A team of RCMP investigators has continued to pursue its probe of a Canadian oil company in Namibia, despite a statement from British Columbia’s securities regulator saying that the regulator isn’t actively investigating the company, The Globe and Mail has learned.
The company, Reconnaissance Energy Africa Ltd. (ReconAfrica), has sparked controversy in southern Africa for its drilling program near the Okavango River, which flows into the environmentally sensitive Okavango Delta, a haven for vast numbers of elephants, lions and other wildlife in neighbouring Botswana.
In submissions to B.C. and U.S. securities regulators last year, complainants alleged that ReconAfrica engaged in deceptive stock promotion and inadequate disclosures. The company has denied the allegations and says it operates in full compliance with all laws and regulations.
A heavily redacted e-mail, written by an investigator at the BC Securities Commission and released to a U.S. hedge fund under freedom-of-information legislation, appears to show that the investigator was reviewing issues at ReconAfrica in early May.
ReconAfrica, in a press released last month, said it was not under investigation by the securities commission. BCSC spokesman Brian Kladko, in response to questions from The Globe, confirmed that the commission is not currently investigating the company, but did not answer questions about whether an earlier investigation had been conducted.
ReconAfrica has its legal headquarters in Vancouver and its operational headquarters in Calgary, according to its website and press releases.
The separate RCMP investigation has focused on two issues: ReconAfrica’s stock promotion activities and its relations with politically connected figures in Namibia.
The Globe previously reported that two RCMP investigators had travelled to Nova Scotia in May to interview an environmental activist and a geologist who have questioned ReconAfrica’s geological claims and drilling activities in Namibia.
Since those RCMP interviews in May, the police investigators have continued working on the issue, The Globe has learned.
On June 30, they interviewed Fraser Perring, a founder of U.S.-registered short seller Viceroy Research, which took a short position in ReconAfrica last year and published a research report saying that the company is “drilling blind” and has a “near-zero chance” of finding deposits of value. The company has denied Viceroy’s allegations.
Mr. Perring said he told the RCMP investigators about the company’s promotional activities on social media, among other issues.
Rob Parker, a Canadian activist at the Economic and Social Justice Trust of Namibia who was interviewed by RCMP investigators in May, said he was still in e-mail contact with them in late August and early September.
One of the investigators, Corporal Karla Kincade from the Sensitive and International Investigations section in the RCMP’s National Division, cited possible securities violations as one of the issues in the investigation, according to an e-mail.
“We are investigating alleged offences contrary to the CFPOA (bribing foreign public officials) by a Canadian company and/or employees or representatives of that company, and possibly also securities fraud,” Cpl. Kincade wrote in a May 2 e-mail to Mr. Parker.
The CFPOA is the federal Corruption of Foreign Public Officials Act, which prohibits Canadian companies from bribing public officials in foreign governments in exchange for contracts or other benefits.
The media relations office of the RCMP’s National Division, in response to queries from The Globe, said in July: “The RCMP does not confirm or deny the existence of a criminal investigation unless charges would be laid. No further comment will be made at this time.”
The Globe asked the BCSC whether it had investigated ReconAfrica earlier this year, whether it had halted an investigation and whether it had transferred the issue to the RCMP. The commission did not respond to those questions. ReconAfrica also did not respond to questions from The Globe about the BCSC and RCMP investigations.
Environmentalists, however, cite an e-mail that a BCSC compliance official sent last November to the Ottawa-based human-rights and environmental group, Above Ground, saying that he planned to ask ReconAfrica to respond to the points made in complaints to the commission last year by Above Ground and others.
They also cite an e-mail obtained by Curtis Boulanger, head of a hedge fund in New York, who used freedom-of-information legislation to ask the BCSC for documents relating to a “final report and/or conclusions regarding its investigation” into ReconAfrica. Mr. Boulanger’s firm, Summit Point Capital Management LLC, has a short position in ReconAfrica, meaning that it stands to profit if shares in the company fall in value.
He obtained a five-page e-mail from a BCSC investigator, dated May 2, headed “memo to file,” with ReconAfrica’s name in the subject line. The entire text of the e-mail was redacted by the commission, citing reasons that included potential “harm to law enforcement” and potential “harm to intergovernmental relations.”
Karen Hamilton, director of Above Ground, said her interpretation of the two e-mails is that the BCSC opened an investigation into ReconAfrica and ended the investigation in May, possibly because it was aware of the RCMP investigation, which seemed to begin around the same time.
Over the past several years, ReconAfrica has paid stock promoters hundreds of thousands of dollars for online posts that coincided with wild swings in the oil company’s share price.
Shares in the company shot up 40 per cent in early 2020 on extremely heavy volume after the publication of an online article by German stock promoter Gunther Goldherz, who compared ReconAfrica’s stock to a jackpot-winning lottery ticket.
In online articles, promoters touted ReconAfrica as “The most exciting oil play of the decade” and “The world’s next giant oil discovery.” Valuethemarkets.com was paid US$116,000 for promotional materials about the company in September, 2020, including an article saying that 120 billion barrels of oil was potentially sitting in ReconAfrica’s area.
By paying for such articles, companies must ensure any promotional statements abide by Canadian securities laws. ReconAfrica said in a regulatory filing last year that it had “no reserves,” meaning it hasn’t proved even one barrel of oil can be extracted economically.