MAC: Mines and Communities

SQM's Chilean Rot

Published by MAC on 2017-01-13
Source: Reuters, Corporate Crime Reporter, Panampost

Mining company linked to illegal financing of political campaigns, bribery and money-laundering.

Sociedad Química y Minera de Chile (SQM), one of the world's biggest producers of lithium, potassium, iodine and nitrates, committed bribery, money-laundering and tax offences linked to the illegal financing of political campaigns in Chile.

Between 2008 and 2015, SQM made donations to dozens of foundations controlled by or closely tied to Chilean politicians. In total, the company admitted having paid nearly $15 million to vendors, despite providing no evidence that any goods or services were actually received.

Last week, SQM agreed to pay a $15 million penalty to settle the Securities and Exchange Commission (SEC)'s charges and a $15.5 million penalty as part of a prosecution agreement announced by the U.S. Department of Justice.

“SQM permitted millions of dollars in payments to local politicians while failing for years to exercise proper oversight over a key discretionary account and internal controls,” said Stephanie Avakian, Acting Director of the SEC Enforcement Division. See:

"Chilean chemicals and mining company Sociedad Química y Minera de Chile (SQM) agreed to pay a criminal penalty of more than $15 million in connection with payments to politically-connected individuals in Chile in violation of the Foreign Corrupt Practices Act (FCPA)", stated the Justice Department’s Criminal Division. See:

Chile's SQM paying $30 mln to resolve U.S. corruption cases

Reuters -

Jan 13, 2017

Chilean-based chemical and mining company Sociedad Quimica y Minera de Chile SA (SQM) has agreed to pay more than $30 million to resolve parallel civil and criminal cases that found it violated the U.S. Foreign Corrupt Practices Act, the U.S. Securities and Exchange Commission said on Friday.

SQM made nearly $15 million in improper payments to Chilean political figures and others connected to them over a seven-year period, the commission said in a statement. SQM agreed to pay a $15 million penalty to settle the SEC's charges and a $15.5 million penalty as part of a deferred prosecution agreement announced in a separate statement on Friday by the U.S. Department of Justice.

(Reporting by Eric Walsh; Editing by Eric Beech)

Chilean Mining and Chemical Company to Pay $30 Million Gets FCPA Prosecution Deferred

Corporate Crime Reporter -

January 13, 2017

Chilean chemicals and mining company Sociedad Química y Minera de Chile (SQM) will pay a criminal penalty of more than $15 million in connection with payments to politically-connected individuals in Chile in violation of the Foreign Corrupt Practices Act (FCPA).

Federal officials alleged that SQM knowingly failed to implement internal controls sufficient to ensure that payments from a fund under the control of one of its officers and high-level executives were made for services received and in compliance with Chilean law.

Between 2008 and 2015, SQM made donations to dozens of foundations controlled by or closely tied to Chilean politicians.

During this period, for example, SQM funneled approximately $630,000 to foundations controlled by a Chilean official with influence over the government’s mining plans in Chile, a key segment of SQM’s business.

SQM also admitted to falsifying its books and records to conceal payments to vendors associated with politicians, logging them as consulting and professional services SQM never received.

For example, in 2009, SQM paid approximately $11,000 to the sister-in-law of a Chilean official, recording the payment in SQM’s books as a payment for services received, despite the fact that the official’s sister-in-law submitted the false invoice solely to disguise payment to a Chilean senatorial campaign.

In total, SQM admitted having paid nearly $15 million between 2008 and 2015 to vendors despite having no evidence any goods or services were actually received.

SQM entered into a deferred prosecution agreement (DPA) in connection with a criminal information filed today in the District of Columbia, charging the company with one count of failing to implement internal controls and one count of falsifying its books and records.

Pursuant to its agreement with the department, SQM agreed to pay a criminal penalty of $15,487,500; continue to cooperate with the department’s investigation; enhance its compliance program; implement rigorous internal controls; and retain an independent corporate compliance monitor for a term of two years, with a third year of self-reporting to occur thereafter.

The Criminal Division’s Fraud Section said it reached this resolution based on a number of factors, including the fact that SQM did not voluntarily disclosure the FCPA violations, but did cooperate with the department’s investigation after news of Chilean prosecutors’ investigation of the company surfaced in media reports.

SQM received a 25 percent reduction off the low end of the applicable U.S. Sentencing Guidelines fine range because of its full cooperation and substantial and ongoing remediation.

Because many of SQM’s compliance enhancements were more recent, and therefore have been subjected to a relatively short period of testing, the DPA imposes an independent compliance monitor.

However, due to the company’s size and risk profile, as well as the enhancements the company has already made, the term of the monitor will be two years and the company will be permitted SQM to self-report for the final year of the agreement.

In a related matter, SQM reached a settlement on Jan. 13, 2017, with the Securities and Exchange Commission (SEC), pursuant to which it will pay a $15 million civil monetary penalty.

