A Greek mining scandal: Reports of tax avoidance, corporate-state corruption ...Published by MAC on 2014-12-15
Source: Anti-gold Greece (2014-12-14)
... and police brutality in the case of the Cassandra
Previous article on MAC: Greece's gold battle continues unabated
A Greek mining scandal: Reports of tax avoidance, corporate-state corruption and police brutality in the case of the Cassandra mines, Halkidiki
14 December 2014
A recent report by the Centre for Research on Multinational Corporations (SOMO) details how the multinational mining company El Dorado Gold, owner of the infamous Cassandra mines, is rerouting profits through tax havens to avoid tax in Greece. These allegations of illegal dealings are only the tip of a rotten iceberg in Greece of possible state-corporate corruption, police brutality and potential environmental degradation, where the citizens of Greece may have been denied the value of a US$15 billion gold and copper mine.
We must go back to 2003 to first understand the undercurrent of corruption in the story of the trio of mining assets that constitute the Cassandra mines, all located in or nearby the ancient forest of Skouries. Following the bankruptcy of TVX Hellas Gold, who owned the Cassandra mines, the Greek government transferred the assets to state ownership. Two days later it then sold the mines to newly created company called Hellas Gold SA, whose initial share capital just met the requirement of €60,000. Hellas Gold SA was an asset of AKTOR, a construction multinational owned by powerful Greek businessman Giorgis Bobolas. From media outlets, natural resources, real estate, railways and other infrastructure portfolios, the Bobolas group dominate the Greek business landscape.
On February the 23rd 2011, the European Commission found that the 2003 privatisation constituted illegal state aid and ordered Hellas Gold to pay €15.34 million euros to the Greek state. It stated:
“After an in-depth investigation, the European Commission has concluded that the sale of the Cassandra Mines, in 2003, was carried out below its real market value and, therefore, involved subsidies in breach of EU state aid rules. The subsidy was calculated at €14 million. As the company also did not pay transaction taxes, the total amount to be recovered from the beneficiary to the State’s coffers is €15.3 million, plus interest”
Moreover, the European Commission found that the privatisation was “conducted in the absence of a transparent and open public tender”. The real market value was established by independent advisors Behre Dolbear International on the 30th June 2004, 6 months after the privatisation. They valued the assets at €408million, over 37 times more than the government’s manufactured value.
Some, including Anti-Gold Greece, an activist group resisting El Dorado, have argued that the Bobolas family used their media outlets to influence government policy to produce favorable outcomes for profitmaking in Skouries. Aside from Aktor, the Bobolas Group owns the MEGA Channel, Greece’s largest TV station, they also own DOL, a media group that produces Ethnos, a popular daily and Sunday newspaper and other print media and websites. Alex Tsipras, the leader of the opposition party SYRIZA in Greece, has argued that:
“In Greece the real power is with the owners of banks, the members of the corrupt political system and the corrupt mass media. This is the triangle of sin”.
His claims may have some credence. According to a European Commission report on media freedom and independence, published in December 2011, Greek media policy “has remained highly centralized in the hands of the government of the day… and that it has been thoroughly influenced, albeit in opaque and informal ways, by powerful economic and business interests who have sought to gain power, profit, or both”.
Indeed, some contend that media outlets of the Bobolas family failed to report large demonstrations against the Skouries mining project. One-sided reporting of the mining conflict in Halkidiki is a common criticism of those resisting the mining project. In an open letter addressed to the National Federation of Editor Unions from the Coordinating Committee, the affected communities expressed their disbelief at the biased reporting of events in Halkidiki:
“During the last few days the residents of our towns and villages have been targeted by a certain part of the media, which systematically presents us as “terrorists”. There is no mention of the repetitive violations of our human and constitutional rights, the continuous police surveillance of our personal lives, the violation of our lawyers’ rights, the abductions/citizens’ disappearance for hours at a time, the unbearable pressure to give DNA samples. The rule of law is abolished everyday in our towns and the journalists pretend they see nothing”.
