The National Post is Canada’s second largest national paper.
Potash company MagIndustries Corp. has provided a glimpse of what appears to be a major bribery scandal involving its African subsidiaries. But there may not be any more details to come.
Mag is short of cash and needs money from its controlling shareholder, a Chinese firm called Evergreen Holding Group, to continue funding an independent investigation. Evergreen, which is alleged to be responsible for some of the bribery, said it couldn’t afford to put up any money.
That means the investigation has ground to a halt. Every Mag director who was working on it has resigned, and chief financial officer Geoff Woo was removed from his duties. Auditor Ernst & Young LLP has resigned, concluding it can’t complete its work amid the controversy.
But the allegations already presented suggest this could be one of Canada’s biggest foreign bribery scandals in years. It involves infractions, minor ones such as gifts of furniture, and major ones involving “black money” payments to government officials, and the construction of a villa for one official.
It may come down to the Royal Canadian Mounted Police to unravel the whole debacle. The RCMP raided Mag’s Toronto headquarters in January, looking for evidence the firm made bribes to officials in the Republic of Congo. It continues to run its own probe into the company.
“There’s a number of facets to this case they’ll have to unravel,” said Riyaz Dattu, a partner and international trade expert at Osler, Hoskin & Harcourt LLP.
Mag controls the Mageno potash project in the Congo. After failing to find a partner to help develop the project, the company agreed to be bought out by Evergreen in 2011. But instead of trying to buy 100 per cent of Mag’s shares and take it private, Evergreen bought 76 per cent of the stock and maintained a minority stock listing in Canada. That kept the company under the jurisdiction of the RCMP and Canadian regulators.
Mag began its internal investigation in January, shortly after the RCMP raid. Since then, the company has failed to file financial results and the stock has been cease-traded. The Toronto Stock Exchange is reviewing the company for a possible de-listing.
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