Investment Agency Helps Businesses With Shady Ties

A government agency that helps U.S. businesses investing in developing countries has approved millions of dollars of loans to companies whose owners did business with Mafia (search) figures and rebels in a bloody African conflict, records show.

The agency also awarded insurance to assist a company that is part of a Mexican energy conglomerate ordered by the Internal Revenue Service to pay more than $70 million in back taxes.

The Overseas Private Investment Corp., which operates with about $5 billion in reserves, says it conducts background checks before awarding loans or insurance. But the agency acknowledged it missed some negative information about its clients that The Associated Press found in a review of public records.

An OPIC spokesman said the agency checks some of the same public databases where the AP found the information.

For instance, the agency put on hold a $5 million loan to Globus International Resources Corp. "pending some further reviews" after the AP raised questions about evidence introduced in court showing Globus did business in the 1990s with Mafia figures who later were convicted of federal crimes.

Globus is not related to International Communications Systems Inc., which got an OPIC loan last year to market phone cards in Moldova under the brand name GlobUS.

Globus gave hundreds of thousands of dollars' worth of shares to four Mafia stockbrokers and a mob-owned company between 1996 and 2000, according to court and Securities and Exchange Commission records.

Prosecutors alleged in 2000 that Globus was one of 19 companies that had their stock manipulated by the Mafia. The government never charged either Globus or its officials with crimes.

"Our due diligence didn't turn up anything like that," OPIC lawyer Eli Landy told AP. "This certainly raises a red flag."

An OPIC spokesman defended the agency's background checks. "We feel that the due diligence we do is very good and very thorough and we stand by that," Lawrence Spinelli said.

The chairman of the Senate Foreign Relations Committee is not so sure.

After the AP provided details of its findings to his office, Sen. Richard Lugar, R-Ind., wrote the agency's acting president, Ross Connelly, seeking more information on why OPIC agreed to provide assistance in these cases.

During its three decades of existence, OPIC has experienced its share of controversy.

In 2003, Congress ordered OPIC to be more open about its selection process and create a committee to bring together interested nongovernmental groups such as environmentalists and labor unions.

Doug Norlen, a member of that oversight panel, said OPIC still has significant improvement to make.

"They appear incapable of comprehending their own need for reform," said Norlen, an environmentalist. He said OPIC has "shabby due diligence" on issues such as corruption, human rights and environmental impact.

Congress created the agency in 1971 to give loans and insurance that were unavailable in the private sector to U.S. companies doing business in developing countries.

In its 34 years, the agency has provided more than $160 billion to such projects. Recipients have included ExxonMobil, Unocal and franchisees for Ruby Tuesday restaurants and Marriott hotels.

OPIC's money comes from proceeds from its loans and insurance premiums rather than tax dollars.

OPIC says it is striving to expand its support beyond traditional oil and mineral ventures to projects that have wider benefits to communities, such as a recent $250 million loan to build homes for HIV-positive South Africans.

But it told the AP that it did not know everything about the backgrounds of the companies it has supported.

OPIC agreed last fall to lend Globus $5 million to build a cold-storage warehouse in Moscow. OPIC did not know about Globus' court-documented ties to organized crime

Three men who pleaded guilty in the Mafia stock manipulation conspiracy -- Anthony Stropoli, James Labate and Salvatore Piazza -- were among Globus' initial private shareholders in 1996 and 1997, court and SEC records show.

Labate is serving an 87-month prison term. Stropoli was released from federal prison last year. Piazza is awaiting sentencing.

Globus also gave consulting contracts to a company identified in court records as being controlled by the Mafia, and a business owned by Steven D'Apuzzo, a Mafia stockbroker who later pleaded guilty to racketeering and conspiracy to manipulate Globus stock.

D'Apuzzo told a judge he made more than $400,000 selling Globus shares and invested some of the profits in the brokerage he worked for, First Liberty Investment Group. That investment strengthened the mob's hold on his investment firm, prosecutors said.

More recently, Globus hired accountant Michael T. Studer in 2003 after a federal court ordered him to pay more than $100,000 for securities violations, records show. The National Association of Securities Dealers also has banned Studer from the securities business for life.

Globus' co-chief executive officers, Yury Greene and Herman Roth, declined comment.

"I don't blame them," said lawyer Leo Salzman, who represented Globus in a 2002 civil lawsuit. "It's the first I heard about it, and obviously I understand why they didn't talk to you."

In a second case, OPIC granted a $25 million insurance policy in 2002 for a propane gas terminal in Guatemala that is part of the Mexican business empire of Miguel Zaragoza Fuentes.

The facility on the Pacific Ocean is owned by Zeta Gas, part of Zaragoza's Grupo Zeta. OPIC granted the insurance to a participant in the project -- a U.S. company, Texas Overseas Gas Corp., whose president is a Zaragoza relative and top Zeta Gas executive.

Five other companies in the conglomerate owned by Zaragoza were hit with multimillion-dollar U.S. tax bills in the 1980s and 1990s, records show.

In 1991, the IRS slapped three Grupo Zeta companies with bills for $4.7 million in unpaid taxes. Agents seized eight propane tanker trucks and related equipment in the U.S. that belonged to those companies.

The companies challenged the IRS seizures in federal court and lost.

The court also ruled Zaragoza concealed a twin-engine Cessna airplane from the IRS after two of his other companies got bills for more than $71 million in unpaid U.S. taxes in 1985.

The companies paid the $4.7 million debt by 1996, records show. The tax liens for the $71 million debt have not been satisfied, although the IRS seized and sold the Cessna to pay part of that debt.

Grupo Zeta officials did not respond to messages seeking comment.

OPIC spokesman Spinelli said the agency's background check found "the individuals involved in this and the company involved in this met our criteria."

In 2003, OPIC agreed to a $25 million loan for a U.S. company owned by Jean-Raymond Boulle, a mining magnate whose company has been cited by the United Nations for unethical business dealings with rebels in the Democratic Republic of the Congo's civil war.

A Boulle company, America Mineral Fields, made deals with Congolese rebel leader Laurent Kabila for minerals estimated to be worth billions of dollars. The company and the rebels made the deals shortly before Kabila's forces ousted former dictator Mobutu Sese Seko in 1997.

Boulle has said his help for Kabila included letting the rebel leader use Boulle's satellite telephone and AMF's corporate jet. Boulle said he also set up a company to buy diamonds from territory Kabila's rebels controlled, which paid Kabila's group $1 million in "advance taxes."

The U.N. panel on the Congo said Boulle's AMF violated international ethical guidelines. AMF, which changed its name last year to Adastra Minerals, said it did nothing wrong.

Boulle's OPIC financing is not complete. The money would fund Sierra Rutile Ltd., which is preparing to reopen a mine in Sierra Leone with millions of dollars' worth of rutile, an ore used to produce titanium oxide for use in pigments.

Walter Kansteiner III, a member of Sierra Rutile's board of directors, said the U.N. criticism was unwarranted.

"I've known Jean Boulle for many years, and I think he is a very positive financier in Africa and does some very important work in Africa," Kansteiner said.

OPIC officials knew of the reports before approving Sierra Rutile financing, Spinelli said.

"Allegations are allegations. And while you look at them and you pursue them and you drill down as far as you can go, at the end of the day, those are allegations," Spinelli said.