Steinmetz Claims Dozens Aware of Guinea Vote Rigging

Beny Steinmetz’s BSG Resources Ltd. has claimed hedge fund Och-Ziff Capital Management Group LLC and leading South African government officials are among dozens who knew of the “corrupt rigging” of an African election that led to the loss of the Israeli billionaire’s most valuable mineral asset.

Guinean President Alpha Conde and a raft of current and former government officials of the West African country, as well as South African secret-service agents and prominent business figures in the country, were all said to have knowledge of the election rigging that led to Conde taking power in 2010, according to a Sept. 3 filing in a federal court in New York. They also have knowledge of the subsequent “wrongful misappropriation” of mining rights from BSG Resources, or BSGR, to the world’s best untapped iron-ore deposit, Steinmetz’s company claimed.

The filing is the first time lawyers for Steinmetz and BSGR have made public elements of their defense to claims by the world’s second-biggest mining company, Rio Tinto Group, that they conspired with rival Vale SA to steal the rights to Simandou as far back as 2008 by bribing Guinean officials. BSGR described the suit as “baseless and bizarre” at the time.

Och-Ziff and others named in the filing aren’t parties to the litigation and there was no allegation of wrongdoing made against them. A spokesman for the hedge fund wasn’t immediately able to comment.

The Simandou project, where Steinmetz and Vale had planned a $10 billion iron-ore mine, has been the focus of a bitter battle for control that’s attracted the world’s biggest mining companies and some of the industry’s most prominent investors, bankers and entrepreneurs.

Grand Jury

Rio’s suit against Vale, Steinmetz and others wasn’t the first time allegations of corruption had centered on Simandou.

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 Simandou, according to U.S. prosecutors. Frederic Cilins, a Frenchman with ties to Steinmetz and BSGR, was sentenced to two years in prison for interfering with the U.S. probe of allegations that bribes were paid to win rights to Simandou.

Och-Ziff, the largest publicly traded hedge fund on Wall Street, has been actively investing in African resources. Some of its investments in the region are at the center of an investigation by the U.S. Justice Department and the Securities and Exchange Commission.

Discoverable Information

A former Och-Ziff partner and a current director of the fund, both focused on Africa, are among the names of parties aware of the alleged election rigging, according to the filing by lawyers for Steinmetz and BSGR at Mishcon De Reya LLP. It lists 83 individuals and companies known to them “who are likely to have discoverable information that defendants may use to support their claims or defenses in this action.”

Mining executives including Rio Chief Executive Officer Sam Walsh and the London-based company’s former CEO, Tom Albanese, were listed as having “knowledge of the subject matter of the lawsuit” while former Vale CEO Roger Agnelli was said to have information regarding talks between Vale and BSGR regarding their $2.5 billion joint-venture deal signed in 2010.

A spokesman for Rio declined to comment. Vale declined to comment in an e-mailed statement. Agnelli didn’t immediately respond to an e-mail seeking comment.

Secret Service

Conde knew that South African “business interests supplied illicit funds” to rig elections in exchange for a share in Simandou, according to the filing. Celia Gremy, a spokeswoman for Conde, said the government wasn’t immediately available to comment.

The South African secret service met with Conde, Guinea’s electoral commission and Waymark Infotech, a South African information technology company that helped run the elections, it said.

Among the senior South African figures Steinmetz’s lawyers identify as having knowledge of the alleged plans to rig the elections and seize Simandou from BSGR are then Deputy President Kgalema Motlanthe, former housing minister Tokyo Sexwale and the ex-head of the National Intelligence Agency Moe Shaik, according to the filing.

Sexwale’s Mvelaphanda Holdings Ltd. has a joint venture with Och-Ziff to invest in African resources.

“Neither Mvelaphanda nor Sexwale, nor any of its directors, nor any of its shareholders, directly or indirectly or via nominee, have, in any way, been involved in the politics and /or elections in Guinea,” Rael Gootkin, a Cape Town-based lawyer with Werksmans Attorneys, said in an e-mailed response to questions. “It appears that an attempt is being made to ’drag’ our clients into a dispute of which our clients have no involvement and is an apparent ’fishing expedition’ being embarked upon by BSGR.”

Rio Claim

Motlanthe didn’t immediate respond to two voicemail messages left on his mobile. Shaik declined to comment when contacted by phone. Brian Dube, a spokesman for South Africa’s State Security Ministry, didn’t immediately respond to e-mailed questions. Chris Koukeas, a Waymark project manager, didn’t immediately respond to a phone message or an e-mail.

In Rio’s original April claim, the company said it spent 11 years and hundreds of millions of dollars developing mining operations in the Simandou region of southeast Guinea. The producer lost half its interest in 2008, valued at billions of dollars, when the Guinean government decided to give the stake to BSGR for free.

That decision followed a $200 million bribe to Mahmoud Thiam, the former mining minister, Rio claimed. Thiam at the time said the claim was false and “borderline comical.”

Vale CEO

Rio claims the defendants violated U.S. civil racketeering law and committed fraud. It’s seeking unspecified damages, which may be tripled under the Racketeer Influenced and Corrupt Organizations Act.

Vale was cleared of any wrongdoing in connection with the purchase of Simandou rights by the governments of Guinea, France, Switzerland and the U.S., CEO Murilo Ferreira said April 30. The defendants asked U.S. District Judge Richard M. Berman in a Sept. 3 letter to dismiss the case so it can be litigated in England.

Steinmetz, who has a net worth of about $4.4 billion according to the Bloomberg Billionaires Index, began amassing his fortune in the diamond trade, according to his personal website.

The case is Rio Tinto Plc v. Vale SA, 14-cv-03042, U.S. District Court, Southern District of New York (Manhattan).