Mining Firm Doles Out $400,000 in Cash to Officials, Others; Company Says Payments Are Legitimate
By RACHEL LOUISE ENSIGN and CHRISTOPHER M. MATTHEWS*
African Barrick GoldABG.LN +2.64% PLC's North Mara gold mine is a tough place to do business.
The site, in a remote region of Tanzania, is nearly 700 hundred miles from the commercial hub Dar es Salaam. Travel is difficult and infrastructure, nearly nonexistent.
But for African Barrick and parent Barrick Gold Corp. ABX.T -1.79% , the site is posing more than logistical headaches.
As part of a process to buy land near the mine starting last year, African Barrick paid more than $400,000 in cash mostly to Tanzanian government officials and consultants responsible for valuing the land, according to company invoices and copies of checks reviewed by The Wall Street Journal.
An anonymous person said the payments were bribes to officials in position to influence African Barrick's business interests, according to an email sent to the company last year and reviewed by the Journal. The person didn't describe any quid pro quo behind the payments.
African Barrick and Toronto-based Barrick Gold said payments they made weren't bribes and were legitimate payments for expenses and allowances tied to an agreement with the Tanzanian government.
"Cash is often the only viable method of payment because in many regions of the country, banking infrastructure and services are extremely limited, or sometimes not available at all," the companies said. "All such payments are carefully documented, monitored and controlled."
The nearest bank was hours from the mine, people close to the company said.
An investigation for the companies by law firm Steptoe & Johnson LLP found that African Barrick "acted appropriately in all instances, in accordance with Tanzanian, U.S., and U.K. law," the companies said.
African Barrick recently has cut back on paying officials for certain expenses and is evaluating how to make payments differently, according to company budgets and the people close to the company.
The Tanzanian government didn't respond to requests for comment.
U.S. authorities have said that cash payments to government officials, while not necessarily illegal, are a red flag. "The most obvious form of corrupt payment is large amounts of cash," says a guide from the Justice Department and the Securities and Exchange Commission.
The anonymous person's email mentioned plans to report the African Barrick payments to the Foreign Corrupt Practices Act units of the Justice Department and the SEC. The 1977 law makes it illegal to offer money or a gift to foreign-government officials to gain a business advantage. Barrick Gold shares trade on the New York Stock Exchange, making the company and its subsidiaries subject to the FCPA. If a person provides information that leads to an SEC action, the person can get up to 30% of any penalty the agency recovers. The SEC and the Justice Department declined to comment.
Canada has a similar law that makes it illegal for Canadian citizens and companies to bribe foreign government officials.
Barrick Gold declined to comment on whether U.S. authorities have contacted the firms regarding the allegations.
African Barrick's earnings fell sharply last year, though the North Mara mine increased output, according to the company's annual report. Barrick reduced its stake in African Barrick in March as part of an effort to pay down debt and focus on its most profitable operations.
Under a memorandum of understanding between African Barrick and the Tanzanian government that was reviewed by the Journal, local and national officials would oversee the valuation of land parcels that African Barrick wanted to buy and determine their owner. The company would compensate the officials with allowances and pay cash for travel and other expenses, the memorandum and the people close to the company said.
Some of the money was paid in cash to Adam Yusuf, the head of a Tanzanian government task force overseeing the land valuation for African Barrick, with the intention that he would deliver cash to other officials, according to the documents reviewed by the Journal.
Mr. Yusuf was responsible for asking for money, picking up the cash at a bank and turning in documentation, such as sign-in sheets, that the cash was used as intended, the people close to the company said.
Two people inside the company raised concerns over the cash payments to Mr. Yusuf and other officials, according to company emails.
Mr. Yusuf didn't respond to requests for comment.
Jerry Minja, a district land officer who also received cash as a part of the process, according to company emails, said the agreement between the government and African Barrick prevented him from commenting.
The company's payments began last year after African Barrick began a new process to buy land close to the North Mara mine. Past efforts to buy land had been hampered by problems such as unreliable land documentation, the people close to the company said.
The task force was comprised at various points of between five and 13 government officials and met regularly for a year starting in February of last year, according to the documents reviewed by the Journal. The officials sometimes participated in a broader group that a company budget and an email listed as having up to roughly 140 additional members.
A large portion of the payments, which ranged from about $19,000 to roughly $121,000, were for allowances to compensate task-force members for their time, according to the documents reviewed by the Journal.
The task-force officials received up to roughly $250 a day in such fees for as many as 45 days at a time, according to African Barrick budgets. Some of the fees covered a "night out allowance." Other payments were designated for stationery, gasoline and other contingencies, according to the budgets. Tanzania's per capita gross national income is $570 a year, according to the World Bank.
African Barrick received sign-in sheets saying that government officials picked up their payments, the people close to the company said. The company received receipts vouching for the officials' gasoline usage, for which the company initially gave the officials cash, the people said.
Jaco Maritz, African Barrick's interim chief financial officer until last September, raised concerns about the cash payments, according to an internal email reviewed by the Journal. After receiving an email in March 2013 from a mine employee requesting about $121,000 in cash for a meeting with government officials, he wrote back, "Let's find best way to deal with payments going forward to avoid cash payments where possible."
Mr. Maritz, who is now vice president for finance, said in response to a request for comment that the company takes all its compliance obligations and internal controls seriously. "In this case, the company applied a high degree of oversight to ensure we met our obligations, complied with the law at all times and also followed company procedures," he said in written statement."
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