BHP Billiton, the world’s biggest mining company, has joined its smaller rival, Rio Tinto, in being implicated in possible corrupt activities.
The news was buried in the company’s first quarter exploration and development report, issued yesterday.
The short BHP statement read:
"Following requests for information from the U.S. Securities and Exchange Commission as a part of an investigation relating primarily to certain terminated minerals exploration projects, the Company has disclosed to relevant authorities evidence that it has uncovered regarding possible violations of applicable anti-corruption laws involving interactions with government officials.
"Accordingly, the Company is cooperating with the relevant authorities including conducting an internal investigation, which is continuing. It is not possible at this time to predict the scope or duration of the investigation or its likely outcome."
We have no information of what sort of activities or in which part of the world.
It could be China, Africa, Asia or the US or Australia, for all we know.
BHP said in a separate statement to newsagencies yesterday that "We can confirm that the SEC’s requests for information primarily relate to certain terminated minerals exploration projects and not any activity in China, BHP Billiton’s marketing activities or the sale of any of the company’s products".
That could have been made clearer in the first statement by BHP yesterday.
As could have the results of obvious media briefings in the media this morning which said the problem was in Cambodia and put a figure of $2.7 million on the problem.
Why this couldn’t have been made public yesterday is another question for BHP, as is the revelation in the Fairfax papers that BHP first learned of the problem in August of 2009.
Rio of course was caught up in the Stern Hu case in China last year and early this year.
Now BHP seems to have been snared in a similar fashion: alleged corrupt behaviour involving down the line staff or agents, not the company, with the discovery made by the government of another country.
The ASX and or ASIC should ask BHP to provide more details as soon as possible.
We have to know when the SEC first told BHP of its suspicions and when BHP told the SEC what it had found.
The disclosure laws here in Australia will have to be applied to see if BHP has provided timely and adequate disclosure to the local (and London) markets.
BHP has mostly oil producing assets in the US, especially in the Gulf of Mexico. It has US dollar issued debt and its shares are traded in the US. It is what the SEC calls a "foreign issuer" which is all the Commission needs to get involved.
There’s no word on whether the US Justice Department will become involved, but if it involves a breach of America’s bribery laws, it will.
If the reports are confirmed then authorities in countries in Europe, especially the European Commission and China could also become involved.
And that could also be enough to cause the proposed iron ore joint venture with Rio Tinto in the Pilbara to be blocked or collapse.
European Commission competition authorities are investigating the JV, as are their counterparts in Germany, China and Australia. The ACCC here has halted its review while more information is provided by the two companies. This disclosure by BHP should become part of it.
Having the two members of the JV accused of corrupt activity, either directly or indirectly, would probably see the whole idea blocked; the cloud of suspicion would be too much for the two companies to overcome.
If the SEC has the goods, then BHP will move to settle it as quickly as it can.
But the fact that the allegations have been raised by the SEC shows the lax controls inside BHP, just as Rio Tinto has admitted to having lax processes and controls in regard to the results of the Stern Hu case.
That’s a bad look for the biggest and third biggest mining companies in the world.
It’s an early test for BHP’s new chairman, Jac Nasser, who took over from Don Argus at the end of March.
