True story from the Stabile Center for Investigative Journalismhttp://stabilecenter.org
Africa has become one of China’s most important energy sources. Nowhere on the continent is this more evident than in Angola, China’s second-largest oil supplier, trailing only Saudi Arabia.
According to Chinese customs data, Angola’s oil exports to China increased to 40 million tons last year from 16.2 million tons in 2004. China’s state-run oil companies, mainly Sinopec Group, have won a number of drilling concessions. The country’s oil fields now account for 16 percent of all foreign crude shipped to Chinese refineries.
In exchange, China writes loans and builds infrastructure. Chinese enterprises have undertaken infrastructure projects ranging from highways and railroads, to airports and public housing. Non-Chinese media outlets say about 70,000 Chinese laborers have worked at Angolan construction sites.
Lubricating deals between China and Angola is a small group of deal brokers headed by Hong Kong-based Sam Pa and Lo Fong Hung. They’re at the core of concerns called China International Fund (CIF) and China Sonangol, CIF’s joint venture with Angola’s state oil company Sonangol. In these capacities, they’ve demonstrated unparalleled power.
CIF’s activities have attracted critical attention from various researchers. In 2009, British foreign policy think tank Chatham House and the U.S.-China Economic & Security Review Commission began in-depth studies of the Pa and Lo’s dealings to clarify CIF’s mysterious background and vast influence. An August 2010 report in the Economist magazine gave the CIF-Angola connection wide exposure.
Reporters at Columbia University’s Toni Stabile Center for Investigative Journalism started looking into CIF and its various business ventures around the world last year. They recently completed the probe, and the center has given us exclusive permission to publish the investigative team’s just-completed report in this edition.
Meanwhile, Caixin reporters conducted and completed a parallel probe in Beijing and Hong Kong that traced CIF’s controversial activities in Angola, as well as its links to the Chinese government. Portions of this report, which likewise appears in this edition, were based on a previously undisclosed Ministry of Commerce study with surprising conclusions.
He was an outgoing Hong Kong businessman with a toothbrush moustache, multiple aliases, and his friends say, a fondness for women and fast cars. She was an older Chinese matron who liked to tell friends and business associates that she was once Deng Xiaoping's translator.
Eight years ago, the two of them formed a business to sell oil and minerals to China. It didn't matter that Sam Pa and his partner Lo Fong Hung had little money and no experience in the oil business. They had good timing and high-level connections.
When they formed the China International Fund (CIF) in Hong Kong in 2003, China had just begun looking toward Africa as a source of oil. At the same time, oil-rich Angola had just emerged from 27 years of civil war and desperately needed to rebuild its devastated infrastructure. The International Monetary Fund, however, was reluctant to lend money unless Sonangol, the national oil company, cleaned up its accounts, published its audit reports and the government cracked down on corruption. A 2006 IMF report cited concerns regarding Sonangol's "deep-rooted governance and corruption issues."
In 2005, CIF announced a US$ 2.9 billion line of credit to rebuild infrastructure in Angola. The same year, China Sonangol, CIF's Hong Kong-registered joint venture with Sonangol, became the broker of oil sales to China from Angola, which has since become China's No. 1 source of oil.
In the years that followed, the CIF network acquired shares in a dozen Angolan oil blocks and diamond concessions in Zimbabwe. It also got a lucrative mining contract in Guinea, which has the world's richest iron ore and bauxite deposits.
In 2008, it took over what was once the most famous address in American finance: 23 Wall Street, the headquarters of the world's first billion-dollar corporation, JP Morgan Co.
Today CIF is the center of a transnational network of over 60 interlocking companies in the investor friendly regimes of Singapore and Hong Kong and the offshore havens of Bermuda, the British Virgin Islands and the Cayman Islands.
CIF has introduced a new model for doing business in Africa: A private Hong Kong company would provide loans from Chinese government banks to help resource-rich African countries build their infrastructure. In exchange, it would get oil and minerals to sell to China.
Flying around Africa
Over the past few years, Pa and Lo have flown around Africa on a luxury jet, promising some US$ 18 billion worth of infrastructure to Angola, Zimbabawe, Guinea and Madagascar.
