"L'AFFAIRE FULTON" - THE UPSTATE NY CHOCOLATE

C O N F I D E N T I A L SECTION 01 OF 02 ABIDJAN 001042 SIPDIS SIPDIS DEPARTMENT FOR AF/W EPLUMB, AF/PD JSCHAMING STATE PASS TO USTR C. HAMILTON USAID FOR C. GARRETT, S.SWIFT COMMERCE FOR MARIA RIVERO TREASURY FOR D. PETERS ACCRA FOR WARP P.RICHARDSON, K.MCCOWN DAKAR FOR FCS S. MORRISON LONDON, PARIS FOR AFRICA WATCHERS E.O. 12958: DECL: 10/04/2017 TAGS: ECON IBRD IMF EFIN EINV EAGR PGOV IV SUBJECT: "L'AFFAIRE FULTON" - THE UPSTATE NY CHOCOLATE FACTORY SAGA REF: A. MASSINGA-PLUMB-TOURE-SCHAMING OCT 5 UNCLASS EMAILS ¶B. ABIDJAN 1036 ¶C. ABIDJAN 1347 (2006) Classified By: Pol/Econ Deputy Chief EMassinga, Reasons 1.4 (b,d) ¶1. (C) Summary. A September 18 letter to World Bank President Zoellick alleging President Gbagbo and a quasi-governmental cocoa regulatory body have manipulated the purchase of a Fulton, New York chocolate factory for fraudulent purposes has generated substantial interest locally (reftel a). The World Bank is preparing a response to the letter, and Embassy understands that Jeune Afrique is preparing a story on the issue. Emboffs have contacted the Fonds des Ressources de Cacao (FRC),the quasi-governmental cocoa regulatory body involved, as well as the World Bank; efforts to contact Lion Capital Management Group, the U.S.- firm that made the allegations, have to date been unsuccessful. While the FRC appears to have failed spectacularly in executing its fiduciary responsibility to invest prudently the proceeds of poor Ivorian cocoa farmers, it does not appear at this juncture that lurid accusations of tens or even hundreds of millions of dollars being laundered through the Fulton chocolate factory are well-founded. The End Summary. ¶2. (C) On September 18, 2007, Lion Capital Management wrote a six-page letter to World Bank President Robert Zoellick, in which CEO Alain Housmann (of Ivorian origin, also known as Ousmane GBANE) leveled a series of serious allegations against the Government of Cote d'Ivoire, President Gbagbo and most specifically the FRC, a quasi-governmental body created to invest some of the proceeds of cocoa receipts on behalf of cocoa farmers (reftel b). Housmann alleged that the FRC's 2003 purchase of a chocolate factory in Fulton was a vehicle to defraud the cocoa farmers and launder money on behalf of the government of Cote d'Ivoire. The FRC formed a company named NY3C for the purposes of purchasing and operating the factory, originally owned by Nestle. ¶3. (C) Unknown sources provided the letter to the Ivorian daily "24 Heures," a largely independent paper which printed a translated text of the letter, adding a note that "CFA 100 billion was embezzled." The paper most likely took out of context a recent World Bank report indicating that the CFA 100 billion (the equivalent of USD 200 million) that has been raised in parafiscal taxes to support the FRC and its sister institutions (see reftel b) was laundered via NY3C. While the Fulton factory story has been reported previously, the sensational figures involved in the latest iteration, and the outright accusation of involvement by President Gbagbo and his government have generated substantially increased and broader interest. The story has since been picked up by several other papers, and is being pursued by Jeune Afrique, the well-read French-language weekly. The World Bank has been asked about the affair, and is reportedly preparing a written response to Housmann's letter that is currently being vetted at HQ in Washington. Embassy expects to receive the text and will share it with Washington as soon as it is available. ¶4. (SBU) In his September 18 letter to Zoellick, Housmann presented several specific allegations of fraud associated with money-laundering. He wrote that: 1) NY3C paid a Jean Claude Amon, a Presidential Advisor, $300,000 for services never rendered, 2) that NY3C paid the mortgage on a Jamesville, NY home for Mr. Amon, 3) that NY3C paid the mortgage on a home occupied by a NYC-based Ivorian diplomat, Yalle Agbre, and 4) NY3C paid Kemakolam Comas, a FRC attorney, USD 250,000. He strongly implied that IC Trading has been used as a vehicle to launder over USD 35 million through NY3C. ¶5. (C) According