Chilean Prosecutor Launches Probe into Bachelet’s Campaign Finances

Karina Martín

Sources: La Tercera; 24Horas; El Mostrador -

Dec 22, 2016

The Regional Prosecutor of Valparaíso Pablo Gómez — who is in charge of investigating possible tax fraud by Soquimich — requested information regarding President Bachelet’s election campaign expenses.

The request was made by Gómez on September 15 before the Electoral Service in regards to alleged irregular contributions to Bachelet’s presidential campaign in 2013.

The request, which was kept secret for three months, requested the “list of the electoral expenses paid or received or contributions received and declared by the President of the Republic Michelle Bachelet Jeria in the process of elections in 2013,” according to local media.

Gómez also requested a copy of voter turnout accounts in that process and resolutions issued by the service that validated them.

Officials also requested all information related to the amounts and means of payment of refunds, if any, and any eventual endorsements that may exist.

The investigation has reportedly not yet reached the president’s campaign period. At the moment, only the pre-campaign period is known. It was determined that Giorgio Martelli received resources from SQM.

Prosecutor Carlos Gajardo said asked Martelli last November 7 for the bills that Ripley paid to a provider of Bachelet’s campaign — the consulting company Credo, which is owned by Diego Perry, the stepson of an ex-advisor to the president.

“I can indeed deduce that this operation could have had to do with funding for Michelle Bachelet’s presidential campaign,” Martelli said.

Chile’s Enríquez-Ominami accused of graft

Buenos Aires Herald -

October 20, 2016

Chilean prosecutors yesterday accused two-time former presidential candidate Marco Enríquez-Ominami and his former campaign chief Cristian Wagner of tax offences over the issuing of fake invoices to siphon off money into political campaigns.

Prosecutors believe that the popular politician “facilitated” his former campaign chief’s emission of 36 fake invoices in 2011, 2012 and 2014 for some 391 million pesos (about US$585,000) for services that were never rendered.

The alleged fake invoices were issued on behalf of SQM Salar, a subsidiary of mining giant Soquimich, which in turn paid for the two-time presidential campaigns of the rising star in Chilean politics.

Enríquez-Ominami, 43, first emerged on the political stage as the third contender in the 2009 elections, finishing with a surprising 20 perecent of the vote.

“Proceeds from Warner, with the full knowledge and agreement of Enríquez-Ominami, were used to finance Marco Enríquez-Ominami’s political project,” prosecutor Pablo Gómez said in a hearing at a court in Santiago yesterday.

Using his company, Cristian Warner Communications Advertising and Marketing, the politician’s right-hand man allegedly “signed a simulated contract in February 2011 with Patricio Contesse (an ex-SQM manager), for the purposes of providing communications advice to the mining group,” the prosecutor said.

The subsequent invoices allegedly skimmed the Chilean treasury of some 130 million pesos (about US$194,000).

While the investigation into their activities is open, Enriquez-Ominami and Warner have both been ordered to report to a police station every fortnight and are banned from leaving the country without the express permission of a judge. Both defendants accepted the precautionary measures, in order to reach an early trial.

Enriquez-Ominami described the prosecutor’s hearing yesterday as a “media show,” as it was broadcast on every television channel in the country, unlike other defendants in the case.

“None of the hundreds of those indicted (in the Soquimich case) have been asked to appear in the proceedings on television,” Enriquez-Ominami told reporters, who before becoming a politician devoted his professional life to cinema and TV.

Sprawling case

Yesterday’s hearing is just one of the branches of a sprawling probe, which involves more than 200 defendants, led by prosecutors against Soquimich — which until recently was controlled by the former son-in-law of the country’s ex-dictator general Augusto Pinochet, Julio Ponce. The company is one of the most important non-metallic mining groups in the world.

Soquimich is being investigated for bribery, money-laundering and tax offences linked to the alleged illegal financing of political campaigns discovered by prosecutors looking into the investigation of another case, known as the “Penta scandal” — named after one the most important conglomerates Chile — where most of those implicated are from the opposition’s political right.

The cases have tarnished the image of Chile’s politicians, with even centre-left President Michelle Bachelet, whose son-inlaw is accused in another corruption case, not escaping the subsequent popularity slip in the polls.

Once the hope among his followers that another way of doing politics was possible, the accusations against Enríquez-Ominami will threaten his political career, even though while there is still no sentence, the doors remain open for his third bid to become president after his failed attempts in 2009 and 2013.

On September 7, the politician formally announced his candidacy for the 2017 presidential election.

The Progressive Party president was linked to illegal campaign funding after weekly Qué Pasa leaked some of Warner’s emails, the contents of which revealed the relationship between the politician and the mining group, which promised campaign donations of four million pesos per month (US$6,000), an amount that eventually rose to 14 million (about US$21,000), for a total of 391 million (about US$590,000), according to the latest data from the prosecution.

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