Global Witness welcomes SFO announcement of formal investigation into ENRC

Global Witness raised repeated concerns of corruption risks over opaque mining deals in Congo 

The UK’s Serious Fraud Office (SFO) announced yesterday that they are opening a criminal investigation into FTSE 100 mining company Eurasian Natural Resources Corporation (ENRC). The SFO said that: “The focus of the investigation will be allegations of fraud, bribery and corruption relating to the activities of the company or its subsidiaries in Kazakhstan and Africa.”

This comes after a tumultuous week for ENRC with the resignation of ENRC Chairman Mehmet Dalman, and a series of other top officials leaving the company. 

Since the middle of last year, Global Witness has raised significant concerns over corruption risks associated with ENRC’s rapid acquisition of mining assets in the Democratic Republic of Congo (DRC) using opaque offshore structures. 

Global Witness published a detailed memo to ENRC shareholders at the time of the company’s AGM in June 2012,[1] which focused on five major mining deals between 2009 and 2011 which, we believe, had risks of corruption. In December 2012, Global Witness raised concerns that a US$550 million deal aimed at buying out ENRC’s main copper-and-cobalt mining partner in Congo would further heighten those risks.[2]

ENRC made large payments to offshore companies to purchase prize mining assets in Congo, which were acquired at significantly undervalued prices.[3] The structure of these deals has meant that the Congo, which has the lowest GDP per capita in the world, may have foregone hundreds of millions of dollars in revenue.

In response to the latest announcement, ENRC issued a statement saying that it is “cooperating fully with the SFO” and is “committed to a full and transparent investigation”. ENRC has previously denied any wrongdoing and has said it “is resolutely opposed to bribery and corruption in whatever form it may take.”

Many of ENRC’s mining deals in Congo involved companies registered in British overseas territories of the British Virgin Islands and Gibraltar. These offshore tax havens are often used to obscure the ultimate beneficiaries of natural resource deals. The BVI and Gibraltar should be put under the strongest pressure to cooperate with investigators, providing all documentation and other information regarding ENRC’s business partners in Africa.

The SFO announcement is another demonstration of the need for action from the G8, at the June 2013 meeting under the UK’s Presidency, to end the abuse of anonymous shell companies. Key to this would be a public registry of information about who ultimately owns and controls a company (its 'beneficial ownership'). This kind of information would seriously undermine the possibility of backroom deals being used to siphon away the wealth of developing nations. The UK Prime Minister announced yesterday in an open letter to his EU counterparts that he intends action on providing better information on beneficial ownership through the G8 and the EU, a move which Global Witness also welcomes.

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Contact:

Nathaniel Dyer, +44 (0)20 7492 5855 and +44 (0)77 11 006 799, [email protected]

Daniel Balint-Kurti, +44 (0) 207 492 5872 and +44 (0) 7912 517 146, [email protected]

Notes to editors:

1. For SFO’s announcement of its investigation into ENRC see: http://www.sfo.gov.uk/our-work/our-cases/case-progress/enrc-plc.aspx

2. The full ENRC statement from 25^th April read: “London - The Board of Directors (the 'Board') of Eurasian Natural Resources Corporation PLC ('ENRC' or, together with its subsidiaries, the 'Group') today notes that the SFO has moved to a formal investigation. ENRC confirms that it is assisting and cooperating fully with the SFO. ENRC is committed to a full and transparent investigation of its procedures and conduct.”

3. See also Global Witness’s statement on UK Prime Minister’s letter on beneficial ownership here: http://www.globalwitness.org/library/global-witness-welcomes-uk-prime-minister%E2%80%99s-move-end-anonymous-shell-companies