to eliminate any references or discussion of the Suspicious Activity Report from its website. ENRC did not object to “appropriate investigative reporting,” Richards wrote in an email, but it did “object to journalists referring to or printing the content of suspicious activity reports…[that] are strictly confidential.” The email demanded that 100Reporters “immediately remove” any reference to the report from stories and “destroy all copies of the Report,” adding that if 100Reporters failed to comply it would be “in contravention of the public interest” and potentially liable “to a claim for damages.”” The article also says that UK newsletter Africa Confidential published an article on the Suspicious Activity Report but “withdrew the document from its website after lawyers for Eurasian Natural Resources threatened the newsletter with legal action”. “The law firm, Jones Day, has exerted similar pressure on at least two other media outlets that obtained the document,” 100Reporters continued. “Jones Day has told journalists that the document was submitted to the government in strictest confidentiality and demanded they return it or face prosecution.”
[xii] ENRC conference call 10 December 2012. See excerpt from transcript in “Notes to editors” above.
[xiii] In the 10 December conference, Mr Dalman said: “Taking the worst case scenario, if there was a worst scenario, I don’t think it will affect our operations whatsoever.”