[Bhpbilliton] Follow up to BHP Billiton bribery - another article on Cambodia

[Andy Whitmore]

** Apologies if you have already seen this (for some reason it seems to 
take a long time for my articles posted to this list to get through), 
but a good, exclusive article which is concentrating the hunt for the 
bribery allegations to Cambodia (finding journalistic proof at least of 
corruption - whether BHPB can be said to be knowingly involved will be 
up to the authorities....).

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BHP's 'tea money' missing in Cambodia

Ben Doherty, Exclusive, Sydney Morning Herald - 
http://www.smh.com.au/business/bhps-tea-money-missing-in-cambodia-20100514-v4fs.html?autostart=1

15 May 2010

PHNOM PENH: BHP-Billiton knowingly bribed the Cambodian government in 
2006, anti-corruption campaigners say, paying $US2.5 million ($2.8 
million) in ''tea money'' which never appeared on government books, and 
which never built a single school or irrigation channel as promised.

In September 2006, BHP-Billiton paid $US1 million to the Cambodian 
government for a mining concession to conduct exploratory drilling for 
bauxite on 100,000 hectares in Mondolkiri province, in Cambodia's far 
east. The world's biggest mining company also gave the government an 
additional $US2.5 million to go towards a ''social fund'' for 
development projects for local communities.

Despite promises from the government the social fund would be 
administered by the finance ministry, budget documents obtained by the 
Herald show none of BHP's money ever appeared on the government's books.

And while the money was variously promised, by both BHP and the 
Cambodian government, to start irrigation projects, and to build dams, 
schools and hospitals in the province, none was ever seen in Mondolkiri.

Anti-corruption campaigners and members of the Cambodian parliament say 
BHP knew the money it paid in September 2006 was a bribe and would never 
reach the communities displaced by its mining activities.

"No doubt BHP knew from the beginning this money is [sic] bribe, is 
bribery, they know from the beginning. They cannot ignore this reality 
by saying that the company believe that the money was just paid 
properly, legally, to the government," said Son Chhay, a 15-year member 
of the Cambodian National Assembly and outspoken anti-corruption 
campaigner. ''There is no excuse for BHP.''

BHP left Cambodia in 2009, after finding insufficient bauxite reserves 
to mine commercially, but the US Security and Exchange Commission is 
understood to be investigating the irregular payment.

And the company, while refusing to confirm its Cambodian payment is 
under suspicion, conceded in its latest quarterly statement that an 
internal investigation had uncovered evidence "regarding possible 
violations of applicable anti-corruption laws involving interactions 
with government officials".

The original deal between BHP and the Cambodian government was signed in 
2006, during a visit by the Cambodian Prime Minister, Hun Sen, to Australia.

BHP's $US3.5 million, which government officials said would be received 
by the finance ministry, was paid into a Cambodian bank account in 
September 2006. It has not been seen, or accounted for, since. It 
appears nowhere on the government's books.

The Herald has obtained the Cambodian government's budget statement for 
2006, which is not released publicly.

It shows revenue from mining concessions for that year of just 
$US443,000. The $US1 million for the mining licence, and the $US2.5 
million for the social fund, do not appear anywhere else in the budget 
papers.

Quizzed on the deal in 2007, the Cambodian Water Resources Minister, Lim 
Kean Hor, told the national parliament the money was "tea money", a 
colloquial term for an undeclared bribe.

"The royal government got tea money, $US2.5 million, from the bauxite 
investment with Australia," he told parliament.

Mr Hor was backed up by another senior member of the ruling Cambodian 
People's Party, Cheam Yeap, who said "the money is just for friendship".

Both ministers refused interviews with the Herald.

There is continuing confusion over what the money was promised.

Defending the payment's legitimacy this month, Mr Hun Sen said: "I 
ordered to use this money to build the Charoek Dam in Pursat province, 
but later this company requested a part of the fund to build schools and 
hospitals in Mondolkiri province."

For its part, BHP-Billiton says it retained control of the money, which 
was to be administered by a committee over which it had veto. However, 
the company concedes it lost control of the money, with some allocated 
to a "social infrastructure project not approved by BHP-Billiton".

Former BHP employees say the money has never been seen in Mondolkiri 
province.

The miner's community official in Mondolkiri, Nok Ven, said no community 
projects were ever funded by BHP-Billiton's money.