But there was a catch. CIF and its affiliated companies ended up with rights to explore, and in some cases, exploit some of Africa's richest mineral resources - but much of the promised infrastructure never materialized. The proceeds of those mineral transactions were then invested by CIF's companies in places far from the reach of African law and the scrutiny of citizens of the affected states.
In Angola, CIF pledged to work on three railway projects, build a new international airport and construct over 200,000 units of social housing. But problems soon arose.
The airport, meant to be the flagship of CIF's assistance and projected to be the biggest in Africa, remains unfinished over five years after it was first announced. Angolan investigative journalist Rafael Marques de Morais reported in March that little more than a partial foundation had been built. Contacted by email last week, Marques said that not much has changed since.
CIF went into countries when the regimes in power were particularly vulnerable and facing international condemnation: in Guinea in 2008, after an army captain had ousted the government; in Zimbabwe, as President Robert Mugabe struggled to stay in power in 2009; and in Madagascar in 2010, just weeks after a military coup.
In each of them, CIF set up a "development corporation" registered in Hong Kong or Singapore, which would be a joint venture between China Sonangol and the government concerned. The new corporation would get mining rights in those countries and also manage infrastructure projects to be funded by loans from China Sonangol.
CIF's deals have raised eyebrows in the boardrooms of oil and mining firms and among watchdogs monitoring natural-resource companies in the developing world.
"This is the new face of competition for natural resources," said Judith Poultney an analyst at the international corruption watchdog Global Witness, which has looked into CIF and other natural-resource deals in Africa. "African elites are using complex offshore structures to cut themselves a personal slice of resource deals with Asian entrepreneurs. And like the old scramble for Africa by the West, it is the ordinary African citizen who loses out."
Relationship with China
Throughout its history, CIF's relationship with the Chinese government has been the subject of speculation. The connections of CIF executives and their high-profile meetings with African officials gave the impression that they had official backing from the Chinese government. But there is no official connection. The Ministry of Foreign Affairs has repeatedly distanced itself from CIF's activities, going so far as to issue a press statement in 2009 saying that CIF is a private company with no connection to the Chinese government.
CIF has gotten loans from state-owned Bank of China and it sold oil to a subsidiary of Sinopec. A 2006 China Sonangol mortgage filing in Hong Kong says it owns 45 percent of Sonangol Sinopec International (SSI), a joint venture with Sinopec.
In 2004, SSI was awarded a 50 percent share of Oil Block 18, making it the first Chinese company to own shares of an oil block in Angola, where oil exploration has traditionally been dominated by Western firms.
SSI made headlines two years later during a record-breaking round of bidding for Angolan oil blocks. Sonangol's 2011 concession map shows that between them, China Sonangol and SSI have concessions in eight Angolan oil blocks. In March, the Economist Intelligence Unit reported that China Sonangol purchased 10 to 15 percent shares in four more oil concessions.
From 2005 to 2008, China Sonangol also bought Angolan oil and then sold at least 15 million barrels every year to a subsidiary of Sinopec.
Mortgage documents filed in Hong Kong by China Sonangol show the sales agreements were used to secure a US$ 2 billion loan to Sonangol from a consortium of banks. In 2006, the Bank of China issued loans to CIF and another affiliated company that were secured with the oil contracts, the documents said.
CIF'S Connections
On April 4, 2004, Sam Pa and Lo Fong Hung were guests on "Alo Presidente," a TV program hosted by Venezuelan President Hugo Chavez. During the program, Chavez sung Lo's praises, "She has such charisma," he said, adding that she is the "daughter of a Chinese general, someone who comes from a family with a military tradition and who is now the manager of a global company."
Lo is married to Wang Xiangfei, who holds several directorships in some influential Chinese state-owned companies. He is currently on the board of several CIF-linked companies.
Before CIF, Lo formed just one Hong Kong company, Deltop Limited. In 2003, she helped set up CIF's parent company, New Bright International. Today she is the director of over 60 CIF-linked companies worldwide.
Sam Pa was originally from Hong Kong, where in the 1980s, he formed several companies under the name Ghiu Ka Leung. One of the companies listed his address as a building near Tiananmen Square, which during that period housed the Belgian embassy.
A former business associate in Hong Kong says that in the 1980s, Pa headed a company that traded equipment with China. In the 1990s, he tried his hand doing business in Hun Sen's Cambodia, but fell into debt, said the associate.
