Following an anonymous whistleblower complaint, the U.S. Securities and Exchange Commission (SEC) has launched a probe investigating whether Freeport-McMoRan Inc. failed to disclose to investors the risk a potential earthquake poses to its new $3.7 billion copper smelter complex in Indonesia, according to reporting by Bloomberg.
The whistleblower is a recognized expert in the field of land reclamation with first-hand knowledge of the facts alleged. The core allegation is that the facility is constructed on a known fault line such that an earthquake of predicable magnitude can cause the Gresik Smelter Project to sink into the ocean, with little to no warning, at a tremendous cost to life, company operations, and the environment.
The SEC is reportedly investigating whether Freeport, an Arizona-based company, violated U.S. securities laws by failing to disclose to investors material facts related to the threats posed by a potential earthquake.
“Freeport allegedly ignored the advice of experts and relied on engineering designs that didn’t meet Indonesia’s code for earthquake-resistant buildings, according to the complaint, which was filed in 2022,” Bloomberg reports.
The $3.7 billion copper smelter, located in Gresik, East Java, opened this year after construction delays resulted in tens of millions of dollars of fines by the Indonesian government. Bloomberg reports that the whistleblower complaint alleges that “engineering experts recommended that the ground should be strengthened more than originally planned to support the complex, which sits on reclaimed coastal land in a ‘high hazard zone.’” The whistleblower reportedly alleges that the designs used to strengthen the ground were flawed.
Through the SEC Whistleblower Program, individuals may anonymously report potential violations of U.S. securities laws. Qualified whistleblowers, individuals who voluntarily provide original information that leads to a successful enforcement action, are eligible to receive monetary awards of 10-30% of the funds collected in the enforcement action.
The SEC Whistleblower Program has a transnational reach, whistleblowers do not need to be U.S. citizens or residents in order to qualify for SEC whistleblower awards and the misconduct can occur overseas. From 2010 through 2021, over 5,000 whistleblower tips from foreign countries were filed with the SEC.
Further Reading:
Freeport probed by SEC over quake risk at Indonesia copper plant