The Grey Chronicles


Understanding GSHL: Epilogue 3: Investigations and Litigations

Filed under: 'Global' Chronicles — reyadel @ 23:59
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For the past week, The Grey Chronicles analyzed the investment forays of Global Steel Holdings Ltd. [GSHL] from the Balkans, Bulgaria, Nigeria, Libya, India and Zimbabwe. The series of posts was triggered by a review of Pramod Mittal’s promise, or dreams, made during the inauguration of National Steel Corporation in the Philippines back in 04 February 2004. In as much as several posts have already been published in this blog, the omission of the events that took place in the Philippines was deliberate. This post continues the epilogue of the series for insights which could be gleaned from investigations and litigations involving GSHL in foreign lands and their repercussions to Global Steel Philippines.

Investigations and Litigations

In June 2005, in the face of rising global prices for iron ore, Lakshmi Mittal and Pramod Mittal were “embroiled in a legal wrangle” in serious conflict of interest in Liberia. Mittal Steel claimed it approached Liberia’s government in 2004 to develop via a joint venture—the Liberian Mining Corporation (Liminco) concession, which encompasses iron ore deposits, a railway and the port of Buchanan. GIHL and its partner Provider Ltd, however, asserted that they have the rights to the project after signing a memorandum of understanding with Liminco in November 2003 (The Telegraph, 2005). Nostromo Research (2006) appropriately commented: “Brothers in an ispat?” A month later, GIHL withdrawn the Writ of Prohibition from the Liberian Supreme Court and the National Transitional Government of Liberia rushed to sign and ratify the US$1 billion Mittal Steel deal before the elections (The Analyst, 2009).

In an article published by Liberia Corruption Watch, its “investigation uncovered that former U.S. Ambassador John Blaney pressurized former NTGL Chairman Gyude Bryant to drop the agreement with GIHL in favor of LNM Group of Lakshmi Mittal. The investigation found out that Mittal used another company to sway the America Ambassador who later influenced the NTGL Chairman to eliminate GIHL from doing the Nimba project” (PublicAgenda, 2009).

The concession agreement with Liberia granted ArcelorMittal the right to export 12 million tons of ore a year for 25 years. By April 2008, ArcelorMittal announced delayed plans to export iron ore from Liberia because of the current global economic crisis (Chesterton Tribune, 2009).

In February 2006, SOLGAS USA revealed to have brought GIHL in May 2004 as a subcontractor to Ajaokuta Steel Company Ltd. [ASCL] and claimed that the new Concession Agreement was fraudulently conceived; whereby GIHL management, including Love Kumar Sharma, Power and Steel Minister Liyel Imoke, and Dr. Gbenga Obasanjo, son of President Obasanjo, conspired on 14 August 2004 the successful removal of SOLGAS from ASCL (Vanguard Nigeria, 2006).

SOLGAS instituted legal action against Nigeria in a London court, International Chamber of Commerce [ICC], demanding damages to about N399 billion (over $3 billion) for breach of contract (Biafra Nigeria World2005). Moreover, a Texas 4th Court of Appeals Justice, Karen Angelini, affirmed on 03 July 2007 the trial court’s—38th Judicial District Court, Uvalde County, Texas Trial Court No. 05-09-24,865-CV Honorable Mickey R. Pennington, Judge Presiding—order denying Solgas Energy Limited’s request for jurisdictional discovery and granting the special appearance filed by GSHL, formerly known as GIHL (2007 TX App (4th) 428, 2007).

In June 2008, ICC found the Federal Government of Nigeria liable and has ordered Solgas Nigeria Ltd. to file its statement of claims plus it questioned the actions of government personnel and that of Mr. Seun Oyefeso, the Executive Vice Chairman of ASCL (Vanguard Nigeria, 2008). Nigeria is challenging the arbitration award claiming the proceedings were unconstitutional (Winston & Strawn LLP, 2008).