In the 1990s and the early part of the 2000s, Pa was sued over 15 times for bankruptcy, unpaid debts and tax delinquency, according to Hong Kong court records.
After Cambodia, Pa was in Macau where, according to a long-time friend in Hong Kong, he was introduced to the Portuguese banking and business community on the island. By 2004, Pa had entered into a partnership with the Angola-based Portuguese banker Helder Bataglia, who founded the Escom Group, an oil, mining and real estate conglomerate that does business in Angola and Congo.
In the spring of that year, he joined Bataglia on a business trip to meet with President Chavez in Caracas. During that trip, Chavez announced in a public broadcast that Bataglia's Escom and CIF's parent company, Beiya International Development, were working together on projects including "mobile, national television, satellite television station and the construction of social housing" in Venezuela. This partnership, however, fell through.
Pa's girlfriend, Veronica Fung, is listed as the owner of 70 percent of New Bright International, a Hong Kong company formed in 2003 that sits at the top of the CIF corporate structure. She is also a director of 23 other CIF-related firms.
In 2003, the Beiya International Development Company was formed: 70 percent was owned by New Bright and 30 percent, by Beiya Industrial Group, a railway construction company based in Harbin. Beiya, later renamed the Dayuan International Development Corporation, owns 99 percent of the China International Fund.
Multiple attempts to reach Pa and CIF's directors over the phone and through email have gone unanswered since July. One of our reporters went to see them at CIF's Hong Kong offices in July but she was turned away. She was also refused access to any CIF officer by the company's Hong Kong lawyer. Court records show that Pa uses several aliases, among them Sam King and Ghiu Ka Leung. Calls to CIF offices in Hong Kong requesting to speak to these people were never returned.
Expanding in Africa
CIF's Angolan connection eased its entry into Guinea and later, Madagscar and Zimbabwe.
In 2008, dissident army officers ousted the Guinean government. The new regime was diplomatically isolated and desperate for cash. When CIF approached Mahmoud Thiam, an investment banker who was then Guinea's mining minister, he was initially skeptical of their offer to provide much-needed financial support as a "special friend."
"When a new government comes into power, especially an inexperienced one," he said in an interview in New York, "there's one phenomenon that never fails: every crook on Earth shows up. And every crook on Earth has the biggest promises, has access to billions of dollars of lines of credits, of loans." A week later, he says, CIF arranged for Sonangol's powerful CEO and President Eduardo Dos Santos's heir apparent, Manuel Vicente, to fly to Conakry to convince him.
Within six months, Thiam had signed what he called the "contract of the century." In a press conference on October 10, 2009, he announced that CIF would be investing from US$ 7-9 billion in Guinea. CIF was given rights to explore three large areas of Guinea in return for infrastructure projects proposed by the government.
The signing ceremony came 12 days after one of the bloodiest events in recent Guinean history. On September 28, the Guinean military opened fire on a peaceful protest against the junta, leaving over 150 people dead. Hundreds of women were raped and 1,200 protesters were injured. The international community reacted by imposing sanctions.
"There was something seriously wrong," said Abdoulaye Yero Baldé, current vice-governor of the Guinean Central Bank who was then in the opposition. "The government had just raped women and killed innocent civilians, all investors were going away and yet this group stayed and signed. It's hard to know what's truly in it for Guinea in this contract."
One month after the massacre, CIF transferred US$ 100 million from a Bank of China account in Hong Kong to the Guinean Central Bank as an advance on the infrastructure projects they had promised. Thiam said in an interview that he had requested use of US$ 50 million for "emergency budgetary support" because the government was then short on cash.
On October 21, 2009, CIF lent the Guinean government US$ 3.3 million to audit a rival Russian company, Rusal, the world's largest aluminum firm, which had mining concessions that China Sonangol was interested in acquiring. The loan agreement specified that CIF would receive 1.8% of the money recovered from Rusal by the Guinean government and was signed by Thiam. When asked about the reason for obtaining funding from China Sonangol for the audit, Thiam said "it was the only place where we could get that money."
In a February 26, 2010 cable recently released by Wikileaks, the U.S. embassy in Conakry reported that its political chief had met with executives of Western mining companies operating in Guinea. The cable reported that at the meeting, the country representative of the Australian mining company, Rio Tinto, said that Thiam "personally benefited from promoting CIF" and worked closely with the president "to ensure that deals that provide kickbacks to the leader and his CNDD compatriots are assured throughout the transition."
