Panama Papers reveal Australian pair linked to mining deals with North Korea
07 Apr, 2016, No Comment
Summary: An ABC investigation has found two Australian businessmen are linked to companies striking mining deals with North Korea…..
An ABC investigation has found two Australian businessmen are linked to companies striking mining deals with North Korea.
Sydney-based businessman David Henty Sutton and South African born, Brisbane-based geologist Louis Schurmann were directors of two companies which announced the mining sub-license agreements on the Australian Stock Exchange (ASX).
A former United Nations official told the ABC the deals announced were with North Korean entities under sanctions, and the revelations warrant an inquiry.
The United Nations has banned individuals and companies from dealing with a range of North Korean companies.
Mr Sutton’s involvement was uncovered by the leak of over 11 million documents from law firm Mossack Fonseca known as the Panama Papers.
The documents show the Australian is connected to a network of international businessmen who use shell companies to hide their identities.
Mr Sutton was Chairman of AAT Corporation in December 2012, when it announced on the ASX a mining sub-license with a North Korean entity, National Resources and Development Investment Corporation (NRDIC) outlined in a 2013 prospectus.
At the time Louis Schurmann was a director of AAT.
A few months later in March 2013, another company EHG Corporation made a similar announcement with the Korea Resources and Development Investment Corporation.
Mr Schurmann and Mr Sutton later also became directors of EHG.
Ex-UN official ‘absolutely stunned’
William Newcomb, a former member of the UN Security Council Panel of Experts for North Koreasanctions said he was “absolutely stunned” by the lack of attention given to the public announcements.
The NRDIC has been placed under international sanctions since mid-2012.
The company is considered an alias for Green Pine Corporation, which is known for its involvement in North Korea’s ballistic missile program and for exporting roughly half of the rogue state’s weapons to countries including Iran and Syria.
Mr Newcomb said even though the company names on the AAT and EHG announcements were slightly different he said they were clearly sanctioned entities.
“From what I know there is no distinction aside from the spelling, these are one and the same entities,” the UN official said.
Mr Newcomb said the North Koreans slightly adjust the title of a sanctioned entity to enable it to bypass regulators and operate in the international banking system.
“It’s a common tactic to either add or remove a name like that, I’ve seen it in various banking traffic on shipping invoices, it’s just a way to confuse and deceive,” said Mr Newcomb.
The ABC contacted David Sutton about the deal. He denied the agreement involved the weapons company, Green Pine Corporation.
“Although this had a similar sounding name it was confirmed at the time that this was a separate legal entity and was unrelated to Green Pine Corporation,” Mr Sutton wrote in an email to the ABC.
Thomas Clarke, a specialist in corporate governance and Professor at the University of Technology in Sydney, said the directors and shareholders had a responsibility to intimately understand the activities of the company with which they were forming a relationship.
“Having looked at the documents that they submitted to the ASX, it’s quite clear that they are forming a relationship with a sanctioned entity in North Korea. They must have been aware of that and the ASX should have been aware of it too,” Mr Clarke said.
The ASX declined an interview request by the ABC but in a statement said “matters to do with the UN sanctions list are outside our jurisdiction”.
Pair came to attention of corruption investigator
Mr Schurmann appears to be the public face of the deals but his name does not appear on any of the shell companies that sit behind AAT and EHG.
However, the Mossack Fonseca leak revealed Mr Sutton and his company Dayton Way Financial make several appearances in those related shell companies.
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Two years ago Mr Schurmann and Mr Sutton came to the attention of US corruption investigator and visiting scholar at Johns Hopkins University’s US-Korea institute JR Mailey.
In a series of conversations with Mr Mailey, Mr Schurmann spoke openly about his North Korean dealings.
Mr Schurmann told Mr Mailey about his multiple mining projects in North Korea, stressing he had never paid a bribe and his clients dealt directly with “the government” in Pyongyang.
Whilst UN experts have questioned the wisdom of making agreements with North Korean entities possibly in breach of UN sanctions, the ABC makes no suggestion that either Mr Schurmann or Mr Sutton are involved in any financial wrongdoing.
The geologist views North Korea as a final frontier, a vast untapped mineral wealth that will pay astronomical dividends for the companies who have “the guts to go in there”.
