Mozambique - Possible Activity Involving Violation

UNCLAS MAPUTO 000585

SIPDIS

SIPDIS

AF/S FOR HTREGER
EB/IFD/OIA FOR PBROWN
L/LEI FOR JCOGAN
L/AN FOR GTAFT
STATE PASS USTR FOR PCOLEMAN

SENSITIVE

E.O. 12958: N/A
TAGS: EINV ECON EAGR ETRD MZ
SUBJECT: Mozambique - Possible Activity Involving Violation
of Foreign Corrupt Practices Act

Ref: A. 05 Maputo 1481


B. Maputo 396

Sensitive But Unclassified - Handle Accordingly


1. (U) This is an Action Request. Please see para 4.


2. (SBU) On May 19 one of the leading newspapers in
Mozambique, Savana, published a story that the American
tobacco company, Universal, has opened an investigation into
an internal report that one of its employees in an unnamed
country had engaged in improper activities involving
payments totaling USD one million over a five year period.
Later in the day, a law firm that has represented another
U.S. tobacco company here (see para 3 below),Alliance One,
forwarded Post a copy of the Universal document. The
document, which was a press release issued by the Universal
Corporation on March 13, 2006, reads in part as follows:

"In another matter, Universal also announced today that as a
result of a posting to the Company's Ethics Complaint
hotline alleging improper activities that involved or
related to certain of the Company's tobacco subsidiaries,
the Audit Committee of the Company's Board of Directors
engaged an outside law firm to conduct an investigation of
the alleged activities. That investigation revealed that
there had been payments that may have violated the Foreign
Corrupt Practices Act. At this time, the payments involved
appear to have approximated $1 million over a five-year
period. In addition, the investigation revealed activities
in foreign jurisdictions that may have violated the
competition laws of such jurisdictions, but the Company
believes those activities did not violate U.S. antitrust
laws. The Company voluntarily reported these activities to
the appropriate U.S. authorities. The Company has initiated
corrective actions, and such actions are continuing."

Note: On May 19 Post forwarded the entire press release to
the Mozambique desk at the Department via email. Copies of
the press release on May 22 also were sent to EB/IFD/OIA
Brown, L/LEI Cogan and L/AN Taft by email.

Background
--------------


3. (U) Last October Universal's local subsidiary, Mozambique
Leaf Tobacco (MLT),was awarded concession rights in the
lucrative Chifunde tobacco growing area (Tete province),
after the government stripped the concession from MLT's
rival, another American tobacco firm, Alliance One (ref A).
In March 2006 Alliance One announced that it was pulling out
of Mozambique (ref B). In April MLT inaugurated its new
tobacco processing factory outside Tete city. According to
MLT, the Tete factory and associated infrastructure
represent a total investment of USD 50 million.

Action Request
--------------


4. (SBU) From the press release, it is not clear in which
country the alleged improper payments were made. However,
given the Univeral's significant investment in Mozambique,
we suspect that they were made here. We would be grateful
if the Department would follow up with Universal, if
appropriate, to discover whether this is indeed the case,
and for any further guidance in this matter.

La Lime