When asked to comment on the allegations, Thiam said, "The ambassador quotes the directors of mining companies against which I was fighting to reestablish and enforce Guinea's rights. These are the opinions of desperados."
In December 2010, Thiam flew to Madagascar with CIF representatives to negotiate with the Malagasy government, which came to power after a March 2009 coup. He was a friend of the mining minister, and CIF was interested in the country's Tsimoro oil block, which is estimated to have 975 million barrels of oil reserves.
The company's entry into Madagascar was soon followed by a government-sanctioned audit of Madagascar Oil, a Texas-based firm that until recently had stakes in the Tsimoro oil block. Gide Loyrette Nouel, the same firm that audited another China Sonangol rival in Guinea, conducted the first round of audits. A second audit quickly followed, conducted by representatives of one of Sinopec's subsidiaries.
In January this year, the finance minister announced the formation of the Madagascar Development Corp. (MDC), a joint venture between the government and CIF. Registered in Singapore, it is to have priority over all other companies in the exploration of the country's oil and minerals.
That venture, however, appears to be at a standstill. Although the company has workers on the ground, nothing has been built.
In Guinea, meanwhile, CIF's relationship with the democratically elected government that came to power last year seems uncertain. Last month, Reuters quoted the new mining minister as saying that the CIF contract had been overturned. Yet, during a visit to Columbia University in New York not long afterward, Guinean President Alpha Conde said, "I don't see how we can overturn the contract when we haven't examined it yet."
In Zimbabwe, China Sonangol and CIF followed the template they used in Guinea and Madagascar. They promised to help in the "refurbishment of the country's infrastructure" at a time when Zimbabwe was crumbling under the combined weight of factional politics, hyperinflation and a cholera epidemic that had already killed 4,000 people. CIF agreed to invest in gold and platinum refining, oil and gas exploration, fuel and housing development. Like elsewhere, however, few details of its agreement with the Mugabe government have been released.
CIF also formed a joint-venture, the Sino-Zim Development Corp. (SZDC), which was registered in Singapore. Singapore records reveal that SZDC is wholly owned by two companies registered in the British Virgin Islands. Another company also called Sino-Zim Development was registered in Zimbabwe. Lo and Pa's girlfriend Veronica Fung, are among its directors.
Sino Zim Development has concessions in the controversial Marange fields, where, according to Global Witness, "Zanu PF political and military elite are seeking to capture the country's diamond wealth through a combination of state-sponsored violence and the legally questionable introduction of opaque joint venture companies."
Buying Manhattan
CIF's global ambitions were soon evident in New York. In late 2008, China Sonangol purchased the JP Morgan Building from Africa Israel USA for US$ 150 million. It was considerably more than the building was worth at that time, according to a former Africa Israel executive. And China Sonangol, he said, bought the property sight unseen.
Months later, CIF was negotiating on another iconic building: the old New York Times office near Times Square.
Africa Israel USA, a real estate company owned by Uzbeki-Israeli diamond dealer Lev Leviev purchased the building for US$ 525 million in 2007. It was a much publicized sale, as Leviev had paid triple the price at which its previous owner had bought the building in 2004.
Leviev, who was already doing business in Angola, wanted China Sonangol to provide an additional US$ 25 million that he needed to fix up the property.
In 2009, a team from Africa Israel flew to Hong Kong to negotiate with China Sonangol representatives. The two-day meeting commenced with dinner on the 55th floor of a hotel. A businessman who was there said Lo Fung Hung donned a tiara and Sam Pa was dressed in cheap-looking pants and an open collar shirt. The CIF executives, he recounted, were discussing the Times deal while reaching over the multiple cell phones arranged in rows next to their plates and grabbing dinner rolls.
"They're all dressed like street people," recalls a former Africa Israel executive present during the negotiations. "One of them's got a diamond tiara on and the next one's wearing bag lady clothes. It just didn't look professional."
The following day, China Sonangol's representatives met with Leviev and Sam Pa signed a commitment letter to give the company US$ 25 million. But the agreement was never honored.