Furthermore, when the new Environment Minister Tina Birbili blocked a license for Skouries mine in 2009, the Bobolas papers christened her ‘Green Tina’ and criticized her performance. Birbili was consequently sacked in June 2011. The new Environment Minister, Giorgis Papaconstantinou, immediately granted a ‘fast-track’ mining license. After the license was issued, AKTOR received a windfall of anywhere between €261 million and 19.9% of €2.4 billion, as European Goldfields was taken over by El Dorado Gold. Papaconstantinou proclaimed that the “decision was made solely on the basis of the environmental impact study”. Yet, scores of environmental scientists have argued that the environmental impact study has serious deficiencies, including incomplete scientific data, deviations from the procedures of the European Commission, along with an unprecedented method of flash melting.
Giorgis Bobolas, in a letter to Reuters, said that the “only remaining connection his family has with the mine is his son’s indirect stake of less than 1%”. However, according to its website, AKTOR owns 1.1% of El Dorado Gold Corporation and 5% of Hellas Gold SA, the effective subsidiary of El Dorado Gold operating in Halkidiki. Hellas Gold SA also owns the exploration license of Mavres Petres mine in Stratroniki village, in Halkidiki.
One figure that is repeatedly at the heart of the government-Bobolas relationship is Giorgis Papaconstantinou. Papaconstantinou, elected Member of Parliament in the PASOK party, was the Greek Finance Minister who signed the initial bailout agreement with ‘Troika’; the trident of the European Central Bank, the IMF and the European Union in 2009 and along with it severe austerity measures that have had devastating impacts on the lives of Greeks. In 2013, Papaconstaninou was given a list of 2,000 Greeks with Swiss bank accounts and rather than passing it on to the relevant authorities he kept it and deleted the names of three members of his family. As a consequence, he was expelled from PASOK and the recipient of a full-blown parliamentary investigation.
As Mining Watch Canada explain, Papaconstantinou and the Greek government utilized their newly created fast-track law for the benefit of El Dorado:
“The “fast-track” law was designed for investment projects that are considered “strategic” and it shortens and simplifies all permitting procedures. National and international protection conventions are no longer barriers to development; any activity that disturbs mining is prohibited in designated mining areas; and private land can be expropriated”.
Furthermore, fast tracking includes exemption of pre-tax profits and procedures in place for state subsidies. Consequently, El Dorado Gold is not required to pay any royalties, and has a flat rate of corporate tax (a tax on profits), yet, unsurprisingly, Hellas Gold SA declared losses between the period of 2009 to 2013.
Tellingly, there are numerous reports that claim the extractive industries aggressively avoid tax in peripheral economies. In the case of Zambia for example, the Deputy Finance Minister declared that the country lost US$2 billion in corporate tax avoidance, while only one or two multinationals who export copper (the country’s largest export) actually declared a profit. Rather they transferred the copper to a subsidiary in a tax haven at a rock bottom price – a process called transfer pricing. The SOMO report details how the financing of Hellas Gold SA is rerouted through Holland and Barbados, and as such El Dorado Gold can avoid tax in Greece.
Perhaps most shocking in this case is the systematic reaction of the police when dealing with protestors. Amnesty International has called on the Greek authorities to conduct impartial investigations into allegations of human rights violations by the Greek police in the village of Ierissos that has formed the epicenter of protests against the mine. Indiscriminate use of tear gas and chemical pollutants, disproportionate violence, and random arrests are some of the allegations.
Unfortunately, the only real conclusions that emerge from these reports are unanswered questions: Why did the Greek state sell such a valuable asset to Bobolas without open public tender? How has Bobolas managed to amass such wealth from selling off the assets while Greek people suffer austerity? Why is the Greek state so keen to fast track extractive projects in ancient forests despite reportedly deficient environmental studies? Why is there such systematic state violence to protect this investment?