Deception & Fraud

Lying, faking, covering-up, cheating, or lack of transparency to gain an advantage or hide wrongdoing

Scheme to secretly expand Pacific Northwest export terminal part of plan’s undoing

Allegations of deception by the developer of a proposed coal export terminal in Longview, Washington date back to 2011, when Millennium Bulk Logistics was caught concealing the true scope of its plans from local residents and elected officials. The company had publicly stated that it intended to ship a modest 5.7 million tons per year from the Pacific Northwest port facility it wanted to build. But court records obtained by the New York Times showed the company secretly was planning to a massive expansion from its initial plan in a second phase that would ship allow the port to ship up to 80 million tons annually, 14 times more than the company originally stated in its application. 

Longview is the last of six coal export terminals proposed in the Pacific Northwest that still has any life life, although in early 2017, the Washington State Commissioner of Public Lands denied a key permit need for the project, citing “a chronic pattern of failure by the company to provide essential and accurate information” as a key reason. The company is challenging the permit denial and continues to pursue a plan to export up to 44 million tons of coal per year. That amount of coal would mean eight full coal trains per day moving through dozens of cities and towns along a 500-mile rail shipping route from the Powder River Basin in Wyoming and Montana. Concerns about toxic coal dust, noise, public safety and snarled traffic have drawn stiff opposition from residents, community leaders and elected officials in communities all along the rail line.

Sources:

– Portland Business Journal

– The (Longview, Washington) Daily News

– The New York Times

 

 

 

Coal mining executives charged with fraud for roles in Serbian scams

After more than a decades of shady financing deals, Serbian investigators in early 2011 opened a case against state-run Electric Power of Serbia related to its operation of Kolubara coal mine in west-central Serbia. An internal audit of the company’s books revealed serious irregularities by management that resulted in unnecessary expenditures benefitting private contractors. The investigation led to the arrest in late 2011 of 17 people, including Dragan Tomic, who had been director of the Kolubara mine, deputy director at EPS and also a member of the Kolubara legislative assembly.

The suspects, which included officials from the mining company and the private businesses that resold lignite from the mine or leased machinery to Kolubara, were accused of running up fraudulent costs equivalent to around $11 million (US). According to reports, Tomic allegedly paid the companies for unnecessary mining equipment and services, and the companies overcharged for the number of hours they worked. Some of the private businesses that were accused belonged to high-level management in Kolubara. In all, 28 people were finally charged in connection with the case.

In a related case, several other executives of Kolubara Mining and EPS were also arrested for their part in fraudulently profiting from resettlement funds. An EPS board member was paid €1.2 million by the company as compensation for his house in the village of Vreoci. He claimed his house needed to be moved to make way for a new strip mine even though it was in fact located far from the mining zone and wasn’t actually his residence.

Sources:

– Bankwatch here and here

Sham procurement leads to fraud charges, leaves Slovenians on the hook for millions

A broad scheme of falsifying water samples to avoid coal pollution limits in West Virginia

A second employee at Appalachian Laboratories, Inc. is headed to jail for taking part in a broad scheme to cover up coal company water pollution by submitting fake water samples for required testing for compliance with permit limits. Former lab manager John Brewer has been sentenced to a two-year jail term. Another former employee, John Shelton, is already in prison. Shelton admitted diluting water samples and substituting water he knew to be clean for actual mining discharges. He said he would take water from what he called a “honeyhole” known to have water that would pass testing. Brewer admitted that he and other employees would falsify the dates on water samples to avoid having to submit samples they knew would violate pollution limits. U.S. District Judge Irene Berger said the crime put communities at risk and enabled companies to pollute without fear of getting caught or facing any consequences.

Sources:

– Charleston Gazette-Mail: 18 January 2017, 15 July 201610 May 2016

Fraud and conspiracy convictions, charges for companies and officials in India’s ‘coal scam’

From 1993 to 2011, the government of India gave away the nation’s coal deposits for free to government and private companies, providing a massive windfall for mining firms and depriving the country of at least Rs1.86 lakh crore in revenues. Just between 2006 and 2009, the coal blocks given away without auction accounted for some 14 percent of India’s total coal reserves. The scandal that resulted – known as ‘Coal scam’ or ‘Coalgate’ – prompted widespread media attention, corruption investigations by India’s Special Central Bureau of Investigation (CBI), and a special court to hear the coal allocation cases.

