MAC: Mines and Communities

London Calling looks behind the Ralph affair - Richard Ralph condenado por "negociaciones incompatibles"

Published by MAC on 2008-11-17
Source: Nostromo Research

It's a scandal - and a juicy one at that.

One of Britain's high-ranking former diplomats this week was caught with his trousers down (or at least with his files undone). In return, he gets a mild spank on his buttocks in circumstances where you or I (were we playing the same fraudulent game) would be hauled to court on a criminal charge.

Richard Ralph's crime is simply explained. As chairman of Monterrico Metals, operating the Rio Blanco project in Peru, in late 2006 he was alerted to the impending takeover of his company by a consortium headed by China's Zijin mining group.

It didn't take a degree in international finance for Ralph to reckon that Monterrico's share price would rise when the deal was publicly announced early the following year. Ralph got a Belgian pal to purchase just over £100,000 of the shares in advance of the buy-out, quickly raking a fairly tidy profit for the two of them. That's illegal - and doubtless most of us would agree that it should be.

Now that he's been found out, Ralph's murky past is getting some of the critical attention it deserves.

Insidious agencies

However, there are darker conclusions to be drawn from this smokey tale, attached to the disturbing ploys - themselves verging on the illegal - employed by Bliar's New Labour
regime during the period that Ralph held ambassadorial posts not only in Peru but also Romania.

In November 2005, two protestors against the Rio Blanco project were killed during a demonstration; the following March, Monterrico was accused by a community representative of orchestrating violence against opponents of the project.

On March 22nd 2006 we commented:

"Several months ago, the British ambassador to Peru...went on record as supporting Monterrico Metals' Rio Blanco project. Ambassador Richard Ralph even had the gall to state that UK mining norms are 'among the most rigorous in the entire world' - a statement as daft as it is disingenuous. Try telling that to the day labourers at Vedanta's bauxite mines in the Indian state of Chhattisgarh. Or to farmers downstream of wastes, spewed from Xstrata's Alumbrera operations in Argentina."

We pointed out that: "Such diplomatic interventions are by no means exceptional", and that "in 2002, the UK ambassador to Romania [Yes, the same Mr Ralph] intervened directly with the Bucharest government, to push Mittal Steel's bid for the state smelting company, Sidex.

"No competitive tenders were offered, and Lakshmi Mittal got the plant for a knockdown £300 million. This came shortly after the company's eponymous founder handed a cool quarter of a million pounds to the Labour Party. Although Britain's prime minister claimed he knew nothing about this particular sleazy deal, four years later Tony Bliar himself intervened to support Oxus Gold, when the new, popularly-elected president of Kyrgyzstan cancelled the AIM-listed company's contract. In his rebuke, Bliar berated president Kurmanbek Bakiyev for not "living up to obligations under his [Bliar's] global anti-corruption initiative".

Just five weeks later, the UK prime minister himself was under siege for allowing honours to be sold in exchange for massive secretive loans made to his political party."

Bangladesh nexus

On June 9th 2006, we also revealed a link between Monterrico Metals - still headed by Ralph - and another company, also firmly backed by the British government, which was attracting hefty criticism in Bangladesh:

"London Calling has been following the recent career of Chris Eager, former NM Rothschild's manager of mine finance investment... On May 9th, Mr Eager suddenly resigned as non-executive chairman of Asia Energy, a company he'd been instrumental in bringing to London's Alternative Investment Market (AIM) specifically to grab the huge Phulbari coal fields in northwest Bangladesh. We don't know whether Eager was levered out of Asia Energy because of his poor defence of the company.In any event Eager remains the Chief Executive Officer (CEO) and a director of Monterrico Metals, whose Rio Blanco operations in north western Peru only this week incurred the wrath of local people."

A month further on, in August 2006, Eager also resigned from Monterrico, but Ralph didn't surrender his non-executive directorship at the company until May this year. He was no doubt gently nudged aside by the Chinese who were more than aware of his earlier bad record.

It's a truism that there'll always be "bad apples" in the average apple cart. Regulators may pick out the odd rotten one now and again, but will ignore other dubious agents which operate
on the margins of the law.

But this is indefensible.

For several years, Richard Ralph operated within a culture, inculcated and constantly upheld by a government which had no moral scruples when it came to "bringing business to Britain."

His guard slipped once - and he was found out. His erstwhile partners and masters are still at large. And their former commander (T Bliar) is now the highest-paid private "emissary" on the face of this blighted earth.

[London Calling is published by Nostromo Research, London. Opinions expressed in this column do not necessarily represent the views of any other individual or group, including the editors of the MAC website. Reproduction is welcome, provided full acknowledgment is given to sources.]

Corporate fraud: Former UK envoy fined for insider dealing

Julia Kollewe, Guardian

14th November 2008

A former British ambassador has been fined £118,000 for insider trading after he bought shares in a mining company he chaired while negotiating a takeover. Richard Ralph, the former executive chairman of Aim-listed mining company Monterrico Metals, was fined £117,691.41 by the Financial Services Authority, and his friend, the Belgian businessman Filip Boyen, received a £81,982.95 penalty for dealing in Monterrico's shares on the basis of inside information.

