Candid words from the Cambodian government in 2007 came back to haunt the world’s largest mining company on Wednesday as it reported that it was under US authorities’ scrutiny for possible corruption violations.
The Australian miner BHP Billiton, which terminated a sprawling bauxite exploration project in Mondolkiri province last year, told investors it had provided the US government’s markets regulator with evidence “regarding possible violations of applicable anticorruption laws involving interactions with government officials.”
The information referred to the US Securities and Exchange Commission, or SEC, primarily concerned unnamed exploration projects which had been canceled, BHP said in a news release on first quarter exploration results.
The news immediately prompted Australian newspapers to assert that the bribery in question concerned so-called “tea money,” or an unofficial commission, which the Cambodian government in 2007 said BHP had paid in order to secure the Mondolkiri exploration rights.
Newspapers including The Australian and The Sydney Morning Herald also cited a 2009 Global Witness report which alleged that a $1 million payment from BHP was not recorded on government ledgers.
The “tea money” remark emerged in 2007 when Minister of Water Resources Lim Kean Hor told the National Assembly that Prime Minister Hun Sen had telephoned him from Australia in 2006 to inform him of a signing bonus in the BHP contract.
“The royal government of Cambodia got tea money, $2.5 million, from the bauxite investment with Australia,” Mr Kean Hor said at the time. “Samdech Prime Minister was really happy.”
Under a 1977 US anti-bribery law, the Foreign Corrupt Practices Act, companies whose securities are traded in the US are prohibited from bribing government officials anywhere in the world. Long considered a blue chip company, BHP is traded on the New York Stock Exchange.
Neither Mr Kean Hor nor Mining Minister Suy Sem were available yesterday for comment. However Chan Yutha, cabinet chief at the Water Resources Ministry, said the term “tea money” referred to nothing illicit.
“His Excellency the minister actually clearly explained that this was not under-the-table money,” Mr Yutha said. “I can say that it was not bribery or corruption money,” he said.
“It is hard to use a proper word in the Khmer language. That is why it is called tea money. But it is legal and loyal money that has been used in accordance with financial procedures for an irrigation project in Pursat,” he added.
He referred further questions concerning the allegedly missing $1 million to the Finance Ministry where officials could not be reached.
SEC spokesman Kevin Callahan said by telephone from Washington on Wednesday that the SEC only discloses investigative information if cases are brought to court.
“I wouldn’t be able to confirm or deny the existence of any investigation,” he said, citing US government policy.
Amanda Buckley, spokeswoman for BHP, said yesterday that the information forwarded to the SEC concerned neither sales or marketing activities nor company activities in China, where four employees of Anglo-Australian miner Rio Tinto were jailed last month on bribery charges.
She declined to say whether the possible violations occurred in Cambodia and said news media allegations that they involved the Cambodian government did not originate with her company.
“We are not making any statements at all about which terminated mineral exploration projects are the subject of these inquiries,” she said by telephone from Melbourne.
News reports have also cited unnamed BHP sources as saying the information did not concern activities in the US. However The Sydney Morning Herald reported Wednesday that the Philippines, where BHP downsized operations at a nickel plant in 2008, were a possibility.
In a letter to environmental campaigners Global Witness in November 2008, BHP said the $2.5 million amount disclosed by Mr Kean Hor, the water resources minister, concerned a BHP-controlled social development fund supporting the Danish Red Cross, the Wildlife Conservation Society and the Cambodian Mine Action Center, among other organizations.
However BHP also paid $1 million directly to the Cambodian government to secure the bauxite exploration rights, BHP Vice President for Sustainability and Community Relations Ian Wood said in the letter to Global Witness.
BHP “has never made a payment to a Cambodian official,” Mr Wood said.
However, in a report last year, Global Witness claimed that no record of the $1 million payment could be found on the government’s non-tax revenue statements for the period.
An inquiry by Australian authorities in 2006 revealed that BHP had provided $5 million worth of wheat on credit to the former Iraqi government in the course of negotiating contract for the Halfayah oil field beginning in 1995.
However Ms Buckley, the BHP spokeswoman, said yesterday that the inquiry “made no findings as to possible breaches of the law by BHP Billiton.”
The company has an extensive and conscientious code of business conduct, she added.
In a statement yesterday, Global Witness Campaigner Eleanor Nichol did not specifically endorse media speculation of Cambodian involvement in the SEC investigation of BHP but said the company’s bauxite payout to the government appeared to have vanished.
“BHP is not in a minority of one here. Other extractive companies paid large amounts of money to the Cambodian government which are not showing up in the national accounts,” she said in the statement.
“The mystery surrounding this underlines the vulnerabilities of companies making these kind of payments.”
Mr Callahan, the SEC spokesman, said the SEC, an independent agency, did not have authority to bring criminal charges. However, SEC civil actions commonly give rise to prosecutions by the US Department of Justice, he said.
The German car and truck manufacturer Daimler AG settled with the US government on April 1 after the SEC sued the company, alleging that it had earned $1.9 billion, including $91.4 million in illegal profits, after paying $56 million in bribes across 22 countries including China, Vietnam, North Korea and Indonesia.
The company has agreed to pay $185 million in fines and disgorgement of profits, according to the SEC.
Word of the SEC’s scrutiny of BHP came as the company hoped to gain the support of European and Australian market regulators for the merger of iron ore operations in Western Australia with Rio Tinto.
Shares in BHP, which reported a 7 percent net drop in profits for the six months ending in December at $5.7 billion, closed down by 1.13 percent in New York on Wednesday at $78.46.