Steinmetz sentence opens new front in war on mining corruption

Israeli billionaire Beny Steinmetz has been at the centre of an international investigation into alleged bribery to win mining rights in Guinea. (Image from Beny Steinmetz’s website.)

Switzerland took direct aim at the global mining industry when it sentenced Beny Steinmetz to five years for bribery. But it’s not clear if the Israeli billionaire will ever set foot in prison.

Steinmetz’s conviction was hailed as a milestone in the fight against corruption in a sector long dogged by allegations of murky dealings and shady practices. The court ruling comes as miners from Glencore Plc to Rio Tinto Group face increasing scrutiny from both law enforcement agencies and investors. Still, until Friday few executives were subject to such personal punishment.

“It’s an important decision because it happened in Geneva as one of the most important commodity-trading hubs that is vulnerable to corruption,” said David Muehlemann, a policy analyst at Swiss corporate governance watchdog Public Eye. “It’s also an important sign that there are Swiss prosecutors who’ve showed it’s possible to enforce bribery provisions.”

A quirk of Swiss law allowed the billionaire to walk away from a Geneva courtroom just minutes after being convicted and return to his native Israel

Yet there are also caveats. Not only will Steinmetz appeal, but it could be years, if ever, before he enters a Swiss prison.

A quirk of Swiss law allowed the billionaire to walk away from a Geneva courtroom just minutes after being convicted and return to his native Israel. To encourage Steinmetz to testify, his lawyers received court assurances before the trial that he would not be detained. That provision in the Swiss criminal code is a nod to the realpolitik that most countries, including Israel, don’t extradite their citizens.

Still, the Swiss verdict will hurt Steinmetz, further impairing his ability to cut international deals.

Appealing verdict

Steinmetz made his money in the diamond trade, before securing the rights to Simandou, the world’s richest untapped iron-ore deposit. That should have been his crowning glory but instead sparked years of legal headaches that culminated in his conviction for bribing Guinean officials.

Marc Bonnant, Steinmetz’s lawyer, is appealing the verdict because he said his client never took part in a bribery pact and the court didn’t properly consider the “fragility” of the testimony against him. “This judgment goes completely against the course of international justice, it is not final,” Steinmetz said on Friday, following the ruling.

The fallout from Simandou has already curtailed Steinmetz’s business empire. He put BSG Resources into administration in 2018 to preemptively protect it from an arbitration claim from former Simandou partner, Vale SA, while he’s also cut ties with the family diamond business.

Steinmetz’s conviction was made easier by his position at the head of a private company, rather than a listed one.

“The evidence which demonstrated that Steinmetz had a personal role in the bribery was what made this case easier to reach a conviction,” said Kush Amin, a legal specialist at anti-corruption advocacy group, Transparency International. “The fact that he was so clearly the principal of the organization supported this argument and helped to build a strong case.”

Complex cases

While that status may make it difficult to replicate Steinmetz’s sentence in other cases, resource giants will ponder a growing list of adverse legal outcomes.

In 2019, Gunvor Group Ltd. agreed to pay $95 million to end an investigation by Switzerland’s Attorney General after the energy trader admitted a former employee bribed officials in the Republic of Congo and Ivory Coast to secure oil contracts. The penalty was among the largest ever paid by a Swiss company and, like the Steinmetz case, shone a spotlight on the use of agents or middlemen to win lucrative deals.

Gunvor said in November it would no longer use foreign agents or middlemen to facilitate deals.

“There is always the risk that individuals like Steinmetz will try to evade criminal liability but that should never stop prosecutors pursuing them,” said Transparency International’s Amin. “This case will hopefully demonstrate to other prosecutors in Switzerland and elsewhere that the complexities of these cases can be overcome.”

(By Hugo Miller and Thomas Biesheuvel)

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