"There's no such thing happen in Mondolkiri province. There's no school, 
there's no irrigation. There's nothing at all happened," he said.

Separately from the $US2.5 million social fund payment, BHP-Billiton did 
donate nearly $US470,000 to six non-government organisations working in 
Mondolkiri province.

Mr Chhay said it was common practice for tea money payments to be made 
over and above mining licence fees, and for the money to disappear.

"The tea money paid by BHP to the government … is just the same thing. 
We could not find where this money [went] … there is no doubt that this 
money was somehow paid to someone, but there's no evidence that they 
will be part of the government budget."

He said Cambodia was institutionally corrupt, with government officials 
bleeding the country's natural resources for their own profit, while 
international donors contribute fully half the country's budget to keep 
the state afloat.

UN figures show 68 per cent of Cambodians survive on less than $US2 a day.

"But there are so many rich people in Cambodia. You can look on the 
streets, there are a lot of LandCruisers, Lexuses and Mercedes … 
Cambodia receives more than half [its] budget from donor countries, but 
the officials are so rich and live in castles.''

---------------

Tea-time free for all

Ben Doherty, Exclusive, Sydney Morning Herald - 
http://www.smh.com.au/business/teatime-free-for-all-20100514-v4ql.html

15 May 2010

Mining has the potential to drag the people of Cambodia out of poverty, 
but corruption means millions of dollars are going into the pockets of a 
powerful few.

PHNOM PENH: IT'S JUST after midday when the group arrives at Titanic, a 
restaurant on the banks of the Tonle Sap River. The restaurant is the 
nicest on the Phnom Penh waterfront, despite its pessimistic name.

Tailor-made suit jackets are discarded and ties are loosened as the 
party of 20, entirely male save one, takes its seats at a long table.

Immediately, bottles of whisky appear, and generous glasses are poured.

The group stands, noisily charges its glasses to a short speech, and 
downs the lot.

Five minutes later, it's another speech, noisier and longer, before 
another, and another, each a little more raucous than its predecessor.

"It's a business deal. Celebrating a business deal. A Chinese company," 
a waiter informs other diners. There are three government ministers in 
the group, he whispers conspiratorially.

This is the public face of doing business in Cambodia. The benign 
bonhomie of a successful negotiation sealed over a long lunch.

But there is also a hidden side that is never so indiscreetly displayed 
and is threatening to stop the benighted country ever pulling itself out 
of the mire of poverty: corruption.

Cambodia is widely regarded as one of the most corrupt countries. Of the 
182 countries tracked for public sector corruption by the Transparency 
International corruption index, Cambodia ranks 159th.

Corruption exists at all levels. Low-ranking public servants, most of 
whom have had to pay their superiors for the privilege of a job, recoup 
the money by requiring bribes to perform even the most routine of 
duties, to process a driver's licence application, approve a building 
permit, or register a business.

And it extends to the very top of the government. Senior ministers are 
regularly accused of accepting millions of dollars in ''tea money'' - a 
colloquial term for illegal, under-the-table payments - to grant 
forestry, oil and mining licences.

Sometimes, the money is window-dressed as donations for ''social funds'' 
or ''development projects'', but little of it is seen again. In 2009, 
the US ambassador to Cambodia, Carol Rodley, opined that $US500 million 
went missing in Cambodia each year.

So perhaps it should not have been a great surprise that last month, 
when the US financial markets regulator, the Securities and Exchange 
Commission, said it was investigating allegations of corruption 
involving BHP Billiton, speculation turned quickly to the company's 
operations in Cambodia. The SEC investigation is believed to centre on a 
deal between BHP Billiton and the Cambodian government signed in 2006, 
during a visit by Cambodian Prime Minister Hun Sen to Australia.

BHP conceded in its latest quarterly statement that an internal 
investigation had uncovered evidence "regarding possible violations of 
applicable anti-corruption laws involving interactions with government 
officials".

But the company has never confirmed that the SEC investigation is in any 
way related to dealings in Cambodia.

Whether or not it is the subject of the SEC inquiry, it is known that 
BHP paid $US1 million to the Cambodian government for a mining 
concession to conduct exploratory drilling for bauxite on 100,000 
hectares in Mondolkiri province, in Cambodia's poor far east.

The world's biggest mining company also gave the government an 
additional $US2.5 million to go towards a ''social fund'' for 
development projects for local communities.

BHP's money was paid into a Cambodian bank account in September 2006. 
The money has not been seen, or accounted for, since.

