The Mounties are investigating allegations from a whistleblowing accountant at TSX-listed mining company MagIndustries that his bosses paid bribes to officials in the Republic of Congo to win approvals tied to a potash mine development in that country.
According to newly unsealed court documents, the RCMP's sensitive and international investigations unit raided the Toronto offices of MagIndustries in January. The company has been developing a $1.5-billion potash mine and processing facility in the West African country for several years.
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Search warrant materials obtained by CBC News tell a cautionary tale about the company, which is registered in Toronto but controlled by Chinese interests since a takeover in 2011. Those investors and managers are now ensnared in an international police bribery investigation.
The RCMP believe four top executives with the company, including CEO Longbo Chen who took over in 2012, ignored warnings from Canadian financial advisers and signed off on a string of illegal payments to Congolese officials.
None of the allegations contained in the search warrant have been tested in court, and the RCMP has not laid any charges.
When asked for comment for this story, the company and its officials declined.
RCMP began "Project Aloes" in late 2013 after a lead accountant on MagIndustries' Mengo potash project in Pointe Noir, Congo, contacted Canadian Embassy officials. The Canadian accountant alleges his new Chinese bosses at MagIndustries ignored his refusals to pay out $12,000 in cash to government officials.
The accountant believes the money was to help win permission to expropriate 290 hectares of land to build a seaside shipping terminal near the company's new potash processing facility. Canadian prosecutors involved in the case blanked out portions of the unsealed search warrant, including the names of the accountant and the Congolese officials involved, citing the need to protect the ongoing investigation.
MagIndustires was working closely with various Congolese officials including Pierre Oba, mining minister, and Pierre Mabiala, minister of land ownership, the warrant states. Neither of those men are accused of doing anything wrong in the public portions of the RCMP search warrant.
The accountant told the RCMP in a videotaped statement that ultimately he was terminated for his refusal to approve the illegal payments, after being told by a company official "that it was the way to conduct business in Africa."
2 sets of books
The cash payments flagged by the whistleblower, it turns out, were not the first of their kind. In March 2014, the RCMP seized MagIndustries' emails from the company's internet service provider. Those communications reveal auditors and company executives were wrestling with what is described in internal emails as five "black money" payments made in 2012 to government tax officials.
The company, using the subsidiary Eucalpytus Fibre Congo, agreed to a series of "under the table" payments to unnamed tax officials totalling $102,000. In exchange, the company was granted a deep discount in the amount of tax it had to officially pay to Congolese authorities, the warrant alleges.
Eucalpytus kept two sets of books with one company official explaining they agreed to the payoffs "in exchange for cost efficiency," the court documents state. The RCMP warrant also cites evidence the company believed only Chinese employees should work in the finance department. In 2012, MagIndustries hired an outside "governance specialist," consultant Michael Gunns, who began sounding alarm bells and advising executives the scheme could be in violation of Canada's Corruption of Foreign Public Officials Act.
In August 2013, Gunns travelled to Congo where he met with the whistleblowing accountant. Gunns began asking questions, and a month later he too was terminated. The RCMP warrant materials cite a Sept. 22, 2013, email from risk manager Kevin Stephens to MagIndustries CEO Longbo Chen, expressing worry the situation was handled poorly and that the accountant "for the past two years had been privy to some sensitive and confidential company information such as per diem payments made to certain members of the Congolese government, tax and other financial issues."
The RCMP document states "Stephens emphasized that they needed to avoid any possibility that [name redacted] might release anything of a sensitive nature to the Congolese government, or worse, the Canadian government."
Cost of doing business?
Forensic auditor Peter Dent works with corruption watchdog Transparency International. In an interview, he said the Republic of Congo is ranked as one of the most corrupt countries in the world.
While he stresses he's not familiar with the specifics of this particular story, he rejects the notion that allegations such as the ones laid out above can merely be dismissed as the cost of doing business in some of the world's more shadowy jurisdictions.
If there is a cost, it's to be more scrupulous, he said. "One of the costs of doing business in one of the most corrupt regions of the world would be to have very robust compliance programs," he said. "The risks are much higher and therefore the due diligence that's going to be required on the business is likely going to be more expensive as well."
He notes there are numerous examples of foreign companies taking over a Canadian company and then using Canada's stellar business reputation as they operate abroad.
"It does give them perhaps a degree of credibility that they would not otherwise have had operating from their home jurisdiction," he said.
MagIndustries launched an internal probe in January after the RCMP raided its Toronto headquarters. Ontario securities regulators have been keeping a close eye on the company ever since, and as part of an order from the Ontario Securities Commission, the company must file a report on the probe by June 1 or risk an immediate halt on the trading of MagIndustries shares on the TSX.