UPDATE 1-Frenchman gets 2 years in U.S. prison for role in Guinea mine scandal

Fri Jul 25, 2014 3:16pm EDT

(Adds details of court hearing, background, case citation, byline)

By Joseph Ax

July 25 (Reuters) - A former adviser to mining giant BSG Resources was sentenced in New York federal court on Friday to two years in prison for obstructing a criminal probe in connection with a bribery investigation in Guinea.

Frederic Cilins, a French national, pleaded guilty in March to one count of obstruction and admitted attempting to bribe Mamadie Toure, a widow of former Guinea President Lansana Conte, so she would leave the United States to avoid questioning by federal authorities.

Cilins was charged as part of a U.S. probe into potentially illegal payments made to Guinean officials to secure rights to half of one of the world's largest untapped iron ore deposits for BSG Resources (BSGR), the mining arm of Israeli billionaire Beny Steinmetz's conglomerate.

BSGR has denied any wrongdoing.

The investigation eventually prompted Guinean officials to strip the concessions from BSGR and its partner, Brazilian iron ore mining company Vale SA, after a government-appointed committee accused BSGR of obtaining them through corrupt means.

BSGR has accused officials of improperly trying to wrest away its rights to the northern half of the Simandou mine. The company is seeking arbitration at the International Centre for Settlement of Investment Disputes.

Developing Simandou would offer an enormous boost to the Guinean economy, but the project has suffered delays because of disputes over the mining rights.

Last month, Guinea's national assembly ratified an investment framework agreement with global miner Rio Tinto , its Chinese partner Chinalco and International Finance Corporation to raise nearly $20 billion to revive the project. First production from Rio and Chinalco's southern half of Simandou, however, is at least four years away.

The government is also planning to open a new auction to grant the rights stripped from BSGR and Vale for the northern part of the deposit. Guinean officials have said Vale did nothing wrong and encouraged the company to bid again.

At Friday's hearing, Cilins apologized to U.S. District Judge William Pauley for his actions and to his family for causing them pain.

Pauley said Cilins' crime "strikes at the very foundation of the sound administration of justice," but declined to impose a sentence of more than three years, as prosecutors had requested.

Cilins, 51, was accused of offering to pay for Toure's flight to leave the United States to avoid answering federal investigators' questions. Unbeknownst to Cilins, Toure was working as an informant for the U.S. government.

In a taped phone conversation, Cilins told Toure: "That has to be destroyed very urgently," referring to documents tied to the alleged payments, prosecutors said.

The case is U.S. v. Cilins, U.S. District Court for the Southern District of New York, No. 13-315. (editing by Gunna Dickson)