BusinessDay has obtained the Cambodian government's budget statement for 
2006, which is not released publicly. It shows revenue from mining 
concessions for that year of just $US443,000.

Despite promises from the government that the social fund money would be 
administered by the Finance Ministry, the documents show none of BHP's 
$US3.5 million appeared on the government's books. And while the 
''social fund'' money was variously promised, by BHP and the Cambodian 
government, to start irrigation projects, and to build dams, schools and 
hospitals in the province, none of the money was seen in Mondolkiri.

Asked in 2007 about the money received from BHP, Cambodian Water 
Resources Minister Lim Kean Hor told the national parliament the money 
was "tea money".

"The royal government got tea money, $2.5 million, from the bauxite 
investment with Australia," he told parliament.

Hor was backed by another senior member of the ruling Cambodian People's 
Party, Cheam Yeap, who said "the money is just for friendship".

Both ministers refused interviews with BusinessDay. BHP has steadfastly 
denied the money it paid was ''tea money''.

''BHP Billiton operates over 100 assets in 25 countries,'' a spokeswoman 
said.

''We operate according to a strict code of business conduct, which is 
based on the values contained in the company's charter and has been 
prepared to assist our people, wherever they may be located, to work in 
a way that upholds the highest ethical standards.

''Each of BHP Billiton's businesses is required to ensure that all 
employees, contractors and others with whom they work understand the 
requirements of the code. The code prohibits bribery and corruption in 
all forms.

''The code is supported by a business conduct advisory service. This 
includes a multi-lingual, 24-hours-a-day call centre and online case 
management system. As a leading global resources company operating in so 
many parts of the world, we believe that operating sustainably and 
responsibly underpins everything we do.''

But anti-corruption campaigners and members of the Cambodian parliament 
say BHP must have known the money it paid in September 2006 was a bribe 
and would never reach the communities displaced by its mining activities.

For 15 years, Cambodian-born, Adelaide-educated Son Chhay has sat on the 
opposition benches in Cambodia's parliament, railing against rampant 
corruption.

He says bribery is "normal practice" in Cambodia and the major reason is 
that most Cambodians are still desperately poor.

Earlier this year, he walked out of parliament in protest at new 
anti-corruption laws, which allow senior government officials to keep 
their compulsory declaration of assets confidential.

"The law legalises corruption, it's not a fight against it,'' he says. 
''People in government do not have the will to fight corruption because 
it is they who benefit. You can see that all the senior ministers, 
including the Prime Minister, have hundreds of millions [of dollars].

''Their houses are like castles, their wives are wearing $100,000 rings, 
compared to the poor, who hardly even have a proper place to live.

"No doubt BHP knew from the beginning this money is a bribe, is bribery; 
they knew from the beginning. They cannot ignore this reality by saying 
the company believed that the money was just paid properly, legally, to 
the government. There is no excuse for BHP."

Defending the payment's legitimacy this month, Hun Sen said: "I ordered 
to use this money to build the Charoek dam in Pursat province, but later 
this company requested a part of the fund to build schools and hospitals 
in Mondolkiri province."

For its part, BHP said in a letter to non-government organisation Global 
Witness that it had retained control of the money, which was to be 
administered by a committee over which it had veto. However, the company 
concedes it lost control, with some money allocated to a "social 
infrastructure project not approved by BHP Billiton".

Former BHP Billiton employees say the money has never been seen in 
Mondolkiri province. The miner's former community official in 
Mondolkiri, Nok Ven, says no community projects were funded with BHP 
Billiton's money.

"There's no such thing happen in Mondolkiri province,'' he says. 
''There's no school, there's no irrigation. There's nothing at all 
happened.''

Nok Ven resigned from BHP Billiton because he felt the mining giant 
ignored the wishes of the indigenous Bunong people, who were shut out of 
forests they used for food and cultural practices.

BHP Billiton did, separately from the $US2.5 million social fund 
payment, donate nearly $US470,000 to six non-government organisations 
working in Mondolkiri province.

Chhay says it is common for tea money to be paid over and above mining 
licence fees, and for the money to vanish.

"The tea money paid by BHP to the government I think is just the same 
thing,'' he says. ''We could not find where this money [went] … there is 
no doubt that this money was somehow paid to someone, but there's no 
evidence it will be part of the government budget."

