Korean Steel Giant Pitching BC Mine Caught in Criminal Probe

A South Korean company at the centre of a controversy over a proposed coal mine in British Columbia is embroiled in a slush fund scandal in its home country, which the provincial government only learned of recently.

Harjap Grewal of the Council of Canadians, a national social justice organization, said the case shows a lack of oversight on the part of Canadian provincial and federal governments when it comes to foreign companies doing business.

"Obviously, the government should know what these practices are, it's not hard to Google search and find these things," Grewal said. "But I literally think it's them turning a blind eye to their friends."

The Korean company, Posco, is one of the world's largest steel making companies. Its Canadian subsidiary, Posco Canada Ltd., is part of an effort to open a coal mine in northwest B.C.

The company says coal in the Klappan region of the province is well suited to steel manufacturing.

The proposal has met with strong opposition from First Nations in the region who are concerned about the environmental impact of the mine. The province previously granted the company mining licences, but last week purchased back those licences effectively shelving the project.

Posco Canada Ltd. and its Canadian partner, Fortune Minerals Ltd., have a 10-year window to purchase back the licences.

The B.C. provincial government said talks with the local Tahltan First Nation regarding the mine can continue at a slower pace, according to a release from the Ministry of Energy and Mines, May 4.

But the company -- one of the world's largest steel producers -- has problems in its home country, too.

According to press reports from South Korea and Vietnam, prosecutors in South Korea are investigating top former Posco executives for allegations that they operate a $9 million slush fund. The group is suspected of exaggerating the costs of building a highway in Vietnam.

The allegations started in mid-March after an internal audit of the company. The Vietnamese government is now investigating the projects too. The executives have not been charged.

The Tyee asked the provincial government about the slush fund scandal last Friday. On Monday, the government answered saying it had only just heard about it.

"The Ministry of International Trade just learned of the court case and will monitor events to determine any relevance to operations in this province," said a statement issued to The Tyee. "Posco Canada is the largest Korean company in B.C. and is an important contributor to economic development and job creation in the province of British Columbia."

The ministry insisted it expects all businesses operating within its jurisdiction to behave in "the highest ethical standards."

Grewal said Posco also has problems in India with another proposed mining project, which locals there oppose. The United Nations asked the company to stop building because it would displace thousands of people.

He said the fact that B.C. politicians were unaware of the scandal shows that local and indigenous levels of government should have a larger say in what companies are allowed to do business in their areas.

"They probably would look up what the records of these companies are and made a decision on whether they would like to welcome them into their territory," he said.

Posco isn't the only foreign resource company doing business in B.C., and facing criminal allegations back home.

Last year, China's former federal energy minister Liu Tienan and his business partner Ni Ritao were both arrested in China over corruption allegations partly related to their investment in a shuttered British Columbia pulp mill through a company called Sun Wave Forest Products.

Liu was found guilty of accepting bribes and Ni is still in police custody.

Ni and Liu's company also sued the city of Prince Rupert, which had confiscated a mill it owned on the allegations of unpaid taxes to the city.

Linked to heroin ring

In another case, in June 2014, B.C. Premier Christy Clark was criticized for meeting with Burmese tycoon Steven Law whose family is accused of being part of a massive heroin ring. At the time Clark met with Law the U.S. government had banned its citizens from doing business with him.

As well, a proposed liquefied natural gas plant in Squamish by the company Woodfibre has a parent company owned by Indonesian business magnate Sukanto Tanoto, whose company was fined US$205 million for tax evasion last year.

Posco Canada has donated $1,150 to the BC Liberals and $1,000 to the BC NDP while Sun Wave contributed more than $14,000 to the BC Liberals over the years through it and subsidiaries. Woodfibre donated $28,000 to the BC Liberals and $8,000 to the BC NDP in 2014 alone. *

As for oversight, the federal government said foreign companies must comply with Canadian laws, but the rules are unclear about doing business with companies that break the law outside Canada.

"Provinces and territories act in accordance to federal laws and regulations in respect to trade and attracting investments to Canada," said Department of Foreign Affairs and International Trade spokesperson Amy Mills.

"The Government of Canada works collaboratively with provinces and territories through programs, initiatives, joint trade missions [and] shared offices in missions abroad in order to create jobs and prosperity for all Canadians."

Nathan Cullen, federal New Democrat MP for the region in which the Klappan sits, said the federal government seems to have given up making sure foreign companies in Canada work for the benefit of Canadians.

He said foreign direct investment has always been important for the country's economy, but that foreign companies need a clear understanding of their obligations and what behaviour is expected of them before they open up in Canada.

"The review process in Canada is terrible and unclear, it's terribly inconsistent," Cullen said.

In B.C. in particular he said the Christy Clark government isn't vetting companies properly and either "doesn't have Google" or "can't be bothered" to check the records of those coming to do business.

That lack of oversight is something Grewal said could be fixed by giving more authority to communities where foreign companies want to operate.

"I do feel like it is one of those things where we're kind of in this situation where decision makers in B.C. or decision makers in Ottawa aren't really worried about that," Grewal said. "They are not the ones who are going to feel the impacts of environmental degradation or if the company bankrupts and leaves and that leaves people unemployed."

* Paragraph corrected at 7:30 p.m., May 15, 2015.