Convictions started coming down in April, 2016, starting with jail terms and fines for two directors of a firm called Jharkhand Ispat Private Ltd. They were found guilty of cheating and criminal conspiracy – “fraudulently” and with “dishonest intention” deceiving the government in allocation of a coal block. In its second conviction several months later in July, the special court found Rathi Steel and Power and three of its officials similarly guilty of fraud and deception in procuring a coal block.

Nearly two dozen coal allocation scandal cases are pending before the special court, and in late December 2016 former Coal Secretary H C Gupta were charged along with two other government officials for cheating and criminal conspiracy in allotment of the “Mahuagarhi Coal Block’ in Jharkhand to a private firm. The alleged offenses come under provisions of the Prevention of Corruption Act, and trial is scheduled to begin in mid-April. In early January 2017, yet another firm – Himachal EMTA Power Ltd – and three of its senior officials were charged by the special court.V

Over the course of the CBI investigations, allegations also surfaced that some senior officials in the agency were taking bribes from companies to fix or weaken cases.

Sources:

– India Today

– Indian Express here, here, here and here

– Coalscam.org

Corruption probe hits Indian conglomerate driving big coal export expansion in Australia

The Indian conglomerate planning one of the world’s biggest new coal mines – the Carmichael mine in Australia – is now under investigation by India’s Directorate of Revenue Intelligence for fraud and money laundering. The probes of the Adani Group companies focus on fraudulent invoicing of coal imports and false invoicing for capital equipment imports – schemes whose objectives appear to include both diversion of money into offshore tax havens as well as profit at the expense of the Indian people through higher electricity prices that are based on inflated coal costs.

In addition the Carmichael mine, Adani wants to build a new 400km rail line linking it to the Abbot Point shipping terminal and greatly expand capacity at the port to handle more coal. The Australian government is considering a $1 billion subsidy to support the railway. All the planned developments are based on a web of Adani corporate structures that involve tax havens in the Caribbean and other locations. The Carmichael mine would be 40km long and 10km wide, with six open-cut pits and five underground, threatening the land and existence of the Wangan and Jagalingou people. Expansion of the Abbot Point terminal and shipping threatens the Great Barrier Reef.

Sources:

– ABC here and here

– AsiaBizNews

Bribery and shady dealings behind Punta Catalina coal plants in the Dominican Republic

On January 7, 2017, Dominican Republic President Danilo Medina named a civil society commission to investigate construction of the Punta Catalina coal power plant — the same day the director of the plant’s construction firm was questioned in Brazil over its admitted $92 million in bribes paid to Dominican government officials in return for contracts. Punta Catalina — two power plants and a coal receiving terminal in the Dominican Republic — has has been dogged by allegations of a full range of dirty dealing, including lack of transparency, deception, favoritism, overbilling and bribery.

The Dominican government awarded the Punta Catalina coal project contract to Brazilian firm Odebrecht, with financing from Brazil’s BANDES bank, despite Odebrecht’s bid that inflated costs by $1 billion – double that of competing bids — according to the National Committee to Combat Climate Change (CNLCC). And according to news reports, documents emerging from corruption investigations of Odebrecht in Brazil reveal that the company received insider information from the Dominican government and then ran a scheme in which it billed exorbitant wages for workers on the project. Odebrecht is being investigated in Brazil for using mechanisms to overvalue construction projects and also for paying bribes and providing electoral advice in return for contracts, including in the Dominican Republic. Because of the corruption investigations in Brazil, financing from Brazil’s BANDES bank was stopped, prompting the Dominican Republic to turn to public funds, including from the state pension fund, to finance Punta Catalina.

Sources:

– Dominican Today herehere, here, here and here

– El Nuevo Herald

– Letter from CNLCC

– Banktrack

Alpha execs sued for fraud, deceiving court to exit bankruptcy and avoid mine cleanup

Six former executives at major U.S. coal company Alpha Natural Resources have been sued for fraud by the state of West Virginia, charged with knowingly making false and misleading financial projections in order to finalize Alpha’s plan to get out of bankruptcy. West Virginia’s environment department said the Alpha execs failed to disclose $100 million in obligations to restore land at Alpha mining sites in order to make Alpha’s cash flow look better. The $100 million in debts and obligations came to light just three months after Alpha got approval to exit bankruptcy and create a new stripped down company called Contura where the Alpha executives quickly took management positions.

