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Friday, April 23, 2010

BHP corruption probe widens

The Australian
April 23, 2010
Matt Chambers and Matthew Stevens

THE investigation into BHP Billiton's potentially corrupt behaviour in Cambodia yesterday widened to include British regulators as BHP revealed it had handed over correspondence between its managers and government officials in negotiations involving bauxite deposits there.

It is understood BHP has uncovered internal emails between managers in Cambodia, and possibly other countries, and government officials.

The emails, which relate to several tenements BHP has now left, are understood to have been considered to have potentially breached BHP's code of conduct and, therefore, needed to be handed to the US authorities that had previously queried BHP. It is not known at what level of government the correspondence was with.

BHP stunned markets on Wednesday, when it revealed the US Securities & Exchange Commission had queried its behaviour over certain mineral exploration ground, spurring a BHP internal investigation that uncovered possible corruption in dealing with government officials.

It is understood the investigations relate to up to $US3.5 million ($3.8m) of payments made in Cambodia from 2006 that a government official there had publicly referred to as "tea money", a local term for unofficial payments to government officials.

BHP has said the payments included $US2.5m for community projects near the bauxite project in the northeastern Cambodian province of Mondulkiri.

Britain's Serious Fraud Office confirmed yesterday that it had also been contacted by BHP on the matter and had opened its own preliminary assessment.

In an internal email to staff yesterday, BHP chief executive Marius Kloppers said the announcement of the investigation in a quarterly report was consistent with the company's approach of open and transparent behaviour when such issues arose.

"The investigation is at a relatively early stage," he said. "You should be assured that we will thoroughly and fairly investigate these matters, as we would any other possible breach of law or the code (of conduct) and take whatever action is appropriate."

The investigation comes at a bad time for BHP, just weeks after its potential iron ore partner, Rio Tinto, sacked four workers, including Australian Stern Hu, after they were convicted of bribery and stealing commercial secrets related to deals in China.

It is also comes as European and Asian steelmakers lobby the European Commission to block the planned $US116 billion merger of BHP and Rio's West Australian iron ore mines, ports and railways.

The Australian Securities & Investment Commission would not say if it was investigating BHP under recently beefed-up penalties under the Criminal Code Act.

Regulators in the US, Britain and Australia have recently tightened penalties for bribery (but there is no suggestion the BHP investigation involves bribery).

"We are in an era where these things have never been more serious," said Ian Ramsay, director of the Centre for Corporate Law at Melbourne University. "The penalties for bribery (of foreign officials by an Australian company) skyrocketed in Australia in February and the UK has just passed a new bribery act that in some respects is broader than the US Foreign Corrupt Practices Act." In February, Australia boosted maximum penalties for bribery of foreign public officials from $330,000 to as much as 10 per cent of a company's annual turnover.

In BHP's case, this could be $US5bn.

BHP shares trade in Australia, Britain and the US, so its behaviour is subject to investigations by regulators in all three countries.

In its latest code of business conduct, BHP warned staff about harsher penalties under British law for "facilitation payments", which it described as "small sums to low-level government officials to obtain routine services to which BHP is otherwise entitled".


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