Financial Schemes & Excess

Bid-rigging, skimming, overbilling, tax evasion, golden parachutes, and other tactics for profit – often at public expense

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.


– 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.


– Bankwatch here and here

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

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.


– India Today

– Indian Express here, here, here and here


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.


– 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.


– Dominican Today herehere, here, here and here

– El Nuevo Herald

– Letter from CNLCC

– Banktrack

A coal plant in Sri Lanka dogged by a half-decade of corruption allegations

After years of alleged coal procurement corruption and bid-rigging at Norochcholai Power Plant in Sri Lanka, the Anti-Corruption Front released a report this year finding that the country had lost 4.88 million US dollars, or more than 710 million rupees as a result of the scam. The ACF lodged a complaint with the Commission to Investigate Allegations of Bribery or Corruption. The Supreme Court in Sri Lanka said that the ‘conscience of the court was shocked’ by the conduct displayed by certain individuals involved in the coal tender process. According to news reports, former Power and Energy Minister Champika Ranawaka coined the term “coal mafia” to allude to lobbyists he claimed were influencing coal procurement contracts. Local residents ultimately pay the costs.


– TRLRN News Radio

– Newsfirst


– Lankaweb

– Sunday Times

A secret scheme to export US coal is rife with wrongdoing

Deception and allegations of money laundering and influence-peddling were all behind a scheme to export coal mined in Utah to Asia through a shipping terminal in Oakland, California. To avert public opposition to shipping coal from Oakland, that aim for a new terminal was kept secret for years, while $53 million in public funds in Utah that was supposed to be for local civic projects was diverted to help pay for the shipping terminal project. An investment firm that stood to gain $1 million and a rail line in the deal wrote the script. Utah elected officials supporting the plan took money from the coal company pushing the outlet for Utah coal, Bowie Resource Partners. And the secret scheme, once revealed, forced concerned communities in Oakland to scramble quickly to try to stop it. In Utah, a bill in the legislature to get around prohibitions on $53 million in community impact funds being used for an out-of-state coal terminal was criticized as a money laundering scheme. Ultimately the Oakland City Council voted unanimously to ban coal handling and storage, but developers are considering legal challenges still.


– East Bay Express

– Los Angeles Times here, here and here

– East Bay Times

Endemic corruption in Indonesian coal, and deadly mining pits

Indonesian law requires mining companies to set aside funds for land reclamation before extraction begins, but Luthfi Fatah, a resource economist at Indonesia’s Lambung Mangkurat University explains that companies evade reclamation by leaving a small parcel of land unmined in each lease. Then, “when the government asks them to do reclamation, they say, ‘We haven’t finished yet — we still have 10 hectares to be exploited,’” Fatah explains. It’s just one glimpse into coal corruption in Indonesia, where 50-90 million tons of coal is mined and exported illegally each year, shortchanging Indonesians of hundreds of millions in royalty revenues. District-level politicians trade coal concessions for cash or political favors, according to environmental advocates, and some companies hold concessions in protected wild lands like East Kalimantan’s Bukit Soeharto State Forest. Indonesia’s Corruption Eradication Commission (Komisi Pemberantasan Korupsi, KPK) has revoked the licenses of 721 mines in 12 provinces across the country for failing to comply with basic standards, such as royalty payments, forestry permits and environmental commitments.

One result of the endemic corruption are the hundreds of unused water-filled mine pits in East Kalimantan in which 22 children have drowned since 2011. The most recent was 13-year-old Aprilia Wulandari who was found drowned “in a soccer field-sized mine pit on the outskirts of Samarinda,” according to Inside Indonesia. “Aprilia was reportedly playing with friends on her way home from school when she fell into the unmarked pit.”


– Environment360

– Sea Globe

– Jakarta Globe

– Greenpeace

– Inside Indonesia

Bankrupt mining company seeks huge bonuses for top execs

Peabody Energy, the world’s largest private sector coal company — now in bankruptcy — has asked a bankruptcy judge to let it pay up to $12 million in bonuses to six top executives because of the “extraordinary efforts” required of them in the bankruptcy process. Meanwhile, a small school district in Colorado near a Peabody mine needed a state bailout earlier this year as Peabody – in debt over $10 billion – missed a local tax payment. In April, Peabody and Arch Coal laid off 460 miners at Powder River Basin mines on the same day, saving the pair around $37 million in annual wages – or 84 percent of the $44 million Peabody and Arch paid their executive teams in 2014. From 2012-2014, Peabody paid its executives around $75 million, as the company lost $1.9 billion over the same period.


– Dow Jones Newswires

– Casper Star Tribune

– ThinkProgress

Share This