Miner's Strife Over SFO `Dawn Raids' Laid Bare by London JudgeBy
ENRC lost bid to avoid giving most documents to prosecutors
London court said claims of legal privilege largely not valid
Anxiety was on the rise at Eurasian Natural Resources Corp. in early 2011 after media allegations of corruption and a whistle-blower complaint prompted fears of an imminent visit by the U.K.’s Serious Fraud Office.
“I predict a sh!tstorm and a SFO dawn raid in London before summer’s over,” the head of compliance wrote in an internal email in April of that year. Executives went so far as to plan a mock raid in preparation for the real thing.
While that raid didn’t come, the mining company spent much of the next two years conducting internal probes at the behest of the SFO, agreeing to report any wrongdoing it discovered. By April 2013, after 30 meetings with ENRC representatives, the SFO lost patience and opened a criminal probe which is still underway.
Details of ENRC’s internal review, and discussions surrounding it, emerged this week in a U.K. court judgment after the company lost a bid to avoid handing documents to the SFO by claiming they were covered by legal privilege. In recent years, the once high-flying miner has changed its name and given up its London Stock Exchange listing.
The 47-page court judgment provided a back-story to the long-running investigation and included the emails, comments and chronology described in this article.
The documents at issue in the court decision include interview notes and analysis compiled by lawyers and forensic accountants as part of the company’s investigations. Just because ENRC ultimately decided not to self-report to the SFO doesn’t mean it can assert legal privilege, which protects confidential communications between attorneys and their clients, Judge Geraldine Andrews said in her ruling.
“ENRC repeatedly promised that it would give full and frank disclosure of the results of its internal investigations to the SFO, but then changed its mind,” Judge Andrews said. “If the documents are not privileged, there is no reason why the court should exercise its discretion in a manner that would enable ENRC to escape compliance with those promises.”
Graham Huntley, a London lawyer for ENRC, said in a statement the ruling was “unprincipled and illogical,” and that the company would appeal. Judge Andrews denied leave to appeal, which means ENRC must get permission from a higher court to pursue it. A spokeswoman for the SFO declined to comment.
As the judgment lays out, ENRC’s problems started in 2010. After purchasing a stake in holding company Camrose Resources Ltd. and a number of its African mining subsidiaries, allegations of previous criminality involving those companies led to media controversy over the purchase and litigation with another mining operator. In December of that year, ENRC received an email from a whistle-blower alleging corruption, this time at its operations in Kazakhstan, the judgment said.
The company instructed a law firm to start investigating. A few months later, when a U.K. lawmaker raised concerns in Parliament about the Camrose deal and said he’d written to the SFO, executives started to get nervous. The lawyer leading the internal review warned an SFO probe would be so thorough it would “go through your wife’s underwear," the company’s then-general counsel later recalled.
In August 2011, 24 hours after another press report about the allegations, the SFO wrote to ENRC and invited its general counsel in for a chat. The letter referred to “recent intelligence and media reports concerning allegations of corruption and wrongdoing,” but said the SFO wasn’t carrying out a criminal investigation at that stage.
The judgment details how over the next two years, ENRC met with the SFO 30 times and gave the agency three presentations on its findings, with repeated assurances it was committed to fully cooperating with the prosecutor.
A report from the Kazakhstan investigations was sent to the SFO in February 2013, but the SFO never received the results of an investigation on Africa. In March of that year, ENRC overhauled its board and fired its lawyers. Within weeks, the SFO decided to open a criminal investigation.
ENRC has since delisted from the LSE and changed its name to Eurasian Resources Group. The company sued its former law firm, Dechert, for about 16 million pounds ($21 million), claiming it was overcharged for the work done in the internal investigations.
The SFO was given extra funding from the government to pursue the case last year and has interviewed a number of former executives. ENRC has denied the corruption allegations and no one has been charged in the probe.
“There is a recognised public interest in the SFO being able to go about its business of investigating and prosecuting crime,” said Judge Andrews in the judgment. “The sort of evidence which one would expect to be found in the disputed documents is likely to be of considerable value to its current investigation.”
The court ruling will be welcomed by the SFO, which has faced increasing resistance from targets of investigations asserting privilege to protect documents. Judge Andrews’ ruling makes clear that a law firm investigation on behalf of a company doesn’t get the same privilege protections in place for a company fighting litigation.