EU bank's alleged lack of transparency 'like something out of a Le Carré novel'

EU bank's alleged lack of transparency 'like something out of a Le Carré novel'

Watchdog claims European Investment Bank failed to disclose information relating to tax avoidance allegations against Zambian mining firm

Sam Jones

Guardian

18 March 2015

The EU watchdog has accused the union’s bank of flouting its own transparency rules and hiding what it knows about allegations of tax avoidance by a Zambian mining firm largely owned by the Swiss commodity trader Glencore.

On Tuesday, Emily O’Reilly, the European ombudsman, said she was not satisfied with the European Investment Bank’s claims that, despite an internal investigation, it had been unable to establish whether Mopani Copper Mines had avoided paying local tax running into tens of millions.

Ten years ago, the EIB – which is owned by EU member states – loaned Mopani $50m (£30m) for the renovation of a smelter to reduce sulphur dioxide emissions.

Six years later, after a leaked audit report suggested that Mopani had avoided paying tens of millions of dollars in local tax, the bank announced an investigation into the company.

It also halted loans to Glencore because of “serious concerns” about its corporate governance.

Glencore has always denied the allegations, which it maintains are based on “fundamental factual errors”. Mopani repaid the EIB loan in full in 2012.

After the EIB refused to release the findings of its investigation, the charity Christian Aid referred the bank to the European ombudsman, who was granted access to the internal report.

In her ruling, O’Reilly disputed the bank’s assertion that “it was not possible to comprehensively prove or disprove the allegations” made in the leaked audit report. She said: “The ombudsman considers that this statement does not adequately reflect the information contained in the [EIB] investigation report on this issue.”
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But O’Reilly said she could not reveal the information supporting her conclusion as doing so would mean disclosing details from a report that the EIB had chosen not to make public. However, she said she would let the EIB know the reasons for her findings and explain why she felt it had failed to fulfil its duty to publish a “meaningful summary” of the report.

O’Reilly also found the bank’s refusal to release any “meaningful information” about the findings of the investigation “constituted an instance of maladministration”.

She criticised the bank for breaking its own openness guidelines, saying: “In its handling of the request for access to the report in question, the EIB failed to meet its obligations under its own transparency policy.”

Christian Aid said that while it welcomed the ombudsman’s ruling, it was staggered by the refusal of both the bank and Glencore to address the allegations directly.

“This is the sort of thing you expect in a John Le Carré novel – not in reality,” said Rachel Baird, a Christian Aid spokeswoman.

“What we see so far is that important evidence about alleged crimes by a major multinational company in Zambia has been repeatedly concealed by a bank which is wholly owned by the UK and other EU countries.”

She added: “How are developing countries supposed to collect the tax billions that multinational companies owe them, when the European Union’s own bank engages in what appears to be a conspiracy of silence with a company accused of being one of the perpetrators?”

While acknowledging that Glencore and Mopani had always denied the allegations of tax avoidance, Baird said their continued silence was not helping their case.

“For Glencore to refute these allegations, it must reveal far more about its finances, in Zambia and around the world, than it has ever been willing to do,” she said. “For now, it is hard not to conclude that the company has something to hide.”

The EIB said that although it was examining the ombudsman’s ruling and had noted its recommendations, it still had no plans to release the internal report.

A spokesman added: “The EIB remains committed to achieving the highest possible levels of transparency while taking into account the necessity to strike the right balance between public interest concerning the bank’s investigative activities and the effectiveness of present and future investigations.”

Glencore declined to comment, referring the Guardian to its previous statements on the matter.