"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
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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

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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