This record is a partial extract of the original cable. The full text of the original cable is not available.

C O N F I D E N T I A L SECTION 01 OF 02 ABUJA 001381 
 
SIPDIS 
 
E.O. 12958: DECL: 04/13/2014 
TAGS: PGOV KCOR PREL BEXP EINV EFIN NI
SUBJECT: NIGERIA: U.S. COMPANY LOSES BID, ALLEGES 
PRIVATIZATION HAS LOST TRANSPARENCY 
 
Classified By: AMBASSADOR JOHN CAMPBELL FOR REASONS 1.5 (b) AND (d). 
 
¶1. (U)  ACTION REQUESTED PARAGRAPH THIRTEEN. 
 
¶2. (SBU)  Summary: Earlier this year, Nigeria's Bureau of 
Public Enterprises (BPE) solicited bids in the sale of a 
majority stake in ALSCON, the state aluminum smelting plant. 
The bid by an American corporation, BFIGroup Corporation, to 
acquire the 77.5 percent share in ALSCON allegedly has been 
thwarted by a lack of transparency in the bidding process, 
and perhaps some corruption as well.  We understand that 
BFIGroup has sought the assistance of the U.S. Commerce 
Department, as well as Embassy Abuja, in advocacy for its 
claim to be the legitimate bid winner.  Embassy recommends 
due diligence by the Advocacy Office or State/EB/OCA on 
BFIGroup's U.S. operation, and request guidance.  End Summary. 
 
¶3. (U)  Earlier this year, Nigeria's Bureau of Public 
Enterprises (BPE) solicited bids in the sale of a majority 
stake in ALSCON, the state aluminum smelting plant.  The 
plant, completed in 1997 at a cost of approximately USDOLS 
2.5 billion, operated well below capacity until May 1999, 
when production ceased due to lack of working capital and 
inadequate gas supply.  Efforts to privatize the corporation 
began in earnest two years ago, but were delayed for various 
reasons until this year. 
 
¶4. (U)  In April, BPE announced the two shortlisted bidders 
for the 77.5 percent stake:  BFIGroup Corporation and Russian 
Aluminum (RUSAL).  BFIGroup, an American company, boasts 38 
experts in the aluminum industry.  According to documents it 
filed in the tender process, BFIGroup has a technical and 
marketing agreement with Daewoo International (America) Corp. 
to purchase and market the aluminum products. 
 
¶5. (U)  BPE opened the financial bids June 14.  RUSAL's 
initial offer of USDOLS 205 million was conditional on the 
cancellation or repayment of all ALSCON liabilities.  RUSAL 
refused to pay the 10 percent up-front fee required without 
this and other conditions being met.  BPE summarily rejected 
the bid as against its rules, and disqualified RUSAL from the 
process.  BFIGroup submitted a bid of USDOLS 280 million, and 
raised it to USDOLS 410 million to meet BPE's minimum reserve 
price.  BFIGroup was declared the winner by the Chairman of 
the Technical Subcommittee of the National Council of 
Privatization (NCP). 
 
¶6. (U)  Instead of granting preferred bidder status to 
BFIGroup, the GON announced it was renegotiating with RUSAL. 
RUSAL's bid dropped to USDOLS 160 million.  A few days 
later--allegedly due to pressure from the international 
community--the GON reversed its stance and allowed BFIGroup 
to proceed as the preferred bidder.  According to BFIGroup, 
given Nigeria's history in financial dealings and the 
uncertainty over the political situation resulting from BPE's 
quick reversals, BFIGroup had to soothe jittery investors and 
requested an extension to the 15 day period stipulated in 
which to make the 10 percent downpayment (USDOLS 41 million). 
 Again, according to BFIGroup, it filed such a request on 
June 28, as well as a second one July 6, both of which BPE 
rejected, and the deadline to sign the Sales Purchase 
Agreement (SPA) passed.  At this point BFI Group was 
officially out of the running, pending appeals. 
 
BPE NOT PLAYING FAIR? 
 
