Dodgy dealings within the Steinmetz Group seems to indicate undervaluing of diamonds, which is costing Sierra Leone tax payments.

Sierra Leone Diamond

He is De Beers’ most prolific diamond buyer, a supplier to the luxury jewelry brand Tiffany & Co., and an alleged criminal, accused of bribing the wife of a former Guinean president to land a multibillion-dollar iron deal.

Given that profile, it’s not surprising that Beny Steinmetz and his eponymous company try to stay out of the limelight. But with the Steinmetz Group’s alleged tax avoidance scam in South Africa and an ongoing US grand jury investigation into corruption in Guinea, for the past two years, Steinmetz hasn’t been able to keep his name out of the headlines. So, to avoid exposing the company, the embattled billionaire allegedly sold his 37.5% share in the Steinmetz Group’s diamond segment, Diacore, to his brother, Daniel, in 2014.

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Steinmetz left the Steinmetz Group’s diamond business, Diacore, but has kept a business in Sierra Leone diamonds through the British Virgin Islands-based entity Octea. The company, which he runs through BSG Resources (BSGR), counts the Steinmetz family as beneficiaries. Unlike BSGR which operates in West Africa, Diacore maintains a presence in Namibia, Botswana and South Africa.

Leaked data from a Panama-based offshore fiduciary Mossack Fonseca, shared by the International Consortium of Investigative Journalists (ICIJ) and Germany’s Süddeutsche Zeitung newspaper, sheds light on the internal financial structures created by BSGR to camouflage Octea’s financial activities. The data reveals a BSGR corporate structure, dated 2015, identifying Octea as wholly owned by Guernsey-based BSGR Resources – the latter directly involved in the Guinea scandal. In turn, BSGR is owned by several foundations based in Liechtenstein and Switzerland such as Nysco and Balda.

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Sierra Leone is one of Africa’s leading diamond producers by value – and Steinmetz, who reportedly had a personal fortune of $6 billion in 2012, is its biggest private investor. According to a source at the World Bank, “for a long time, the national government calculated its forecast of national growth closely tied to the success of two companies, the BSGR and AML [African Mineral Limited]”.

Incomplete diamond export data, obtained by the African Network of Centers for Investigative Reporting (ANCIR), show that during some months from 2012 to 2015, Octea exported more than US$330 million in rough diamonds. Yet, although Octea’s rough diamonds average $350 per carat, the company is alleged to be more than US$150 million in the red. Dozens of creditors are waiting to be paid, including the government of Sierra Leone and Standard Chartered Bank. If these debts are not paid, the company could lose its license.

But some say this could be by design. Sources close to the company said the its strategy was to exploit alluvial diamonds, feign financial struggles and leave creditors high and dry. The company declined to answer questions about its financial practices, threatening legal action over issues it claimed were confidential.

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The conspiratorial rumors, unanswered enquiries and legal threats speak to the financial opacity of Octea’s mining operation. Analysis of the available data raises many questions: Why can’t Octea pay its bills? How are the diamonds from Koidu mine valued? Why doesn’t company data document the payment of taxes? And who in the murky diamond trade is Octea connected with?

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