"The letter may as well have been signed on toilet paper," said the executive.
Africa has become one of China’s most important energy sources. Nowhere on the continent is this more evident than in Angola, China’s second-largest oil supplier, trailing only Saudi Arabia.
According to Chinese customs data, Angola’s oil exports to China increased to 40 million tons last year from 16.2 million tons in 2004. China’s state-run oil companies, mainly Sinopec Group, have won a number of drilling concessions. The country’s oil fields now account for 16 percent of all foreign crude shipped to Chinese refineries.
In exchange, China writes loans and builds infrastructure. Chinese enterprises have undertaken infrastructure projects ranging from highways and railroads, to airports and public housing. Non-Chinese media outlets say about 70,000 Chinese laborers have worked at Angolan construction sites.
Lubricating deals between China and Angola is a small group of deal brokers headed by Hong Kong-based Sam Pa and Lo Fong Hung. They’re at the core of concerns called China International Fund (CIF) and China Sonangol, CIF’s joint venture with Angola’s state oil company Sonangol. In these capacities, they’ve demonstrated unparalleled power.
CIF’s activities have attracted critical attention from various researchers. In 2009, British foreign policy think tank Chatham House and the U.S.-China Economic & Security Review Commission began in-depth studies of the Pa and Lo’s dealings to clarify CIF’s mysterious background and vast influence. An August 2010 report in the Economist magazine gave the CIF-Angola connection wide exposure.
Reporters at Columbia University’s Toni Stabile Center for Investigative Journalism started looking into CIF and its various business ventures around the world last year. They recently completed the probe, and the center has given us exclusive permission to publish the investigative team’s just-completed report in this edition.
Meanwhile, Caixin reporters conducted and completed a parallel probe in Beijing and Hong Kong that traced CIF’s controversial activities in Angola, as well as its links to the Chinese government. Portions of this report, which likewise appears in this edition, were based on a previously undisclosed Ministry of Commerce study with surprising conclusions.
He was an outgoing Hong Kong businessman with a toothbrush moustache, multiple aliases, and his friends say, a fondness for women and fast cars. She was an older Chinese matron who liked to tell friends and business associates that she was once Deng Xiaoping's translator.
Eight years ago, the two of them formed a business to sell oil and minerals to China. It didn't matter that Sam Pa and his partner Lo Fong Hung had little money and no experience in the oil business. They had good timing and high-level connections.
When they formed the China International Fund (CIF) in Hong Kong in 2003, China had just begun looking toward Africa as a source of oil. At the same time, oil-rich Angola had just emerged from 27 years of civil war and desperately needed to rebuild its devastated infrastructure. The International Monetary Fund, however, was reluctant to lend money unless Sonangol, the national oil company, cleaned up its accounts, published its audit reports and the government cracked down on corruption. A 2006 IMF report cited concerns regarding Sonangol's "deep-rooted governance and corruption issues."
In 2005, CIF announced a US$ 2.9 billion line of credit to rebuild infrastructure in Angola. The same year, China Sonangol, CIF's Hong Kong-registered joint venture with Sonangol, became the broker of oil sales to China from Angola, which has since become China's No. 1 source of oil.
In the years that followed, the CIF network acquired shares in a dozen Angolan oil blocks and diamond concessions in Zimbabwe. It also got a lucrative mining contract in Guinea, which has the world's richest iron ore and bauxite deposits.
In 2008, it took over what was once the most famous address in American finance: 23 Wall Street, the headquarters of the world's first billion-dollar corporation, JP Morgan Co.
Today CIF is the center of a transnational network of over 60 interlocking companies in the investor friendly regimes of Singapore and Hong Kong and the offshore havens of Bermuda, the British Virgin Islands and the Cayman Islands.
CIF has introduced a new model for doing business in Africa: A private Hong Kong company would provide loans from Chinese government banks to help resource-rich African countries build their infrastructure. In exchange, it would get oil and minerals to sell to China.
Flying around Africa
Over the past few years, Pa and Lo have flown around Africa on a luxury jet, promising some US$ 18 billion worth of infrastructure to Angola, Zimbabawe, Guinea and Madagascar.
But there was a catch. CIF and its affiliated companies ended up with rights to explore, and in some cases, exploit some of Africa's richest mineral resources - but much of the promised infrastructure never materialized. The proceeds of those mineral transactions were then invested by CIF's companies in places far from the reach of African law and the scrutiny of citizens of the affected states.
