US corruption investigation centres on BHP Billiton
Thursday 22 April 2010
BHP Billiton became the latest mining company to be embroiled in a corruption scandal yesterday when it admitted it has been under investigation by the US Securities and Exchange Commission (SEC) since August last year.
The admission, published in the group's quarterly production report, comes just weeks after Rio Tinto, a company BHP tried to buy two years ago, saw four of its employees jailed in China for taking bribes.
BHP said the inquiry did not concern its operations in China, and that it has now discontinued the projects being investigated. It refused to say what type of corruption is alleged to have taken place, or where. It is understood, however, that the Wall Street regulator is looking into bribery allegations.
"We were contacted by the SEC in August 2009 when they informed us they were conducting an investigation. Their requests for information primarily related to certain terminated minerals exploration projects, the last of which ceased about a year ago," the company said in a statement.
BHP is dual-listed in London and Sydney, but investors can trade its ADRs in New York, bringing it into the US regulator's remit. The Serious Fraud Office (SFO) yesterday said that it has also opened a preliminary assessment into the same matter. It is a crime in both the US and Britain to bribe foreign officials to further commercial interests. The case is understood to concern low-level management and local government officials.
"We can confirm that BHP Billiton has opened dialogue with the SFO," a spokeswoman said. "The company has been in to see us and have offered their full cooperation. At this stage, it is only a preliminary assessment."
The group said that it has appointed the New York-based lawyers Davis Polk & Wardwell to conduct an internal investigation and that the information will be shared with the SEC.
The case will deal yet another severe blow to the mining industry's already tarnished image. The investigation is also likely to prove a distraction for BHP, which is trying to persuade competition authorities around the world that a huge Australian iron ore joint venture with Rio Tinto does not breach anti-trust laws.
However, the markets were unmoved by news of the inquiry, shifting BHP's share price down only marginally. "The fact that the investigation applies to expired mineral exploration tenements is infinitely preferable to if it had applied to marketing or sales activities, which would have potentially far wider ranging implications," Michael Bush, the head of fixed income credit research at National Australia Bank, said.
The mining industry is still reeling from the conviction of the four Rio Tinto employees in Shanghai last month. Rio Tinto has said that an investigation by the accountancy group Ernst & Young has cleared it of any wrongdoing in the case that saw the four executives jailed for between seven and 14 years in China.
Stern Hu, an Australian, and three Chinese colleagues, were convicted of taking bribes and commercial espionage. Rio Tinto would only have been censured if the four had faced charges of paying bribes. The company described the crimes as "deplorable behaviour," despite saying last year that the charges against the four were "without foundation". A survey conducted by the Mining Journal at a recent industry conference in Hong Kong found 88 per cent of respondents thought the company should have been aware of the bribes that were paid.
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