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Russian Uranium Probe Reaches Into Small-Town Ohio

26 Jun 2015 9:30 am
By Joel Schectman 

A widening U.S. bribery probe involving Russian uranium has reached from Moscow to a company in the heart of America's Rust Belt.

U.S. authorities are investigating whether an executive in Bremen, Ohio--a rural community of about 1,500 roughly 40 miles southeast of Columbus--bribed Russian energy officials to win his company millions of dollars in contracts to supply shipping containers for uranium, according to people familiar with the matter.

People familiar with the investigation identified that company as Westerman Cos., which was acquired by Worthington Industries Inc. in 2012 and now operates as Worthington Cylinders. Court records refer to the company as Cylinder Corporation A and identify its location as Bremen.

The 100-year-old business is the only U.S. producer of the big cylindrical steel containers used to safely ship uranium, but it competes with manufacturers in the Netherlands and France. As the small-town manufacturer sought to win business from Moscow, it caught the attention of U.S. authorities who were already investigating Russian nuclear officials, according to court records from related criminal cases brought last year.

Authorities suspect that the Westerman executive, who became part of a long-running criminal probe, paid Russian officials tens of thousands of dollars in bribes between 2011 and 2013, court documents say.

People familiar with the investigation say the man, identified by the documents as "Executive A" or "Barry," is Barry Keller, a Bremen native who has spent more than three decades at Westerman, working his way up from the shop floor to senior management.

Mr. Keller couldn't be reached for comment. Neither he nor the company has been charged with any crime.

Worthington, through a spokeswoman, declined to comment on Mr. Keller.

"We first learned of [the investigation] in November, and we are fully cooperating with the Justice Department," said Worthington Industries general counsel Dale Brinkman. He said the company hasn't heard from federal investigators since January.

Mr. Brinkman stressed that Westerman's ties with the Russians began before Worthington acquired it. "When we became aware of this [investigation], we quit selling to them," he added.

In the late 2000s, when Westerman's core oil- and gas-equipment business was hurting because of a drop-off in U.S. energy exploration, the company set out to increase its nuclear-equipment sales. As other manufacturers closed or left Ohio, the company pledged to invest $6.6 million to expand its production of nuclear gear, a move executives said would add dozens of jobs, according to state investment-grant records.

Tenex, part of state-owned Russian nuclear company Rosatom, became a growing customer for Westerman's uranium-transport cylinders, which cost several thousand dollars apiece. In 2009, Tenex supplied around 16% of the uranium fueling U.S. nuclear power plants, according to U.S. government data, and people familiar with the business said the figure was expected to increase.

Authorities suspect that the bribery started in 2011, according to court records. That year the cylinders, which are 12 feet long and 4 feet in diameter, accounted for around 5% of Westerman's business.

But the company, whose workforce ranged from about 150 to 200, considered the cylinders an important part of the business because they were often ordered by the hundred. That scale gave them a higher margin than most Westerman products. In a good year, the cylinders bring Westerman as much as $6 million in revenue, according to a person familiar with the business.

The broader investigation of U.S.-Russia uranium trade began eight years ago, according to court testimony, focusing on Vadim Mikerin, then director of Tenex. Authorities believe Westerman was one of several U.S. companies that paid kickbacks to Mr. Mikerin in exchange for potentially lucrative contracts, according to people familiar with the matter.

Attempts to reach Mr. Mikerin for comment were unsuccessful.

Scott Balber, an attorney with Herbert Smith Freehills LLP who represents Tenex, said "It's been our position Tenex is the victim" of the alleged scheme. He said the company is cooperating with the Justice Department's investigation and other Tenex officials weren't involved with the alleged misconduct. Authorities haven't told the company of anyone other than Mr. Mikerin they believe to be involved in the alleged scheme, Mr. Balber said.

Mr. Mikerin was arrested in October at his Maryland office, after federal agents failed to convince him to work as an undercover informant, according to court records. Mr. Mikerin was charged in federal court in Greenbelt, Md., with pressuring a lobbyist to pay kickbacks to him and other Russian officials. He has pleaded not guilty.

Prosecutors said in a pretrial hearing in April that they intended to bring further charges against Mr. Mikerin.

Prosecutors say Mr. Mikerin arranged for the bribe payments to be channeled through a maze of secret accounts in Cyprus, Latvia and Switzerland, where they were collected by higher-ranking officials at Rosatom, Tenex's parent. The Foreign Corrupt Practices Act makes it a crime to bribe overseas officials in exchange for business.

An attorney for Rosatom said it is cooperating with the U.S. investigation, and that the alleged misconduct didn't involve other officials at the company.

In 2010 emails between Mr. Mikerin and another alleged co-conspirator, which are part of the court record, the two discussed "cake distribution, " which prosecutors say was coded language for the kickbacks that they expected from Mr. Keller. The "cake" was to be worth 5% of a Westerman contract, and would be paid through a consulting invoice, Mr. Mikerin wrote.

"Once they provide us with the multiyear price mechanism we are able to invite 3 bidders (Barry + two from Europe)," Mr. Mikerin wrote in a 2010 email, referring to Westerman and two European competitors. "We will play piano and finally give 'the figer [sic]' to Barry to make everybody happy."

In 2011, the alleged co-conspirator told Mr. Mikerin in an email that "Barry's package was deposited yesterday upon receipt, and is on hold...I will check when for clearance on Monday and advise when the window should open." Prosecutors say in court documents that "the window" was code for a system for moving bribes through a network of secret accounts.

Worthington froze sales to Tenex in November.

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(END) Dow Jones Newswires

June 26, 2015 05:30 ET (09:30 GMT)

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