Ralph, a former ambassador to Peru and governor of the Falklands, was also involved in the Mittal "steelgate" affair when he served as Britain's ambassador to Romania.

His fine is one of the biggest the FSA has imposed on an individual for market abuse. The biggest was a £750,000 penalty imposed on Philippe Jabre, a former managing director of hedge fund GLG Partners, in 2006.

This year, the financial watchdog has issued two other fines for market abuse. In January 2007, Monterrico, which operates the Rio Blanco copper mine in Peru, was known to be in takeover talks with a Chinese mining consortium, but the details were confidential. On the 28th of that month, Ralph, who was involved in the takeover discussions, asked Boyen to buy £30,000 worth of Monterrico shares on his behalf.

Over the next five days, the Belgian businessman, acting on information provided by Ralph, bought Monterrico shares worth £30,533.59 for Ralph and £77,162.05 worth of shares for himself. After the company's takeover was announced on February 5, 2007, Boyen sold all the Monterrico shares, making a profit of £12,691.41 for Ralph and £29,482.95 for himself.

Margaret Cole, director of enforcement at the FSA, said: "This sort of self-serving behaviour by experienced business professionals has the potential to damage confidence in financial markets." She said both men cooperated fully with the FSA's investigation. As a result the FSA had been more lenient. "But for that cooperation, we would have seriously considered taking criminal proceedings." Their fines were reduced by 30% under the FSA settlement discount scheme, as the pair's "extensive cooperation" meant the investigation was resolved at an early stage.

Six years ago, Ralph was drawn into the controversy surrounding the attempt by Labour party donor Lakshmi Mittal to take over Sidex, a Romanian steel plant.

Richard Ralph: the FSA loses its first ambassador

Comment by David Wighton: Business Editor

The Times

14th November 2008

Financial regulators had a rare opportunity to show that they are serious about cracking down on insider dealing. They fluffed it. By ducking a criminal prosecution of Richard Ralph, a former ambassador, the Financial Services Authority risks playing into the hands of the sceptics who believe the practice is not really a crime, especially when the perpetrators are establishment figures.

Mr Ralph has, it's true, been clobbered with a serious fine of roughly nine times the profits he made from his cheating. But a penalty of £118,000 is hardly devastating for a man who got to the top of the diplomatic service and stayed there for years.

Nor will the fine have much of a deterrent effect. As the FSA itself points out, the threat of a criminal prosecution is a much greater deterrent to City wrongdoing than even the biggest fine. Loss of liberty for up to seven years and the stigma of a spell in Ford open prison really would make potential offenders think twice.

The FSA says that it has two main tests in deciding whether to prosecute rather than go down the civil route: is there sufficient evidence for a realistic prospect of conviction? And is it in the public interest?

In the case of Mr Ralph, the answer should surely have been an emphatic yes in both cases. He had confessed in full. There was no doubt about this dishonesty and his knowledge that he was acting dishonestly. The FSA had all the evidence it could possibly need.

As for the public interest, the case ticked all the boxes. The offence was serious. Mr Ralph benefited personally. He knew he was cheating. He ignored the warnings of his advisers. And he was a senior figure - executive chairman of a listed company and a former senior public servant.

The FSA argues that it decided against a criminal prosecution because Mr Ralph confessed and co-operated fully. There is some substance to this. Occasional leniency might help to elicit confessions from culprits who would otherwise try to brazen things out. But insider dealing is rampant and getting worse, according to the FSA's own figures.

Suspicious trading ahead of price-sensitive company announcements is as common as ever. Few things foster more suspicion of the City than insider dealing. Insiders who line their pockets at the expense of outside shareholders do the image of market capitalism enormous damage - damage it could certainly do without just now.

The occasional minnow is brought to book, but rarely a figure of the stature of Mr Ralph. Nothing would have enhanced the reputation of the FSA as a credible crime-fighting agency more than a scalp such as his.

Surely the (apathetic) CPS should be responsible for deciding who to prosecute based on the evidence gathered by the (useless) police force?

Richard Ralph condenado por "negociaciones incompatibles" en la
minera Monterrico Metals

ORO SUCIO - Opinión y reflexión

14 Noviembre 2008

El diplomático retirado inglés Richard Ralph, que fuera embajador en Latvia, Rumania y Perú, se declaró culpable de negociaciones imcompatibles (insider dealing) y deberá pagar unas 120 mil libras de multa.

Ralph era presidente ejecutivo de la compañía minera operadora del proyecto Río Blanco en la norteña Piura, en enero del año pasado, cuando pidió a un amigo que compre acciones de la empresa valuadas en 30 mil libras sabiendo que sería absorbida por el consorcio chino Zijin. Luego que la Autoridad de Servicios Financieros (FSA) inicie una investigación sobre el caso, Ralph se declaró culpable.

No es la primera vez que salta a la notoriedad pública: siendo embajador en Rumania, estuvo involucrado por el escándalo de una donación que hizo el magnate minero Lakshmi Mittal al Partido Laborista, informaron los principales medios gráficos ingleses.

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