In Angola, CIF pledged to work on three railway projects, build a new international airport and construct over 200,000 units of social housing. But problems soon arose.
The airport, meant to be the flagship of CIF's assistance and projected to be the biggest in Africa, remains unfinished over five years after it was first announced. Angolan investigative journalist Rafael Marques de Morais reported in March that little more than a partial foundation had been built. Contacted by email last week, Marques said that not much has changed since.
CIF went into countries when the regimes in power were particularly vulnerable and facing international condemnation: in Guinea in 2008, after an army captain had ousted the government; in Zimbabwe, as President Robert Mugabe struggled to stay in power in 2009; and in Madagascar in 2010, just weeks after a military coup.
In each of them, CIF set up a "development corporation" registered in Hong Kong or Singapore, which would be a joint venture between China Sonangol and the government concerned. The new corporation would get mining rights in those countries and also manage infrastructure projects to be funded by loans from China Sonangol.
CIF's deals have raised eyebrows in the boardrooms of oil and mining firms and among watchdogs monitoring natural-resource companies in the developing world.
"This is the new face of competition for natural resources," said Judith Poultney an analyst at the international corruption watchdog Global Witness, which has looked into CIF and other natural-resource deals in Africa. "African elites are using complex offshore structures to cut themselves a personal slice of resource deals with Asian entrepreneurs. And like the old scramble for Africa by the West, it is the ordinary African citizen who loses out."
Relationship with China
Throughout its history, CIF's relationship with the Chinese government has been the subject of speculation. The connections of CIF executives and their high-profile meetings with African officials gave the impression that they had official backing from the Chinese government. But there is no official connection. The Ministry of Foreign Affairs has repeatedly distanced itself from CIF's activities, going so far as to issue a press statement in 2009 saying that CIF is a private company with no connection to the Chinese government.
CIF has gotten loans from state-owned Bank of China and it sold oil to a subsidiary of Sinopec. A 2006 China Sonangol mortgage filing in Hong Kong says it owns 45 percent of Sonangol Sinopec International (SSI), a joint venture with Sinopec.
In 2004, SSI was awarded a 50 percent share of Oil Block 18, making it the first Chinese company to own shares of an oil block in Angola, where oil exploration has traditionally been dominated by Western firms.
SSI made headlines two years later during a record-breaking round of bidding for Angolan oil blocks. Sonangol's 2011 concession map shows that between them, China Sonangol and SSI have concessions in eight Angolan oil blocks. In March, the Economist Intelligence Unit reported that China Sonangol purchased 10 to 15 percent shares in four more oil concessions.
From 2005 to 2008, China Sonangol also bought Angolan oil and then sold at least 15 million barrels every year to a subsidiary of Sinopec.
Mortgage documents filed in Hong Kong by China Sonangol show the sales agreements were used to secure a US$ 2 billion loan to Sonangol from a consortium of banks. In 2006, the Bank of China issued loans to CIF and another affiliated company that were secured with the oil contracts, the documents said.
CIF'S Connections
On April 4, 2004, Sam Pa and Lo Fong Hung were guests on "Alo Presidente," a TV program hosted by Venezuelan President Hugo Chavez. During the program, Chavez sung Lo's praises, "She has such charisma," he said, adding that she is the "daughter of a Chinese general, someone who comes from a family with a military tradition and who is now the manager of a global company."
Lo is married to Wang Xiangfei, who holds several directorships in some influential Chinese state-owned companies. He is currently on the board of several CIF-linked companies.
Before CIF, Lo formed just one Hong Kong company, Deltop Limited. In 2003, she helped set up CIF's parent company, New Bright International. Today she is the director of over 60 CIF-linked companies worldwide.
Sam Pa was originally from Hong Kong, where in the 1980s, he formed several companies under the name Ghiu Ka Leung. One of the companies listed his address as a building near Tiananmen Square, which during that period housed the Belgian embassy.
A former business associate in Hong Kong says that in the 1980s, Pa headed a company that traded equipment with China. In the 1990s, he tried his hand doing business in Hun Sen's Cambodia, but fell into debt, said the associate.
