Billionaire Steinmetz Under House Arrest on Bribe Suspicion
by Jesse Riseborough, Thomas Biesheuvel, and Franz WildBeny Steinmetz, the billionaire entangled in a long-running dispute over rights to one of the world’s most valuable mining assets, has been put under house arrest in Israel after being detained on suspicion of bribing Guinean government officials.
The 60-year-old, who made his fortune in the diamond trade, was detained on suspicion of bribery and money laundering, Israeli police said. Steinmetz was released to house arrest for two weeks on bail of 100 million shekels ($26 million), court documents show. His Israeli and French passports were confiscated and he was barred from leaving Israel for 180 days. Steinmetz didn’t appear in court.
Steinmetz, and other Israelis who live abroad, “are suspected of giving tens of millions of dollars in bribes to senior public sector employees” in Guinea, according to a police statement. “The investigation was carried out in conjunction with law enforcement agencies in the U.S., Switzerland, Guinea and Israel as part of the OECD-led effort against the bribery of foreign public sector employees.”
The $20 billion Simandou project was once one of the world’s most prized mineral assets. The iron-rich mountain has been at the center of a power struggle for almost a decade, having attracted some of the biggest mining companies and powerful advisers including investor George Soros and former U.K. Prime Minister Tony Blair. It has also spawned legal challenges and a U.S. grand jury probe into potentially corrupt payments to Guinean officials.
Beny Steinmetz
“It is BSGR’s strong belief that these allegations of bribery by the government of Guinea are not only baseless, but are a systematic attempt by the government of Guinea to cover up the endemic corruption which has blighted this country for a number of years,” the company said in an e-mailed statement.
Israeli police arrested a second person, named in court documents on Tuesday as Asher Avidan, in connection with the investigation. Avidan, the former head of BSGR’s operations in Guinea, was also released to house arrest until Jan. 2.
“BSGR has been offering to assist the Israeli authorities on this matter for over a year,” it said in a statement Tuesday. “This heavy-handed approach by the Israeli authorities is clearly a publicity stunt.”
BSGR has rejected allegations it bribed officials in Guinea to win the right to half of the giant Simandou deposit in 2008. It later sold 51 percent of its rights to Brazilian mining giant Vale SA in 2010 for $2.5 billion, though only received a $500 million payment. BSGR was stripped of its rights in 2014 after a government committee said it found evidence of corruption in the awarding of the licenses.
Guinea will “remain loyal to its principle of non-interference in judicial procedures,” the government said by e-mail. “If this affair develops effects in Guinea, we will allow our judiciary to act as it has done in other cases of the same kind.”
On Tuesday, Israel’s Army Radio quoted Steinmetz’s lawyer, Yuval Sasson, as saying BSGR didn’t pay bribes and that other companies seeking to steal its mining rights were responsible for the probe. He didn’t identify the companies, but Steinmetz has argued that the allegations against him and BSGR are part of an attempt by Rio Tinto Group, the world’s second-biggest miner, and others to win back rights to Simandou. Rio has denied the claims. A Rio spokesman declined to comment on Monday.
Steinmetz grew up around the family diamond business, Rubin Steinmetz and Sons, which was founded by his father in 1940. In the 1990s, he formed with his brother Daniel the Steinmetz Diamonds Group, now called Diacor International Ltd., which is one of about 80 firms which can buy gems from De Beers. BSGR also operates the Koidu mine in Sierra Leone, which produces some of the world’s most valuable diamonds and supplies Tiffany & Co.
Grand Jury
In January 2013, a grand jury in New York began investigating possible violations of the Foreign Corrupt Practices Act and criminal money-laundering in connection with the Simandou mining concession, according to U.S. prosecutors.
In 2014, Frederic Cilins, a Frenchman with ties to Steinmetz and BSG Resources, was sentenced to two years in prison for obstructing the grand jury investigation. Prosecutors claimed he tried to bribe a witness to destroy evidence and lie to U.S. investigators. Cilins was released in January.
Last week, Mahmoud Thiam, a former mining minister in Guinea, was accused by U.S. prosecutors of laundering bribes he received as part of a plan to help a Chinese company win “near total control” of the West African nation’s valuable mining sector.
Thiam, a U.S. citizen, was allegedly paid $8.5 million by an unidentified Chinese conglomerate, which was seeking exclusive rights to “a wide range of sectors of the Guinean economy” in addition to control of mining in the country. He was mining minister in 2009 and 2010, federal prosecutors in New York said.
(An earlier version of this story corrected the spelling of Steinmetz in the first paragraph.)