Sanusi Al-Haji Mohamed (2006), Executive Secretary General of the African Iron and Steel Association stated in 2006: “It is now becoming more clear that the company has no financial nor managerial capability to meet the conditions set out in the agreements”

In a twist of fate, Nigeria launched in 30 October 2007 a review into the sale of two steel plants to GIHL after complaints the process was fraught with irregularities (Reuters, 2007). A National Mirror March editorial (2008), former Minister of Defence in the Obasanjo government, Lt.Gen. Theophilus Yakubu Danjuma called on President Yar’Adua to arrest Olusegun Obasanjo for his alleged fraudulent practices. Danjuma alleged that “Obasanjo handed out Ajaokuta Steel Mill, lock, stock and barrel, in addition to the National Iron Ore Mining Company, Itakpe as well as the Delta Steel Company,” to Pramod Mittal whom he described, as “an economic terrorist.”

On 03 April 2008, GSHL with all its temerity said it had “not been receiving the promised support from the Federal Government of Nigeria (FGN).” GSHL claimed to have spent $500 million in reviving the plants. GSHL, moreover, started arbitration proceedings before the International Chamber of Commerce by April (LiveMint, 2008).

Annotations: When NSC was acquired in 2004, and became Global Steel Philippines (SPV-AMC), Inc. [GSPI], a number of local news reported that:

“GIHL’s parent firm Ispat Industries is facing an investigation in New Delhi for alleged misuse of funds, erosion of net worth and high accumulated losses, an Indian newspaper reported recently. … The investigation has been ordered under Sec. 235 of the Companies Act (of India) and the case has been referred to the Serious Frauds Investigation Office. … Ispat officials, however, said they were not aware of any investigation.” (The Manila Standard Today, 17 February 2004) [Emphasis added.].

Research would prove otherwise, as the following article from The Indian Express, dated 11 February 2004, would attest:

“[India] has ordered a probe against steel giant Ispat Industries promoted by the Mittals, for alleged exposure to Rs 8,500 crore of public funds, erosion of net worth and high accumulated losses. … The probe has been ordered under Section 235 of the Companies Act (investigations into a company’s affairs) and the case has been referred by the DCA to the Serious Frauds Investigation Office [SFIO]. … When contacted, an Ispat Industries spokesperson declined to comment on the issue whereas its Executive Director (finance) Anil Surekha was out of the country and also declined to comment. … Sources said while DCA ordered the probe about a week back, the order is awaiting a nod from the Finance Minister.” (The Indian Express, (2004).

Apparently, there is a six-day delay in Indian news reaching the Philippines, much more to the consciousness of GSPI’s Indian officials? Isn’t the world connected now by the Internet?

The Manila Times published a three-part Special Report alleging that despite Iligan City passing a resolution giving the Global Steelworks Infrastructure Inc. [GSII], as GSPI was formerly known, four amnesties on business taxes which ended April 15, it was later agreed GSII would pay in installment of ₱38 million every quarter. Yet, as of April, GSII owed the city ₱63 million. Back taxes and other arrears in 2004 that the National Steel Corp. owes the Iligan City government would reach ₱800 million (Manila Times, 30 May 2005). Then there were procedural irregularities uncovered that became the subject of a probe by Customs officials in Manila who alleged that the GSII is into smuggling (Manila Times, 31 May 2005). With all these developments early in its existence, “top officials of the Philippine steel industry, however, doubt whether the GSII can keep its side of the bargain, i.e., paying the remaining ₱12.25 billion by 2012, because the company seems to be strapped for cash.” (Manila Times, 01 June 2005).

In October 2005, the Association of Galvanized Steel Manufacturers in Indonesia complained against GSPI’s availing reduced tariff rate using Jakarta Form D for its cold-rolled coils [CRC] questioning the source of raw hot-rolled coils allegedly from India rather than the required 40% local content from the Philippines (de Pedro, 2005). Global Steel denied the charges.

