Caterpillar Disputes Illicit Jade Ties, Says ‘Robust Screening’ Used

By Seamus Martov 27 October 2015

CHIANG MAI, Thailand — On the back of an explosive report into Burma’s jade trade, global construction giant Caterpillar has told The Irrawaddy that it took measures to ensure an appropriate level of screening was in place for its local business to guarantee compliance with American laws.

The world’s leading manufacturer of earthmoving equipment came under fire in a detailed report released by Global Witness on Friday, which alleged widespread corruption in Burma’s multibillion dollar jade trade at the behest of the military, senior figures from the former junta and individuals connected to the drug trade.

“Caterpillar has hosted in at least five countries the front man for a group of jade companies Global Witness believes to be controlled by drug lord Wei Hsueh Kang,” the report states.

Global Witness claims that Zaw Bo Khant, a director and shareholder of Burmese firm Myan Shwe Pyi Mining, is a front man for Wei Hsueh Kang, alleged to be the key financier of the United Wa State Army (UWSA). The US government has a $2 million bounty for the arrest of Wei, who was indicted by a New York grand jury in 2005 along with several UWSA colleagues and two of his brothers on charges of heroin and methamphetamine trafficking.

The firm’s sister company, Myan Shwe Pyi Tractors, bills itself as “Myanmar’s premier Caterpillar dealership”.

Zaw Bo Khant is also the managing director of Myanmar Takaung, a firm Global Witness alleges is controlled by Wei, who once served as the UWSA’s powerful southern commander. According to Global Witness, Myanmar Takaung’s jade operations incorporated those of Hong Pang, a firm controlled by the UWSA, a move likely prompted by Hong Pang’s inclusion on the US Treasury’s sanctions list.

Thanks to Zaw Bo Khant’s Facebook account, Global Witness was able to determine that the controversial businessman visited Caterpillar company facilities in Australia, France, Germany, Spain and the UK. Photographs republished in the report suggest that Zaw Bo Khant—who prior to the enterprise’s apparent rebranding was a Hong Pang company manager—appeared to enjoy his worldwide Caterpillar tour. During a visit to France he visited the Eiffel Tower, drank champagne and bought a Rolex.

In correspondence with Global Witness, Caterpillar emphasized that neither Zaw Bo Khant nor Myanmar Takaung were on the US sanctions list. Global Witness argued in its report that the company’s unwillingness to address concerns over Zaw Bo Khant reflected inadequate due diligence on Caterpillar’s part.

“Wei Hsueh Kang and his associates have used an array of front companies precisely in order to avoid US sanctions and indictments,” the report states. “As such, there is a good reason why the ‘public faces’ of UWSA/UWSP-linked companies will not be on current US sanctions lists.”

William Oei, Caterpillar’s Asia Pacific director of public affairs, told The Irrawaddy via email that the company had followed proper procedure.

“We take issue with Global Witness’ assertion that Caterpillar did not take the information provided with the appropriate level of seriousness,” he wrote. “As we explained to Global Witness, Caterpillar implements robust screening procedures to ensure that our transactions do not violate relevant export control laws, and we conduct additional due diligence as needed”.

Burma Campaign UK director Mark Farmaner said the fact that Zaw Bo Hkant was permitted to visit Britain despite his alleged ties to the UWSA and the illicit jade trade was an indictment of British government policies.

“British Burma policy is such a mess that frontmen for dodgy drug dealers are free to visit the UK,” he told The Irrawaddy. “Unlike the USA, they have no list of people in Burma linked with crime and human rights violations who are barred from the country, or who British companies are barred from doing business with.”

Though Wei’s exact whereabouts are unknown, it is widely believed he continues to live in UWSA territory under the group’s protection. According to Global Witness’s research, companies affiliated with Wei and the UWSA saw pre-tax sales totaling US$100 million for 2013-14 at the government-run jade emporium. This is likely to be only a small fraction of total revenue, as most jade mined in the Kachin State township of Hpakant is believed to be smuggled directly to China.

The UWSA, for its part, has spent the last decade downplaying its involvement in the drug trade.

“We, the UWSA, are wholeheartedly engaged in the fight against drug-dealing,” the group’s spokesperson, Aung Myint told The Irrawaddy in a 2013 interview. “For seven years since 2005, there have been no poppy fields and no poppy plants in our region. This has finished. That’s why the world should recognize us,” Aung Myint said.

Jade Trade’s Coca-Connection

Earlier this year, Global Witness reported that Coca-Cola was linked to the jade trade through the global beverage company’s local partner in Burma, Pinya Manufacturing. Pinya chief Daw Shwe Cynn owns a 20 percent stake in the jade mining firm Xie, which according to Global Witness has for the last 20 years served as a contractor for the military-owned Union Myanmar Economic Holdings Limited (UMEHL), a firm still subject to US sanctions.

Daw Shwe Cynn has also been identified as director and majority shareholder of Gold Uni, a firm that Global Witnesses describes as one of Burma’s largest jade trading firms. Chinese state owned media reports indicate that Chinese authorities probed Gold Uni during a jade smuggling crackdown in 2010.

Global Witness notes that before Coca-Cola entered into business with Daw Shwe Cynn it spent “a seven figure amount” on a team of due diligence experts, including representatives of global consulting firms Kroll and PricewaterhouseCoopers (PwC) to conduct background research on its potential partner.

“Seemingly no one picked up that Daw Shwe Cynn is a 20% shareholder in Xie Family, a prominent jade mining company”, the report concludes.