ENRC: Serious Fraud Office launches criminal investigation
FTSE 100 miner investigated over fraud, bribery and corruption claims relating to its Kazakhstan and African businesses.
The Serious Fraud Office has launched a criminal investigation into Eurasian Natural Resources Corporation (ENRC), the embattled FTSE 100 miner that has been beset by corruption allegations.
The move follows efforts by the company to conduct its own investigation into allegations made by a whistleblower relating to its Kazakhstan and African businesses, the findings of which the company had been reporting to the SFO.
The SFO said: “The director of the Serious Fraud Office has accepted ENRC for criminal investigation. The focus of the investigation will be fraud, bribery and corruption relating to the activities of the company or its subsidiaries in Kazakhstan and Africa.”
The company said: “ENRC confirms that it is assisting and cooperating fully with the SFO. ENRC is committed to a full and transparent investigation of its procedures and conduct”.
The SFO investigates and prosecutes the UK’s biggest frauds and has been instrumental in the handing down of fines and custodial sentences.
ENRC has suffered a series of high-profile departures, including the resignation this week of its chairman, Mehmet Dalman, who had been leading the internal investigation.
On Monday Dalman, who had staked his reputation on clearing up the ENRC mess, admitted: “I believe I have achieved all that I can as chairman of ENRC.”
The company’s law firm, Dechert, which had been hired by the company to conduct its investigation, has also parted company with the mining group, a move that prompted the SFO to demand that the law firm hand over documents relating to the case.
The company’s failed efforts to get to the bottom of corruption allegations contributed to the shares being the worst performer in the FTSE 100 last year. The controversies also come after the ousting of former chairman Sir Richard Sykes and independent director Ken Olisa in a 2011 boardroom coup backed by the founding directors, when Olisa memorably described ENRC’S behaviour as “more Soviet than City”.
The so-called “Trio” of founders – Alexander Machkevitch, Patokh Chodiev and Alijan Ibragimov – still own 44% of the company and said last week they were considering a bid to take the company private again. The possible takeover is thought to have persuaded the SFO to launch an inquiry while the company is still listed in London.
When ENRC floated in 2007, its prospectus outlined areas of potential concern for future investors, including the existence of a complex structure called the Russian Trading System (RTS). The document stated that the system involved sales made by ENRC to third parties and resulted in cash payments to ENRC’s founders. Their representatives declined to comment.
Meanwhile, a presentation given to the SFO last year by Dechert, seen by the Guardian, states that its efforts were hampered by staff forging documents, supplying the “wrong computer to the investigations team” and setting up a “false office”.
It also outlines allegations concerning the purchase of a farm in Kazakhstan by a director of the ENRC subsidiary SSGPO, claiming that the acquisition and running costs of the farm were “paid from SSGPO funds” and that the farm was owned through a “nominee shareholding on behalf of SSGPO president and major shareholder, Alijan Ibragimov”.
Representatives of Ibragimov declined invitations to comment on the document, although it is not yet clear what, if any, action the SFO may take.
Meanwhile, in Africa the company has faced questions over its former partner in the Democratic Republic of Congo, Dan Gertler. The Israeli tycoon has been dogged by accusations that a close relationship with the DRC’s president, Joseph Kabila, allowed him to buy interests in the country’s mining assets on the cheap – accusations he has always denied.