¶7. (SBU)  On 28 July, the CEO of BFIGroup, Dr. Reuben Jaja, 
met with Poloffs to discuss what he alleged were the 
transparency and possible corruption problems in the bidding 
process and to ask for assistance.  He alleged several 
instances of unfair and/or criminal actions on the part of 
the BPE and GON: 
 
-  The sealed envelope containing the BFIGroup bid proposal 
had been tampered with while in the possession of the BPE; 
-  BPE refused to meet with company representatives to sign 
the SPA during the 15-day grace period, waiting until the 
deadline had passed; 
-  Requests to the BPE for extension of the 15-day 
downpayment period were rejected, although granted to 
investors in several other recent privatizations; 
-  Local media reports that BFIGroup's CEO is an ex-convict 
constitute a smear campaign against him personally; 
-  An imposter claiming to be an employee of Chase Manhattan 
Bank gained access to the BFIGroup's bank account, presumably 
intending to arouse suspicion about the corporation's 
finances; and 
-  BPE has attempted to cash the USDOLS 1 million bid bond 
submitted by BFIGroup during the negotiation.  BFIGroup has 
filed a court injunction to prevent this action. 
 
¶8. (U)  Emboffs discussed with BPE officials, but their 
rebuttals to the allegations of bias and lack of good faith 
negotiation were often contradictory.  They have stated that 
the BFIGroup did not submit extension requests in time, then 
stated that BFIGroup did in fact submit the request in time. 
BPE first said that BFIGroup had refused to sign the SPA for 
ALSCON, and then that the company did seek to sign the SPA 
but BPE prevented the signing before the deadline. 
 
¶9. (C)  BFIGroup CEO Jaja told Emboffs that BFIGroup 
representatives met with President Obasanjo the night of June 
¶13.  At the meeting, Obasanjo asked for the particulars of 
their bid.  When the BFIGroup's legal advisor advised that 
this would be illegal and could affect the process, the 
President allegedly retorted, "but the Russians showed me 
their proposal."  After the meeting, Deputy Senate President 
Ibrahim Mantu allegedly tried to intervene on behalf of the 
American firm.  Mantu reported back to BFIGroup's CEO that 
NSA Mohammed Aliyu Gusau and the President's wife Stella 
Obasanjo had advised Mantu that he was "on the wrong side." 
Mantu reportedly told the CEO that Stella had offered to 
"take care of him" if he would switch his support to the 
Russians. 
 
¶10. (C)  BFIGroup appears ready to pursue this matter rather 
than accepting defeat.  It has contacted the World Bank about 
BPE's questionable privatization practices and requested 
assistance from the Embassy in pursuing its case at a 
political level in Nigeria.  It says it plans to approach the 
U.S. Congress as well.  The CEO has engaged a team of lawyers 
in Nigeria to file a suit against the BPE process and is 
looking to do the same in the U.S.  In the letter to the 
World Bank, BFIGroup hinted that "big people in Nigeria were 
involved" and that it might be forced to begin naming names. 
 
¶11. (C) Comment: BFIGroup's allegations are serious.  If well 
founded, the USG would have cause to raise this matter at the 
highest level.  Press reports suggest need for caution, 
however.  Some have given conflicting stories on BFIGroup's 
position, and whether it is incorporated in the U.S. 
(California) or not.  One newspaper, BusinessDay, also 
reported on July 7 that BFIGroup and its founder, Jaja, are 
being sued for fraud in the Orange County Superior Court in a 
case from August 15, 2000 in connection with their failure to 
obtain regulatory approval to operate a wire transfer 
business.  BusinessDay said the case was allegedly settled 
out of court, but the plaintiff's attorney claimed Jaja 
defaulted on his obligation to pay and was sued again on May 
12, 2004 for fraud by the same party in a case "Richard 
Nguyen v. Reuben Jaja, Bancorp Financial Investigations 
Group, No. 04CC05740, Complaint for Fraud, Conversion, Money 
Had and Received, Breach of Contract, and Accounting." 
 
¶12. (C) BFIGroup is also alleged to be involved as the 
financial advisor for Solgas in a messy contract for Solgas 
to rescusitate Nigeria's Ajaokuta Steel complex, and 
specifically that it defaulted in sourcing the money to pay 
for the Solgas bid. 
 
¶13. (SBU) ACTION REQUESTED:  BFIGroup has asked that the 
Mission intercede with the GON, and USDOC has received a 
similar request.  Please advise. 
CAMPBELL