According to West Virginia’s environment department, “…the debtors’ senior mangement knew about but did not disclose those impending “unaccounted-for” expenditures“ and “…the debtors’ senior management sat on both sides of these very issues and stood to benefit uniquely from consummation of the plan….” The $100 million shortfall could threaten Alpha’s viability and could saddle taxpayers with the costs of cleaning up Alpha’s mining sites. Alpha’s executives also wrote into the bankruptcy agreement that they could not be held liable if Alpha goes belly up. Without a bankruptcy agreement that was facilitated by alleged fraud by Alpha execs, the company could have been deemed too financially shaky and instead sold off to pay its reclamation obligations.

Sources:

– Vox

– Mother Jones

– Reuters

Bribery and deception behind a coal plant push in Myanmar

A representative from Kyauktan Township on the outskirts of Yangon told the Yangon Division parliament that a company pushing construction of a new coal-fired power plant in Kyauktan has been bribing and misleading local residents since March. Local lawmaker Daw Thet Thet Mu said residents of Zweba Kone village — most of whom could not understand English — were asked to sign forms in English indicating their support for the power plant after the company donated US$3,560 for fresh water excavation and promised to share profits from the project. There has been concern among villagers over pollution from the project impacting local farmland and water. An MOU for the coal plant had been signed several years ago by the Ministry of Electricity, Diamond Palace Services Co, E-Gateway of India and Global Advisors (Singapore). The Divisional Minister of Electricity told Daw Thet Thet Mu that the Yangon government would not allow the coal plant.

Sources:

– The Irrarwaddy

– The Global New Light of Myanmar

The concealing of an illegal mine in China, where a fire kills 11

Despite being closed in 2004, a coal mine in Liaoning Province in China was able to illegally continue operations after the owner concealed the shaft within a coal washing plant. In July 2016 a fire at the mine trapped 13 miners 500 feet underground, killing 11 of them with one missing. The mine had only one opening, whereas normal mine shafts have at least two.

Sources:

NDTV

 

Violence in Philippines vs. indigenous communities to make way for mining

In the Surigao del Sur province in the Philippines, the Manobo group Malahutayong Pakigbisog Alang sa Sumusunod (Preserving Struggle for the Next Generation, or Mapasu) attributes years of armed attack on indigenous peoples to government efforts to protect coal mining in the Andap Valley Complex in the Caraga region. According to a Mapasu statement: “Surigao del Sur has been militarized to guarantee the entry of these mining operations within our ancestral lands. Our leaders have been killed, our schools and cooperatives are being burned down, our teachers and organizations are being vilified and our Lumad communities are being attacked because we remain steadfast in defending our ancestral lands from destructive mining operations and protecting it for our next generation.”

In the past six years, according to the story on Bulatlat.com, 75 of 90 indigenous peoples killed were Lumad: “Most victims were leaders or community members who resist mining, agribusiness plantations and development aggression projects.” Community concerns have included environmental destruction and the handover of lands, forests, minerals and water on indigenous lands to private companies.  “Foreign mining corporations, aided by the government through the military, launched a campaign of deception and intimidation to force the indigenous peoples into leaving their land,” says Piya Macliing Malayao, secretary general of the Kalipunan ng Katutubong Mamamayan ng Pilipinas (Katribu).

Source: Bulatlat.com

Fake photos used to secure a mining go-ahead in Australia

A coal company proposing a controversial mining project in the Bylong Valley in Australia was prosecuted for fraud after a local landowner discovered that the miner had submitted fake photos in its bid to gain approval for the coal project despite local concern over impacts to water and agriculture. The photos were not of the property, showing a different environment instead. Charges brought by the government against Korean miner KEPCO and its contractor Worley Parsons were dropped and the companies avoided fines or criminal records by promising not to do it again.

Sources:

– Newcastle Herald

– Green Left Weekly

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