Metal Bulletin reported on 02 March 2007 and republished in SEAISI Newsletter (2007) that Vietnam had imposed import taxes of up to 7% on CRC from the Philippines after the discovery of allegedly forged documents in a shipment from GSPI. The Vietnam Steel Association [VSA] alleged that it was impossible for GSPI’s CRC to fulfil the Common Effective Preferential Tariff [CEPT] condition as it only started producing hot rolled products in April 2006 on a trial basis. GSPI must have imported HRC from India, the VSA said. The import documentation claimed shipments of CRC before this date had 46.9% ASEAN-made content. Vietnamese customs alleges that GSPI exported 41,733 tons of CRC worth $24 million into Vietnam from November 2005 to April 2006 under the forged documents. Again, Global Steel denied the charges.


Al-Haji Mohamed, Sanusi (2006). The African Iron And Steel Industry: Realities And Prospects, Presented at the Arab Steel Industry 2006 International Symposium and Exhibition, Sheraton Hotel, Abu Dhabi, UAE. African Iron and Steel Association, 6-8 March 2006. back to text

The Analyst (2009). NTGL rushes to sign Mittal steel deal. Monrovia: The Analyst, 19 August 2005. back to text

Asekomhe, Wilson (2008). A Torrent Of Scandals Trail Obasanjo, National Mirror. Lagos: Nigerian Muse, 20 March 2008. back to text

Chesterton Tribune (2009). ArcelorMittal to delay iron ore exports from Liberia 1200 layoffs. Chesterton Tribune, 28 April 2009. back to text

de Pedro, Helegarde S. (2005), Letter of Assistant Director to Commissioner, Bureau of Customs re: “Trade Complaints re GASPI”. Manila: Department of Trade and Industry, 19 October 2005. back to text

Estopace, Dennis D. and Niel V. Mugas (30 May 2005). Govt rules bent for Nat’l Steel owners, Special Report. Manila: The Manila Times, 30 May 2005. back to text

Estopace, Dennis D. and Niel V. Mugas (31 May 2005). Whitewash feared in exposé, Special Report. Manila: The Manila Times, 31 May 2005. back to text

Estopace, Dennis D. and Niel V. Mugas (01 June 2005). Steel firm to settle tax dues, Special Report. Manila: The Manila Times, 01 June 2005. back to text

Flores, Alena Mae S. (2004). Banks seek P10b bonds from NSC. Manila: The Manila Standard Today, 17 February 2004. back to text

Handique, Maitreyee (2008). Global Steel says Pramod Mittal is not avoiding the Indian govt. New Delhi: LiveMint, The Wall Street Journal, 05 April 2008. back to text

Igbikiowubo, Hector (2006). Solgas USA condemns Ajaokuta’s ‘new’ concession pact. Lagos: Vanguard Nigeria, 20 February 2006. back to text

Igbikiowubo, Hector (2008). Nigeria: FG Loses Arbitration to Solgas in London, Lagos: Vanguard Nigeria, 10 June 2008. Distributed by: All Africa Global Media. back to text

The Indian Express (2004). Probe against Ispat, case referred to SFIO. Mumbai: The Indian Express, 11 February 2004. back to text

Lawal, Yakubu (2005). Firm demands N399b from Nigeria. Biafra: Biafra Nigeria World, 03 January 2005. back to text

Nostromo Research (2006). Brothers in an ispat?. MAC: Mines and Communities, 22 July 2006. back to text

Public Agenda (2009). Cars For Favor?. Liberia Corruption Watch, no date. back to text

Reuters (2007). Nigeria reviews sale of steel plants to Indian firm. Mumbai: Thomson Reuters (India), 31 October 2007. back to text

Roy, Amit (2005). Just business: Mittal. Calcutta: The Telegraph, 05 June 2005. back to text

Sachdev, Lisa (2008). Media Mention: Harrison Weighs in on Nigeria’s Challenge to ICC Ruling. Winston & Strawn LLP, 21 July 2008. back to text

Santiono, Jati [ed.] (2007). Vietnam Imposes 7% Tax on Philippine CRC, SEAISI Newsletter. Selangor, Malaysia: South East Asia Iron and Steel Institute [SEAISI], March 2007. p. 7. back to text

Texas 4th Court of Appeals (2009). 04-06-00731-CV Solgas v. Global Steel Hold. PreCYdent – Open Law Source, 03 July 2007. back to text

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