He says Cambodia is institutionally corrupt, with senior government 
officials bleeding natural resources for their own profit, while 
international donors contribute fully half the budget to keep the state 
afloat.

Cambodia is also one of the region's least-developed nations. Nearly 70 
per cent of the populace survive on less than $2 a day. A third of 
children under five are malnourished.

And yet, Cambodia is not a country without means, nor potential. It is 
simply that the country's means are in the hands of so few, and it's 
potential so often abused.

Eleanor Nichol, a campaigner with Global Witness and author of Country 
For Sale, an examination of the developing country's extractive 
industries, says Cambodia's political and economic system is sculpted to 
the benefit of a few key individuals.

"It's a system of government where the state is treated as a personal 
slush fund, as opposed to what we understand as normal government, which 
is one that acts in the best interests of its people,'' she says.

She says donor money is funnelled to keep basic state services such as 
health, education, and infrastructure operating, while private interests 
''bleed the state of its other assets'' - particularly its natural 
resources.

In the decades after the Khmer Rouge period, Cambodia's greatest natural 
resource - its wealth of untouched forest - was comprehensively 
stripped. Primary forest cover was reduced from 70 per cent in 1970 to 
just 3.1 per cent today.

Between 1990 and 2005, Cambodia lost 2.5 million hectares of forest, 
with the huge profits going into the pockets of a powerbroking few, 
members of the cabal that surrounds Prime Minister Hun Sen.

Now there are serious concerns the same will happen with Cambodia's 
remaining natural resources: its minerals, its fish stocks, its oil. 
These industries are all in their infancy, and their eventual value is 
not yet clear, but they are growing exponentially and unchecked. 
Potentially, they are worth hundreds of millions of dollars a year to a 
country that still cannot pay its own bills.

As well as being excluded from any of the economic benefits of the sale 
of their country's resources, it is ordinary Cambodians who suffer most 
directly from the land concessions being granted across their country.

Typically, the people are simply kicked off farmlands or forests they 
have used for generations for food and to generate income. But in many 
cases, entire villages are forcibly evicted by government soldiers, 
homes burnt and land seized, all without compensation.

Thousands of people have been displaced, and scores shot and killed by 
troops acting on government orders.

Most of the companies coming to Cambodia seeking mining licences are 
from China and Vietnam. Many are new enterprises, without a corporate 
reputation to uphold, and bring no mining experience to their new venture.

These companies, Chhay says, are uninterested in a transparent process, 
and are happy to pay whatever, to whomever, for access to Cambodia's 
natural resources.

And so, while it may not surprise many to learn that BHP found 
corruption in Cambodia, anti-corruption campaigners in Cambodia were 
surprised to hear the allegations levelled at BHP.

Time and again, BusinessDay hears that BHP's presence was welcomed in 
Cambodia. BHP was supposed to be the good guy.

With its hard-won reputation as a scrupulously honest operator, it was 
hoped the world's biggest miner could use its corporate influence to 
insist on strict standards of propriety.

Other multinational companies have also become embroiled in corruption 
allegations.

French oil company Total paid $US8 million to a social development fund, 
and $US20 million as a ''signature bonus'' direct to the government for 
the right to drill for oil offshore, while South Korean miner Kenertec 
paid a $US1 million ''start bonus'' simply for permission to begin work.

But while there is no shortage of interest, domestically and 
internationally, in Cambodia developing a transparent governance system 
for its new extractive industries, for every step the country takes 
towards greater accountability, there has been an equivalent leap back.

Global Witness' Eleanor Nichol says Cambodia has been effectively 
"captured" by a dishonest and self-interested clique, formed around the 
Prime Minister, his friends and family.

"The fact that Cambodia is completely corrupt is not a national 
secret,'' she says. ''Any company with even basic due diligence would 
know this and I'm sure BHP had very good due diligence procedures and 
systems in place. So they'd have gone in with their eyes wide open."

She says the BHP case raises questions about multinational companies, 
many with strong corporate reputations to protect, dealing with highly 
corrupt states.

"What responsibility do companies have to make sure the money that they 
pay the government actually reaches government coffers?'' she says.

"How do they ensure that the bank account numbers they've been given 
aren't the bank account numbers of senior public officials and are 
actually going to the Ministry of Finance? When you're dealing with a 
state that is captured by a small group of individuals, corruption can 
be more nuanced than the straight up 'give me a million dollars 
under-the-table' bribery."


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