ACCTING2501 Financial Accounting

A BHP Billiton mining deal being investigated for alleged corruption was personally overseen by Cambodian strong man Hun Sen, diplomatic cables reveal. The mining giant’s aborted attempt to establish a bauxite mine in Cambodia and its hospitality program for Chinese officials at the 2008 Beijing Olympics are at the centre of a foreign bribery probe involving the Australian Federal Police and the US Justice Department.

Diplomatic cables, several marked ‘sensitive’ and ‘protected’, show for the first time Cambodian Prime Minister Hun Sen’s close involvement in 2006 negotiations with BHP executives. The cables show Hun Sen told a private audience in Cambodia that he would give ‘BHP 1 million hectares of land’ weeks before the 2006 agreement was signed. He also promised the company ‘a possible tax holiday’ and chaired a committee examining legal issues associated with the BHP proposal.

The cables reveal how BHP decided to stop all mineral exploration in Cambodia in 2009 just months after a British-based non-government organisation exposed its ‘tea money’ payments of US$3.5 million to Cambodian government departments and raised concerns some of the money had gone missing. There is no evidence suggesting any of the money went to Hun Sen, who has dismissed reports suggesting BHP was involved in bribery in Cambodia.

The cables, released under FOI by the Department of Foreign Affairs and Trade, show BHP in 2006 took what Australian officials regarded as an unusual step of asking them to directly approach Hun Sen for a meeting to ‘go to the next level and close the deal’. Although Australian officials rejected the request to approach the Cambodian leader on BHP’s behalf in order to ‘preserve our political capital’, embassy staff in Phnom Penh contacted Hun Sen’s office to get a contact name and number to pass to BHP.

In September 2006, Hun Sen and BHP executives signed an agreement granting the firm and joint venture partner Mitsubishi rights to explore a huge area of land for bauxite deposits. The deal was ratified by Hun Sen and then prime minister John Howard weeks later.

The cables make clear that although BHP’s exploration process was progressing slowly during 2007 and 2008, the company’s Cambodia-based executives were optimistic about the project’s success. However, the diplomatic cables show a change in BHP’s stance on Cambodia shortly after the February 2009 release of the Global Witness report.

In April 2009, Australian diplomats sent a ‘confidential’ cable to Canberra raising doubts about BHP’s long-term commitment to Cambodia, blaming the global financial crisis and the country’s ‘own poor financial management’. The cable stated that any withdrawal by BHP would ‘not only breach BHPB’s MOU with the Cambodian government (signed in the presence of prime ministers Hun Sen and Howard in Canberra in 2006)’, but would also ‘diminish Australia’s influence in this major sector’.

Australian diplomats in Phnom Penh also sent a cable to Canberra in response to the claims by Global Witness stating that ‘the specific references [to] Australian companies are very concerning’. However, they remained confident BHP had done nothing wrong.

BHP told the Australian government in June 2009 that it would pull out of Cambodia because the bauxite deposit was not worth mining due to global financial conditions.

Required

A. Provide an overview of ethical decision-making model

B. Provide an overview of ethical principles

C. Identify the stakeholders in this situation.

D. Determine the ethical issues (if any) involved.

E. Comment on the ethics of bribing officials in a country where you are conducting business given that such actions are part of the country’s normal business practice, but they are unacceptable in your own country.

Answer: