An Israeli diamond tycoon who locked horns with Rio Tinto over the world’s largest untapped source of iron ore has been put under house arrest with bail set at $26 million.
Beny Steinmetz, the boss of BSG Resources, has been detained in Israel over bribery allegations relating to the Simandou deposit in Guinea.
Last month Rio Tinto reported itself to authorities in Britain, Australia and the United States and dismissed two executives over a questionable payment relating to the saga.
Mr Steinmetz, 60, has business links with Britain. His company is incorporated in Guernsey and businesses connected with his empire have an office in Mayfair, central London. Israeli investigators are understood to have travelled to London and Switzerland recently to compare notes with their counterparts.
The scandal flared in 2008 when BSGR was awarded half of the Simandou concession that had been owned by Rio. Shortly afterwards it sold a share to Vale, a Brazilian group, in a $2.5 billion deal.
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The Guinean government later alleged that BSGR had bribed the wife of the country’s former dictator to secure the mining rights and it stripped BSGR and Vale of the asset. However, BSGR has consistently denied wrongdoing and argued that it was singled out for not paying a bribe by the present Guinean regime, which came to power when Alpha Conde won the country’s first elections six years ago.
BSGR has taken arbitration proceedings against the Guinean government. However, Guinea has cited new evidence that its lawyers allege links Mr Steinmetz more closely to a conspiracy to wrest Simandou from Rio Tinto by corrupt means.
In emails cited by the Guinean government, Asher Avidan, head of BSGR’s local subsidiary, is said to have written in 2007 that the government was poised to strip Blocks 1 and 2 of Simandou from Rio Tinto and award them to BSGR, but said BSGR would need to prepare a presentation to justify being given the rights to mine the area.
According to the Guinean government’s response to BSGR’s claim, Mr Steinmetz agreed that the company should “prepare a very good presentation”, adding: “We should NOT talk about Rio in any written paper, as it is not our problem and government should do their own decision and otherwise it can come back to us.”
A spokesman for BSGR said that the company had “repeatedly demonstrated that these allegations of bribery are not only baseless, but are a systematic attempt by the current government of Guinea to cover up the endemic corruption which has blighted Guinea”.