In the 1990s and the early part of the 2000s, Pa was sued over 15 times for bankruptcy, unpaid debts and tax delinquency, according to Hong Kong court records.
After Cambodia, Pa was in Macau where, according to a long-time friend in Hong Kong, he was introduced to the Portuguese banking and business community on the island. By 2004, Pa had entered into a partnership with the Angola-based Portuguese banker Helder Bataglia, who founded the Escom Group, an oil, mining and real estate conglomerate that does business in Angola and Congo.
In the spring of that year, he joined Bataglia on a business trip to meet with President Chavez in Caracas. During that trip, Chavez announced in a public broadcast that Bataglia's Escom and CIF's parent company, Beiya International Development, were working together on projects including "mobile, national television, satellite television station and the construction of social housing" in Venezuela. This partnership, however, fell through.
Pa's girlfriend, Veronica Fung, is listed as the owner of 70 percent of New Bright International, a Hong Kong company formed in 2003 that sits at the top of the CIF corporate structure. She is also a director of 23 other CIF-related firms.
In 2003, the Beiya International Development Company was formed: 70 percent was owned by New Bright and 30 percent, by Beiya Industrial Group, a railway construction company based in Harbin. Beiya, later renamed the Dayuan International Development Corporation, owns 99 percent of the China International Fund.
Multiple attempts to reach Pa and CIF's directors over the phone and through email have gone unanswered since July. One of our reporters went to see them at CIF's Hong Kong offices in July but she was turned away. She was also refused access to any CIF officer by the company's Hong Kong lawyer. Court records show that Pa uses several aliases, among them Sam King and Ghiu Ka Leung. Calls to CIF offices in Hong Kong requesting to speak to these people were never returned.
Expanding in Africa
CIF's Angolan connection eased its entry into Guinea and later, Madagscar and Zimbabwe.
In 2008, dissident army officers ousted the Guinean government. The new regime was diplomatically isolated and desperate for cash. When CIF approached Mahmoud Thiam, an investment banker who was then Guinea's mining minister, he was initially skeptical of their offer to provide much-needed financial support as a "special friend."
"When a new government comes into power, especially an inexperienced one," he said in an interview in New York, "there's one phenomenon that never fails: every crook on Earth shows up. And every crook on Earth has the biggest promises, has access to billions of dollars of lines of credits, of loans." A week later, he says, CIF arranged for Sonangol's powerful CEO and President Eduardo Dos Santos's heir apparent, Manuel Vicente, to fly to Conakry to convince him.
Within six months, Thiam had signed what he called the "contract of the century." In a press conference on October 10, 2009, he announced that CIF would be investing from US$ 7-9 billion in Guinea. CIF was given rights to explore three large areas of Guinea in return for infrastructure projects proposed by the government.
The signing ceremony came 12 days after one of the bloodiest events in recent Guinean history. On September 28, the Guinean military opened fire on a peaceful protest against the junta, leaving over 150 people dead. Hundreds of women were raped and 1,200 protesters were injured. The international community reacted by imposing sanctions.
"There was something seriously wrong," said Abdoulaye Yero Baldé, current vice-governor of the Guinean Central Bank who was then in the opposition. "The government had just raped women and killed innocent civilians, all investors were going away and yet this group stayed and signed. It's hard to know what's truly in it for Guinea in this contract."
One month after the massacre, CIF transferred US$ 100 million from a Bank of China account in Hong Kong to the Guinean Central Bank as an advance on the infrastructure projects they had promised. Thiam said in an interview that he had requested use of US$ 50 million for "emergency budgetary support" because the government was then short on cash.
On October 21, 2009, CIF lent the Guinean government US$ 3.3 million to audit a rival Russian company, Rusal, the world's largest aluminum firm, which had mining concessions that China Sonangol was interested in acquiring. The loan agreement specified that CIF would receive 1.8% of the money recovered from Rusal by the Guinean government and was signed by Thiam. When asked about the reason for obtaining funding from China Sonangol for the audit, Thiam said "it was the only place where we could get that money."
In a February 26, 2010 cable recently released by Wikileaks, the U.S. embassy in Conakry reported that its political chief had met with executives of Western mining companies operating in Guinea. The cable reported that at the meeting, the country representative of the Australian mining company, Rio Tinto, said that Thiam "personally benefited from promoting CIF" and worked closely with the president "to ensure that deals that provide kickbacks to the leader and his CNDD compatriots are assured throughout the transition."