“The people are trustworthy and respectful and the conditions there are pretty good,” Mr Schurmann added in his phone call with Mr Mailey.
“Compared to Africa, it’s a walk in the park.”
Mr Schurmann said he was given a “clean bill of health” by the Foreign Affairs Department.
The ABC understands the potential sanctions-breaking deals have not been referred to the Australian Federal Police for investigation.
Mr Newcomb said it was “regrettable” Australia was not investigating the possible breach.
The Department of Foreign Affairs and Trade (DFAT) declined an interview request by the ABC but said in a statement it takes “credible allegations of non-compliance with sanctions very seriously”.
Neither AAT or EHG ever started trading on the ASX.
AAT was fined for failing to lodge half-yearly reports and transferred its sub-license to an undisclosed third party.
In late 2014, EHG announced to the ASX it would no longer pursue its North Korean mining deposit.
But this was not the end for Mr Schurmann or Mr Sutton’s North Korean ambitions.
Who is behind the deals?
SRE Minerals and its North Korean joint venture partner Pacific Century Rare Earth Minerals Limited are registered by Mossack Fonseca in the British Virgin Islands.
SRE Minerals’ rare earth venture
In December 2013, Dr Schurmann claimed he had discovered the world’s largest known rare earth deposit, in Jongju in North Korea’s northern Pyongyan Province.
If true, the deposit would be worth trillions of dollars and rival China’s market dominance in rare earth minerals.
Rare earth minerals are highly sort after materials used in communications and satellite technologies but they also have applications for ballistic missiles.
Mr Schurmann was employed as senior geologist with SRE Minerals. That company’s joint venture partner was Pacific Century Rare Earth Minerals Limited which is “jointly held” by the Korea Natural Resources Trading Corporation, an entity not on the UN sanctions list.
But former sanctions advisor to the US State Department, Joseph DeThomas said North Korean front companies could go undetected for some time.
“North Korea creates new entities all the time, it just transfers assets from one place to another so the sanctioned entity takes on a new nameplate but has the same mission,” Mr DeThomas said.
If the SRE Minerals venture went ahead today it would still violate UN sanctions.
In March, the UN Security Council handed down new sanctions for North Korea which include the sale of rare earth minerals.
“The sale of these minerals is now sanctionable, it’s prohibited. So today, it’s a prima facie sanctions violation if it were implemented,” Mr DeThomas said.
The unprecedented leak of a massive trove of Mossack Fonseca documents enabled the ABC to identify the individuals who sat behind the anonymous shell companies.
Along with Australian David Henty Sutton three key foreign individuals have been identified; Kevin Ronald Leech, John Terrence Lister and Andrew Turner.
The trio were listed as ultimate beneficial owners of SRE Minerals, in February 2015.
Mr Leech came to prominence in 2009 as a major shareholder in the British investment bank, First London.
The bank collapsed in 2010 after it became embroiled in an elaborate scandal involving a North Korean mining deal that also bankrupted an English County football club.
British citizen Andrew Turner, 45, was also on the board of First London at the time of its collapse.
In his conversation with US corruption investigator, Mr Mailey, Mr Schurmann confirmed he worked with Kevin Leech.
“Kevin Leech is the main guy,” Mr Schurmann said.
In an email to the ABC, Mr Sutton also confirmed Kevin Leech represented the two mining agreements with AAT and EHG Corporation. Those agreements were also structured through shell companies registered by Mossack Fonseca in the British Virgin Islands.
“Mr Leech was representing TG Mining Limited and EG Mining Limited, the companies that AAT and EHG had entered license negotiations with,” Mr Sutton said in an email to the ABC.
That information is consistent with the leaked files.
Another British citizen Linden Boyne, 72, also appears buried in the documents as a director connected to EG Mining in 2013. Mr Boyne came to the attention of the US fraud authorities when he was found liable for a scam, unrelated to EG Mining, that netted $US12 million.
Andrew Turner and the Gibraltar-based John Lister were not found to have committed any crimes but were mentioned in the suit as connected to at least ten of the entities involved in the scam.
The leaked Mossack Fonseca documents show John Lister to be the owner of David Sutton’s Sydney firm, Dayton Way Financial. Mr Sutton denies this.