ALSCON controversy: BFIG accuses RUSAL, Nigeria’s BPE of money laundering

Nigeria-American firm, BFIG, recognized last year by the Supreme Court as the authentic bidder for the disputed Aluminium smelter plant, ALSCON, has accused rival Russian firm, UC RUSAL, of using the plant to launder billions of dollars, in connivance with Nigerian privatization officials, in a new twist to the longstanding row.

BFIG, which bidded for ALSCON in 2004, has failed to secure operational rights to the plant in Ikot Abasi, Akwa Ibom state, despite the court decision that stripped UC RUSAL of same in a complex case that has lasted years.

On Monday, the Nigerian Supreme Court reopened a hearing into an application by BFIG requesting it to set aside a recent controversial termination of its contract to acquire ALSCON, and to compel the Bureau of Public Enterprise to fully comply with the July 6, 2012 order to execute the share purchase agreement (SPA) sent to it since February 13, 2013.

While awaiting the suit, BFIG said it has found evidences of what appears a stinking conspiracy to launder money between the Russian firm that has held tight to the smelter plant, and the BPE, which has assisted it to do so.

Suspicious loans

In new details seen by PREMIUM TIMES, audit reports on UC RUSAL show that while ALSCON, operating at 9,426 metric tons (about 4 per cent of the 193,000 metric tons installed capacity); realized about N1.3billion as revenue from the sale of aluminium ingots in 2008, cost of sales and administrative expenses stood at N7.1billion, with An attendant loss of N5.8billion after tax.

While that happened, loans and borrowings from offshore affiliated companies in Belize and the British Virgin Islands during the year rose radically from N2.4billion in 2007 to N9.1billion in 2008.

A similar trend was noticed in subsequent years, with the company operating at 10.456 metric tons (about 5 per cent of installed capacity) and realizing about N2.5billion as revenue in 2009, while cost of sales and administrative expenses gulped N8.5billion, with a loss after tax of N5.8billion. Total offshore loans and borrowings was N14.3billion.

In 2010, the company operating at 17.541 metric tons (MT) (about 9 per cent of installed capacity) realized about N4.6billion as revenue, but cost of sales and administrative expenses rose to N9.2billion, with a loss after tax of N4.5billion. Total offshore loans and borrowings was N17.5billion.

In 2011, at an operation level of 14,920 metric tons (MT) – (about 7 per cent of installed capacity), the company realized about N3.9billion as revenue, while cost of sales and administrative expenses was N6.5billion, with a loss after tax of N274.2million. Total offshore loans and borrowings was N21.3billion.

Though the financial statement for 2012 is yet to be released, RUSAL in a recent statement by its Director of Communication, Tatyana Smirnova, said recent management decision to shut-down the plant and sack 475 of its over 700 workforce, followed declining productivity as a result of inadequate gas supply to sustain production, despite obtaining loans totaling over $160million.

“The massive excess of cost of sales/administrative expenses over sales revenue in addition to a huge loan portfolio suggests possible money laundering arising from illegal tolling schemes or questionable cash movements in violation of the national and international money laundering laws and regulations,” BFIG president, Reuben Jaja, said.

RUSAL refused to respond when contacted. Ms. Smirnova said all inquiries about ALSCON be directed to BPE.

When contacted, BPE Director General, Benjamin Dikki, refused to be drawn into any detailed response. In a terse text message he sent to the reporter’s questions, Mr. Dikki said: “Any answer will be speculative. Let’s allow things to unfold.”

History of abuses

The allegation, if proven, only tends to fit into a pattern of abuses established by PREMIUM TIMES in multiple reports on the case.

Investigations have shown previously how the plant, built in 1998 for $3.2billion, and closed down barely six months later in mid-1999, following working capital issues, was run down through a series of fraudulent schemes.

Based on the company’s financial statements, Directors’ and Auditors’ reports prepared by both PriceWaterHouseCoopers Limited and KPMG, independently sourced from the Corporate Affairs Commission (CAC), PREMIUM TIMES revealed the serial pillage of ALSCON by UC RUSAL in connivance with successive BPE top officials.

The classified financial statements had revealed how ALSCON’s total asset base valued at over N127.6billion in 2004 before its privatization and N129.9 billion, prior to its handing over by BPE to RUSAL in 2006, was dubiously devalued to about N30.98 billion by December ending (more than 76 per cent) in less than a year of the controversial sale in February 2007.

Under the management of the Russians, supervised by BPE top officials as members of the Board, the plant’s asset base was further devalued to N25.19billion in 2008; N19.35billion in 2009; N14.85billion in 2010, and N14.57billion in 2011.

The 2011 report by KPMG had contained the qualified opinion of the auditing firm after RUSAL refused to provide evidence to justify its decision to dispose about N5.9billion worth of store room items, consisting spare parts kept since the plant’s closure in 1999, in addition to dubious loans totaling about N21.35billion from its parent company, Dayson Holdings.

Qualified opinion is usually issued by auditing firms when information at its disposal provided by the management of the company being audited are in doubt and cannot be used to reach a reliable conclusion in the final report.

Controversial visit

Following the crisis in the wake of the closure of the plant, the director general of BPE, Mr. Dikki, led a seven-man team on a visit to ALSCON to pledge support to its management in apparent defiance of a subsisting court injunction against further dealings with the Russian firm, whose acquisition of the plant was declared illegal in July 6,2012.

BFIGroup, wrote to BPE to protest Mr. Dikki’s action, describing the reported assurances to the ALSCON workers “to join forces with RUSAL to fight BFIGroup” as defiance of the ongoing N2.8billion suit against RUSAL and “part of the conspiracy to frustrate the execution of the mutually agreed share purchase agreement ordered by the Supreme Court.”

In the letter to BPE, Mr. Jaja, urged the Federal Government to hold BPE officials responsible for the safety and security of BFIG officials and associates based on allegations that RUSAL is “linked to notorious organized criminal group known as “Izaylovskaya”, widely accused of murder, assassinations and money laundering around the world.”


JD: Getting more and more interesting!