Diary

Another Look at UraniumOne, part 1: The Art of the Deal

AP Photo/Kathy Willens

Frank Giustra was an investment specialist and stock trader who started out working for Merrill-Lynch,  developed a loyal investor base in the mining sector, but left to create a resources-financing group in Europe called Yorktown Securities in the 1980s.  It quickly became a major force in the world of mining finance.  In 2001, he and Rob McEwen, the founder of GoldCorp purchased Wheaton River Minerals.  Along with Ian Telfer, they turned the company into one of the largest gold mining operations in the world.  Later that year, he became the head of Endeavour Financial, an investment firm specializing in mining operations.

Around 2004, he began putting together a company called UrAsia Energy.  In 2005, they paid $70 million for a 30% stake in a uranium mine in Kazakhstan from a company called Jeffcott Group which operated out of the British Virgin Islands.  Later, it paid another $350 million to Kazakh oligarch Mukhtar Ablyazov for a stake in two other uranium mines in Kazakhstan.  When listed on the Canadian stock exchange in 2005, UrAsia was valued at over $500 million.  Then in 2007, UrAsia sold its interests to a company called Uranium One in a $3.5 billion reverse merger and Giustra received a $4 million payoff in stock options.

By 2005, Giustra was well-known in the mining industry, but his dealings in Kazakhstan were his first foray into uranium mining.  What he lacked in expertise in this area, he made up for it through connections.  On September 6, 2005, he and former President Bill Clinton arrived in Almaty, Kazakhstan.  They had a private dinner with the president of that country- Nursultan A. Nazarbayev.  This was a public relations coup for Nazarbayev since Clinton lent his enthusiastic support for the Kazakh leader to head an international organization that would monitor elections and promote democracy.  This was against stated US policy at the time since the Bush administration had documented evidence of many human rights abuses in Kazakhstan under Nazarbayev’s 19-year rule.  

Two days later, Giustra and UrAsia signed preliminary agreements to buy into the three lucrative uranium mines in the country from Kazatomprom- the government-owned uranium agency.  The deal stunned the mining world where a little-known company and one that never ventured into uranium mining would win such a monster deal.  Just months after the deal was finalized, Giustra gave the Clinton Foundation a $31.5 million donation with a promise to donate another $100 million over the next ten years.

When the New York Times revealed the story, Clinton admitted that Giustra had accompanied him on the trip to Kazakhstan, India and China to help monitor the philanthropic work of the Foundation in those countries, but was unaware Giustra had any pending deals for uranium in Kazakhstan.  However, Moukhtar Dzhakishev, the president of Kazatomprom at the time, stated Giustra did discuss the deal with Nazarbayev with Clinton present.  He acknowledged that Giustra’s association with Clinton made an impression.

In 2007, Giustra sold his interests in UrAsia to Uranium One which was a Toronto-based uranium mining operation.  They owned some operations in the United States including a company called Energy Metals Corporation which, in turn, owned a major uranium processing plant in Texas as well as uranium exploration mines in Wyoming and Texas.

Around this time, Russia became interested in uranium mining hoping to gain a world monopoly on the mineral.  Their main atomic agency- Rosatom- targeted Uranium One, not only because of its US holdings, but its holdings elsewhere.  In 2009, Rosatom moved to purchase Uranium One through financing from the Kremlin-connected bank, Renaissance Capital.  This is the same bank which paid Bill Clinton $500,000 for a one-hour speech after which he met with Vladimir Putin.  Previously, Rosatom was working through its American subsidiary Tenex to help secure the deal.  Later, it was learned that APCO, Inc. had done lobbying work on behalf of Tenex in the United States and also that APCO had done pro bono lobbying work for the Clinton Foundation.

Meanwhile, the FBI had opened an investigation into Rosatom and Tenex’s dealings in the United States.  Specifically, they were looking at allegations of bribery, kickbacks and money laundering on the part of several figures, including Vadim Milkerin who was the head of Tenex.  To do this, they used a confidential informant to develop a case against Tenex for influence-peddling by a foreign company in violation of the Foreign Corrupt Practices Act (FCPA).

There was, however, a problem with the deal: it required the approval of the Committee on Foreign Investments in the United States (CFIUS).  That committee was comprised of the following people: the Treasury Secretary Tim Geitner, the Defense Secretary Robert Gates, the Homeland Security Secretary Janet Napolitano, the Commerce Secretary Gary Locke, the Energy Secretary Steven Chu, Attorney General Eric Holder, representatives from the White House’s US Trade Representative and the head of the Office of Science and Technology, and Secretary of State Hillary Clinton.  

The Committee cannot theoretically stop a sale from going through as that is the ultimate decision of the President.  However, it can bypass Presidential involvement through approval, or it can recommend suspension of the sale to the President.  We know that the sale ultimately went through as none of the nine members on that committee objected.  

According to their rules established in 2008, deliberations are private and only if any member objects can any of those deliberations be made public, or can information they received as part of their deliberations be made public.  In prototypical Hillary Clinton fashion, it was later stated that former assistant Secretary of State Jose Fernandez represented the Department on the Uranium One issue and that Clinton was not involved at all.  Despite the erection of a wall of deniability,  it indicates one of two things and neither look good to Clinton.  Either she effectively recused herself from the decision of the CFIUS because she suspected a conflict of interest given the interactions between Giustra, her husband and Uranium One especially as they applied to the dealings in Kazakhstan, or she was simply out of the loop in a major transaction involving a strategic item like uranium.  It boggles the imagination, unless one wants to assert she was the most unknowing and inept Secretaries of State ever- and there is ample evidence for that viewpoint- that Clinton was unaware of the deal and had no say in it.  To assert such is to admit an abrogation of one of her duties as a member of the CFIUS to the point that she would delegate the full authority of her office to an assistant.

Next: Russian designs and corruption