When asked to comment on the allegations, Thiam said, "The ambassador quotes the directors of mining companies against which I was fighting to reestablish and enforce Guinea's rights. These are the opinions of desperados."
In December 2010, Thiam flew to Madagascar with CIF representatives to negotiate with the Malagasy government, which came to power after a March 2009 coup. He was a friend of the mining minister, and CIF was interested in the country's Tsimoro oil block, which is estimated to have 975 million barrels of oil reserves.
The company's entry into Madagascar was soon followed by a government-sanctioned audit of Madagascar Oil, a Texas-based firm that until recently had stakes in the Tsimoro oil block. Gide Loyrette Nouel, the same firm that audited another China Sonangol rival in Guinea, conducted the first round of audits. A second audit quickly followed, conducted by representatives of one of Sinopec's subsidiaries.
In January this year, the finance minister announced the formation of the Madagascar Development Corp. (MDC), a joint venture between the government and CIF. Registered in Singapore, it is to have priority over all other companies in the exploration of the country's oil and minerals.
That venture, however, appears to be at a standstill. Although the company has workers on the ground, nothing has been built.
In Guinea, meanwhile, CIF's relationship with the democratically elected government that came to power last year seems uncertain. Last month, Reuters quoted the new mining minister as saying that the CIF contract had been overturned. Yet, during a visit to Columbia University in New York not long afterward, Guinean President Alpha Conde said, "I don't see how we can overturn the contract when we haven't examined it yet."
In Zimbabwe, China Sonangol and CIF followed the template they used in Guinea and Madagascar. They promised to help in the "refurbishment of the country's infrastructure" at a time when Zimbabwe was crumbling under the combined weight of factional politics, hyperinflation and a cholera epidemic that had already killed 4,000 people. CIF agreed to invest in gold and platinum refining, oil and gas exploration, fuel and housing development. Like elsewhere, however, few details of its agreement with the Mugabe government have been released.
CIF also formed a joint-venture, the Sino-Zim Development Corp. (SZDC), which was registered in Singapore. Singapore records reveal that SZDC is wholly owned by two companies registered in the British Virgin Islands. Another company also called Sino-Zim Development was registered in Zimbabwe. Lo and Pa's girlfriend Veronica Fung, are among its directors.
Sino Zim Development has concessions in the controversial Marange fields, where, according to Global Witness, "Zanu PF political and military elite are seeking to capture the country's diamond wealth through a combination of state-sponsored violence and the legally questionable introduction of opaque joint venture companies."
Buying Manhattan
CIF's global ambitions were soon evident in New York. In late 2008, China Sonangol purchased the JP Morgan Building from Africa Israel USA for US$ 150 million. It was considerably more than the building was worth at that time, according to a former Africa Israel executive. And China Sonangol, he said, bought the property sight unseen.
Months later, CIF was negotiating on another iconic building: the old New York Times office near Times Square.
Africa Israel USA, a real estate company owned by Uzbeki-Israeli diamond dealer Lev Leviev purchased the building for US$ 525 million in 2007. It was a much publicized sale, as Leviev had paid triple the price at which its previous owner had bought the building in 2004.
Leviev, who was already doing business in Angola, wanted China Sonangol to provide an additional US$ 25 million that he needed to fix up the property.
In 2009, a team from Africa Israel flew to Hong Kong to negotiate with China Sonangol representatives. The two-day meeting commenced with dinner on the 55th floor of a hotel. A businessman who was there said Lo Fung Hung donned a tiara and Sam Pa was dressed in cheap-looking pants and an open collar shirt. The CIF executives, he recounted, were discussing the Times deal while reaching over the multiple cell phones arranged in rows next to their plates and grabbing dinner rolls.
"They're all dressed like street people," recalls a former Africa Israel executive present during the negotiations. "One of them's got a diamond tiara on and the next one's wearing bag lady clothes. It just didn't look professional."
The following day, China Sonangol's representatives met with Leviev and Sam Pa signed a commitment letter to give the company US$ 25 million. But the agreement was never honored.
"The letter may as well have been signed on toilet paper," said the executive.
Last edited:
