Report finds “no evidence” SQM bribed officials

By Myles McCormick
Published: Monday, 21 December 2015

Law firm reports under-documented payments but highlights lack of accuracy in company’s books.

An investigation into the activities of Chilean lithium producer Sociadad de Quimica y Minera SA (SQM) by US law firm Shearman and Sterling LLP found no evidence that the company was engaged in the bribery of public officials. 

The report identified a number of payments authorised by the miner’s former CEO, Patricio Contesse, which SQM had not sufficiently documented, said that the company’s books did not accurately reflect a number of transactions and found the company’s internal controls to be insufficient.

Contesse was sacked by the board in March this year amid allegations of payments made to Chilean politicians. He was replaced by Patricio de Solminihac.

Shearman and Sterling was commissioned by SQM in February this year to look into its potential liabilities under the US Foreign Corrupt Practices Act (FCPA). 

Specifically, the terms of reference were to consider whether it had made any payment defined as corrupt for FCPA purposes and whether it had breached the accounting provisions of the act.

According to a statement released by SQM in mid-December the key findings of the report included that "payments were identified that had been authorised by (…) Contesse, for which the company did not find sufficient supporting documentation". It added that "no evidence" was found demonstrating that payments were made "in order to induce a public official to act or refrain from acting in order to assist SQM obtain economic benefits".

The third and fourth findings related to a cost centre managed by Contesse. The report concluded that "the company’s books did not accurately reflect transactions that have been questioned" (though they were "below the materiality threshold" defined by SQM’s external auditors) and that "SQM’s internal controls were not sufficient to supervise the expenses made by the cost centre".

SQM highlighted that it has already undertaken a number of measures to strengthen its corporate governance and internal controls, including dismissing Contesse; filing corrected tax returns with the Chilean internal revenue service; creating a corporate governance committee; separating and strengthening its internal audit and compliance departments; hiring audit firm KPMG to review its payment process controls; improving these controls; and reformulating its code of ethics. 

An ad-hoc committee, formed by the miner in February to look into allegations that had been made, commissioned the inquiry. It received its findings in December following nine months of investigations. 

Chilean law firm Grupo Vial / Serrano Abogados and international forensic services group FTI Consulting, Inc. assisted Shearman and Sterling in the process. 

SQM reported in late September that Contesse was suing it for almost $6m on a number of claims relating to his dismissal.