to the FRC's Director General Firmin Kouakou, who received Emboff at FRC HQ Oct 3, the FRC was originally informed of the opportunity to purchase the Fulton facility from Nestle in 2003 by Lion Capital CEO Housmann. According to documents from a dossier produced by the FRC and reviewed by Emboff, the FRC, through its Delaware-based investment arm IC Trading, agreed with Lion to purchase the ABIDJAN 00001042 002 OF 002 Fulton facility and operate it under the "NY3C" corporate name, with an 80/20 percent ownership split (FRC/Lion). According to GM Kouakou, IC Trading put up the purchase price of the Fulton facility, but Lion never provided the 20 percent of the operating capital as had been agreed, abrogating, from the FRC's perspective, Lion's claims of partial ownership. To date, according to the FRC dossier (which contains numerous documents from and pertaining to the FRC and the Ministry of Finance),the FRC has, through IC Trading, spent USD 19 million on the venture. ¶6. (C) GM Kouakou readily admits that so far, NY3C has not produced a single bar of chocolate. Claiming ignorance, Kouakou said that Nestle sold the factory's chocolate-making equipment prior to the factory's sale without the FRC's knowledge. Emboff questioned FRC staff about the business acumen and due diligence associated with such an oversight; Kouakou and his staff obliquely acknowledged a lapse in judgment, and said that they have since been trying to restore NY3C's ability to make chocolate, paying utilities and salaries while acquiring, slowly, the expensive equipment needed for manufacture. ¶7. (C) Emboff attempted to contact Hausmann at Lion Capital Management directly to get the company's perspective on its public allegations. To date, Lion has not responded. Emboff shared this with World Bank Country Representative Barnard Harbone, who is personally directing the Fulton investigation, and who said he was not surprised. Given the questionable nature of the original letter and several inconsistencies in the way the overall set of allegations were presented, World Bank staff have some misgivings as to the overall bona fides of Housmann and Lion Capital. However, Harbone did concede that a number of the specific allegations, such as those related to the mortgages and car payments noted in para 4, were cause for concern. To avoid making judgments on the merits of the conflicting accounts, we understand that the World Bank's letter back to Housmann will focus almost exclusively on the efforts of the Bank and its sister institutions (IMF and AfDB) to encourage the FRC and the other Ivorian quasi-governmental cocoa institutions to invest in prudent instruments. ¶8. (C) The legal wrangling between Lion and the FRC appears to be ongoing, and the FRC's Kouakou told Emboff that the group was "considering" a defamation lawsuit to respond to Lion's accusations of money laundering and fraud. Concerning a relatively small issue (given the extent of the legal issues involved),Emboff did receive a copy of a September 13 Superior Court of California (County of San Francisco, case number CGC-06-459078) ruling in favor of NY3C against Lion over USD 565,479 in tax credits provided by the State of New York. The court ruled that Lion improperly took control of the tax credit check, and, moreover, "the Defendant's (Lion's) conduct... constitutes a misuse of the discovery process... and (the Defendant's) conduct was willful, tactical, egregious and inexcusable." ¶9. (C) Comment: The upcoming Jeune Afrique story will give the "Affaire Fulton" story more legs. (And it may tie this development to allegations made by Housmann regarding the Andres Kieffer mystery, in which a French-Canadian journalist engaged in investigating shenanigans in the cocoa sector disappeared in 2004. Fresh accusations that the Presidency was involved in Kieffer's kidnapping and alleged murder have rekindled interest in that episode.) From what Embassy has been able to glean thus far, the facts indicate that this sems to be a case of rank investor incompetence (and some level of corruption) rather than a massive scheme to defraud the cocoa farmers of Cote d'Ivoire out of tens or hundreds of millions. End Comment. NESBITT