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