Diamonds, Big Mining and Soros: The Fall of Beny Steinmetz, Once Israel's Richest Man

Years-long dispute over rights to massive African iron ore deposits have been replete with charges and counter-charges of bribery.

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Beny Steinmetz, one of Israel's richest men, and his wife, 2013.
Beny Steinmetz, one of Israel's richest men, and his wife, 2013.Credit: Tomer Appelbaum
Uri Blau
Uri Blau

A Geneva court has convicted Israeli businessman Beny Steinmetz of bribery, dealing him a five year prison sentence on Friday, January 22, 2021. In December 2020, Romania’s Supreme Court handed down another five-year sentence to Steinmetz.

The story below was published in December 2016. For more on the latest developements, click here.


Mist shrouds the Simandou mountains in Beyla, Guinea, June 4, 2014. Credit: Saliou Samb/REUTERS

The arrest of Beny Steinmetz on Monday morning over suspicions of bribery and corruption in Africa is just the latest setback for the Israeli billionaire.

Only a few years ago, Bloomberg estimated his fortune at $8 billion, making him Israel’s richest person. Steinmetz counted two former prime ministers, Ehud Barak and Ehud Olmert, among his close friends, as well as Housing Minister Yoav Galant.

Steinmetz still owns one of the most expensive homes in the Israel, a yacht and a private plane that ferries him between Israel, Switzerland and London. But TheMarker estimated this year that his fortune had shrunk to just $1.3 billion.

In April, many of Steinmetz‘s business activities were revealed in the exposed Panama Papers of the law firm Mossack Fonseca. A year prior to that, leaks of secret bank accounts held at HSBC’s Geneva branch, spanning the period of 1988 to 2007, showed he maintained scores of accounts totaling more than $100 million.

Steinmetz, 59, grew up in the family diamond business, Rubin Steinmetz & Sons. In the 1990s, he formed the Steinmetz Diamonds Group with his brother Daniel. Now called Diacor International, it is one of a select group entitled to buy gems from De Beers.

However, Beny Steinmetz owes much of his fortune to his business dealings in some of the world’s poorest countries. His BSG Resources company, implicated in the bribery probe, operates Sierra Leone’s Koidu mine, which supplies diamonds to Tiffany & Company among others.

The West African country has a GDP per capita of $1,600 and an average life expectancy of 58.

But Steinmetz’s biggest prize of all is the one that has entangled him and BSGR in years of legal disputes and led to his arrest on Monday. The $20-billion Simandou mine in Guinea has one of the largest iron ore reserves in the world, an estimated 2.4 billion metric tons.

Potential boon for Guinea

If the mine were to be put into full production, it would double the size of Guinea’s economy and create an infrastructure of ports and roads for the country. But after two decades, the mine remains undeveloped and has instead become a battleground between some of the world’s biggest mining companies and government-run investigations. Billionaire investor George Soros, who later became Steinmetz's archenemy, and former British Prime Minister Tony Blair have played a role in them, as have international human rights groups.

Rio Tinto, a British-Australian multinational and one of the world’s largest mining companies, was ordered by the Guinean dictator Lansana Conté to relinquish half its rights to mine Simandou in 2008 on the grounds that it failed to meet its commitment to develop it.

BSGR bought those rights for just $160 million and two years later sold 51% of its share to Vale, a Brazilian company that is the world's largest ore miner, for $2.5 billion (only $500 million was ever paid before Vale decided to shelf the project).

By then, however, Conte was no longer. He died shortly after awarding the rights to BSGR, and a military junta took over. The junta in turn was replaced in 2010 by Alpha Condé, who won Guinea’s first democratic elections and quickly launched a review of past mining deals aided with money and advice from Soros.

How did Soros become involved? The billionaire investor says helping Guinea is just part of a crusade he has waged against corruption in Africa and Eastern Europe; Steinmetz alleges it is due to a personal grudge Soros has against him, perhaps in connection with a Russian telecom tender the two vied for in the 1990s.

