U.S. Bribery Case Sheds Light on Mysterious Chinese Company

In fall 2014, Patrick Ho flew to New York. His intention, according to the Justice Department, was to bribe African officials on behalf of a private Chinese conglomerate with global ambitions and enormous wealth.

In meetings at the United Nations, Mr. Ho, a former Hong Kong civil servant, laid the groundwork for millions of dollars of payments to the president of Chad and Uganda’s foreign minister in exchange for oil rights in the two countries, federal prosecutors say.

The accusations against Mr. Ho, detailed in a criminal complaint filed in Manhattan, became public this week after officials charged him and Cheikh Gadio, a former Senegalese official who acted as a fixer for Mr. Ho, with bribery. Mr. Gadio was arrested on Friday and Mr. Ho on Saturday, the Justice Department said.

The complaint does not name the Chinese company Mr. Ho represented: CEFC China Energy Company. But it does say that the company, also known as CEFC, pursued new avenues to secure coveted oil rights in Chad and Uganda through its nonprofit think tank in Hong Kong, where Mr. Ho was an executive.

CEFC has risen suddenly from little known outside China to a major player in global business. It has investments in Europe, the Middle East, Central Asia and Africa, but its most promient move was taking a $9 billion stake in Rosneft, Russia’s most important oil company and a subject of sanctions by the United States.

CEFC is among a small number Chinese companies to receive Beijing’s approval to chase splashy deals at a time when the government has mostly restricted overseas acquisitions. Its investments have largely meshed with China’s efforts to court other countries by offering infrastructure investment, an indication of why it has been able to make such deals.

The company’s expansion underscores how Chinese businesses are increasingly mixing money with diplomacy as they scour the world to secure valuable natural resources. The criminal complaint charging Mr. Ho casts a light on the practice — and on a vast, mysterious conglomerate with ties to the Chinese Communist Party.

CEFC provides all of the financing for the China Energy Fund Committee, a Hong Kong research organization. The conglomerate’s founder, Ye Jianming, is listed as a chairman on the think tank’s website.

Through Mr. Ho, the think tank was behind the approaches in Chad and Uganda, prosecutors say, and details included in the complaint were confirmed by news releases from the company’s website.

In a statement, CEFC disputed the allegations. It said it was “highly concerned” about the action taken against Mr. Ho, a former home affairs secretary in Hong Kong, and added that the think tank did not “get involved in business activities of CEFC.”

CEFC has emerged from obscurity in recent years as a key player in the China’s plans for a modern day Silk Road, scooping up businesses in the oil, travel and financial industries in the Czech Republic, Kazakhstan, Spain and the Middle East. Along the way, it has grown into a behemoth with revenue of nearly $40 billion in 2015, according to corporate disclosures.

Mr. Ye, who was 25 when he started the company, has been both a corporate leader and a diplomatic envoy of sorts, posing for photographs with leaders like President Recep Tayyip Erdogan of Turkey, Jean-Claude Juncker, the president of the European Commission, and President Idriss Déby of Chad. He has also met with Henry Kissinger, the former secretary of state, and Alan Greenspan, the former Federal Reserve chairman.

His think tank holds special consultative status with the United Nations Economic and Social Council. According to its website, it has organized conferences “on world civilizations to explore common ethics” that have featured senior American military officials and Chinese People’s Liberation Army generals.

In China, CEFC has become a prominent corporate player. Its oil storage facilities in Hainan Province are leased to the state-owned giant ChemChina as part of the country’s strategic reserves. The company also has joint ventures with the state-backed China State Shipbuilding, China Railway and Guangdong Material Reserve Administration. The Communist Youth League, which has long bred new generations of party leaders, is listed as a part of the CEFC management that oversees strategy.

CEFC has sought major oil deals outside China, playing a major role in President Xi Jinping’s One Belt One Road initiative to bring developing countries on China’s periphery closer to its orbit through infrastructure projects.

In September, CEFC agreed to take the stake in Rosneft. In October, Chan Chauto, the company’s president, met with President Vladimir V. Putin of Russia at an investment forum in Moscow.

CEFC also has a joint venture with Kazakhstan’s national oil company, KazMunayGas International, which has given it access to a network of oil and gas terminals in Europe.

But it was the company’s pursuit of oil rights in Africa that drew the Justice Department’s attention.

Mr. Ho met Mr. Gadio, a former foreign minister in Senegal, at the United Nations with a proposition, according to the complaint filed in Manhattan. CEFC wanted to expand its oil operations into Chad, and to do so with CNPC, a state-owned Chinese company facing a $1.2 billion fine in Chad for environmental violations.

Mr. Gadio, who helped broker a peace agreement that ended the military conflict between Chad and Sudan, used his friendship with Mr. Déby, Chad’s president, Mr. Gadio helped facilitate a CEFC pledge in early 2015 that it would make a $2 million “donation” to Mr. Déby for charitable causes, according to emails and documents obtained by the Justice Department.

The pledge was intended to influence the government to give CEFC the exclusive rights to certain oil blocks, federal prosecutors say. In the end, the company acquired other oil rights from a Taiwanese company. But Chad’s fine against CNPC was ultimately lowered to $400 million, and CEFC is in talks to develop an oil project in the country with CNPC, according to the CEFC website. Mr. Ho is accused of paying Mr. Gadio for his services.

In a statement, CEFC said its deal with the Taiwanese company was an “investment in Chad” that did not involve any other “interest” from the country’s government.

Edward Y. Kim, Mr. Ho’s lawyer, declined to comment. Robert Baum, a lawyer for Mr. Gadio, said that his client’s “integrity and honesty have never been questioned. The current charges do not reflect the decades of work he has admirably and capably performed.”

Around the time that Mr. Ho met with Mr. Gadio, he also initiated contact with Uganda’s foreign minister, Sam Kutesa, according to the complaint. Mr. Kutesa had just become president of the United Nations General Assembly, according to the Justice Department. Over the course of a year, the two struck up a friendship, the complaint says.

By 2015, Mr. Kutesa, in his General Assembly role, had appointed Mr. Ye as a “special honorary adviser,” officials said.

When Mr. Kutesa returned to his position as Uganda’s foreign minister, he solicited a payment from Mr. Ho in the form of a donation for a charitable foundation that he planned to launch, according to the Justice Department. The payment was actually in exchange for oil contracts, according to U.S. officials. Mr. Ho wired $500,000 into a bank account designated by Mr. Kutesa, who is not charged in the criminal complaint.

The Ugandan Ministry of Foreign Affairs did not respond to a request for comment. CEFC said it had no investment in Uganda.

Two weeks after the complaint says the money was wired, the the Mr. Kutesa’s wife sent a note to Mr. Ho, expressing the couple’s thanks to Mr. Ye of CEFC.

“Let me seize this opportunity,” she wrote, “to convey our gratitude to the chairman for his contribution to our foundation.”

Content originally published on https://www.nytimes.com/2017/11/21/business/china-energy-cefc.html by ALEXANDRA STEVENSON