The allegations eventually led to a grand jury investigation by the United States and in 2014, Frederic Cilins, a Frenchman with ties to Steinmetz and BSGR, was sentenced to two years in prison for trying to bribe a witness to destroy evidence and lie to U.S. investigators.

Meanwhile, BSGR was stripped of its rights in 2014 after a Guinean government committee found evidence of alleged corruption in awarding the license. Guinea handed the rights back to Rio Tinto and a Chinese partner. Steinmetz contends that the accusations against him were part of a conspiracy to deprive him of the Simandou mine.

Then last month the British-Australian company also found itself ensnared in bribery allegations after it revealed that Alan Davies, its executive in charge of Simandou, had paid 10.5 million pounds ($13 million) to a former French banker who was working as an informal adviser to Condé to help secure Rio Tinto’s rights to Simandou.

Last week, BSGR’s lawyers sent a letter to Rio Tinto demanding billions of dollars in compensation for using bribes to take Simandou away from the company.

Unsurprising development

No one, least of all Steinmetz himself, should be surprised by the recent developments in the case in Guinea. As far back as 2012, the Financial Times of London published an extensive expose about his various business transactions in the country.

Moreover, in 2011, after BSGR sold its stake in the mines in Guinea, a raid was carried out at Steinmetz’s home in Geneva. And in 2015 – as this reporter revealed, in connection with the above-mentioned leak of documents from the HSBC branch in that city – that Steinmetz and his diamond-merchant brother Daniel were mentioned in those documents as being linked to, and beneficiaries of, dozens of accounts worth more than $100 million.

Also appearing in the seized materials was the name Nir Livnat, chairman of the Steinmetz diamond group, along with the names of dozens of companies in Switzerland, South Africa, the Virgin Islands and elsewhere that were linked to Steinmetz, according to the documents. At the time, the leak was of great interest to the Israel Tax Authority, which for years had been attempting to come to a determination relating to a tax assessment of Steinmetz's businesses from 2003 to 2007.

The assessor issued a ruling regarding the structure of Steinmetz’s businesses, claiming that holdings and operations in trust were “artificial” and were “aimed at improperly reducing taxes” – or, alternatively, that they represented a policy that was not actually carried out. As a result, the assessor stated, "the trusts should be ignored,” and Steinmetz “should be viewed as the person in possession of the assets of the trusts and their income.”

In 2014, Israel's Channel 10 broadcast a report about recordings of Ehud Olmert in which the premier allegedly boasts to Shula Zaken, his bureau chief, about assisting him Steinmetz because “he has a problem with income tax.” (The report of a connection between Olmert and Steinmetz's tax affairs was denied.)

In 2015, as part of a huge leak of information relating to the Panamanian law firm Mossack Fonseca, a large amount of materials were publicized, relating to the Israeli billionaire’s business interests in Guinea, which shed light on the complex structure of the companies linked to him, notably BSGR and the Beny Steinmetz Group. (Despite the name of the latter company, Steinmetz is not registered as its owner, but rather as a beneficiary of and adviser to the firm.)

Among the internal correspondence between the law firm and the Diacore International diamonds concern that came to light as well, there is a reference to Israel’s current construction and housing minister, Yoav Galant, as someone purportedly close to Daniel Steinmetz. The correspondence shows that the lawyers' Geneva office asked that Diacore urgently provide information on possible ties between Daniel Steinmetz and Galant.

In response to an inquiry from Haaretz at the time, the housing minister’s office replied: “Minister Galant does not know Daniel Steinmetz, and has seen him just a few times in social settings. Beny Steinmetz has been a friend of Galant’s for many years and is to this day.”

Among the documents that were publicized, Steinmetz’s name also appears explicitly as a beneficiary of a number of companies and there is also a photocopy of his French passport. In addition, the materials include an agreement with Diacore, being disclosed here for the first time, relating to the sale of an 8.41-carat pink diamond to the Sotheby’s auction house. The diamond was sold by Sotheby’s in 2014 for $17.7 million.

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