How we investigated Duke’s investments in Ferrous Resources

Duke University made headlines in November 2017 for holding shares in Ferrous Resources, a company with plans to build a controversial pipeline. For the past six months, reporters at The Chronicle have been working to understand the rest of the story.

What was the value of those investments? Was the University aware that the mining company’s proposed pipeline was projected to cause detrimental environmental impacts for communities along its path? And what was the deal with Ferrous, anyway?

The 2017 annual meeting for Duke’s Advisory Committee on Investment Responsibility, held less than a month after the New York Times published its investigation into dozens of universities whose investments surfaced in the Paradise Papers, did not provide many answers: Lawrence Baxter, chair of ACIR, said he had only found out about Duke’s holdings in Ferrous as recently as meeting attendees.

Since August, reporters Julia Donheiser and Julianna Rennie have sorted through hundreds of documents, working with translators to parse Brazilian court dockets and news articles and interviewing University administrators to better understand the now decade-long relationship between Duke and Ferrous.

Inside the Paradise Papers

The Paradise Papers consist of 13.4 million confidential documents about offshore investments, which were leaked to journalists Frederik Obermaier and Bastian Obermayer at the German Süddeutsche Zeitung. The newspaper shared the documents with the International Consortium of Investigative Journalists, which then organized a global reporting collaboration.

Duke University was among the dozens of schools listed in the offshore law firm Appleby’s client database, which was part of the Paradise Papers document leak.

The Chronicle was granted access to those documents in July, and our reporters dug through client lists and share receipts that spanned seven years. We found that Duke bought not only 2.1 million shares in Ferrous in 2008, but also an additional 1.9 million shares in 2015.

Shareholder receipts showed that both of Duke’s investment entities—-Gothic Corporation and the Duke University Management Company (DUMAC)—-invested in Ferrous. 

Client lists further revealed that although Gothic bought shares in Ferrous directly, DUMAC acquired its holdings at first through direct investments and then later through Bank of New York Mellon, an investment firm based in New York City. Mellon was registered as a shareholder in Ferrous on behalf of Duke, which continued to benefit from the investments. These findings were confirmed by a tax attorney, who reviewed the source documents.

We also consulted Gothic and DUMAC’s tax returns and found that he Internal Revenue Service only requires nonprofits to list their investments by the location of a company’s headquarters. Simply put, Duke’s investments in Ferrous are listed under Europe rather than South America in DUMAC and Gothic’s 990s. We then reached out to Richard Schmalbeck, Simpson Thacher and Bartlett Professor of Law, to better understand the implications of investing through blocker corporations.

Investigating Ferrous Resources

The New York Times and Süddeutsche Zeitung reported that Ferrous planned to build a pipeline to transfer iron from its mines in the Brazilian state of Minas Gerais to the coastline. Our reporters dug into local reports on protests against the pipeline, which posed a potential threat to clean drinking water for communities along its path. 

In 2012, Brazilian news outlets in Espírito Santo—-the proposed endpoint for Ferrous’ project, where the company planned to build a iron processing plant and a port for exporting refined materials—-reported that 28 people had been arrested by the federal police for their alleged involvement in an land sale scheme supposedly organized by government officials. Ferrous was mentioned in  the deal. The company had bought land along the coastline for inflated values from companies owned by public officials in exchange for tax incentives. The scheme diverted millions of reais from public funds, the report alleges.

Reporters at The Chronicle then used OCR software to convert the police report into a machine-readable format and translated it via Google Translate and DeepL. The translation of all information from the report pertaining to Ferrous was reviewed by Magda Silva, senior lecturer of romance languages, and senior Bella Letourneau, a native Portuguese speaker. The translation was also cross-checked with coverage of the scheme by multiple Brazilian news outlets. 

We also reached out to several Brazilian journalists and researchers who referred us to the most recent coverage of the trial. Seven years after the initial arrests were made, prosecution of individuals allegedly involved in scheme is still ongoing. 

Getting a dollar value

After months of gathering information about Ferrous and Duke’s investments in the company, we contacted  the person who spearheads how Duke invests its endowment. Neil Triplett, president of both Gothic and DUMAC, declined to comment on The Chronicle’s findings due to a longstanding University policy against providing information about specific investments. We also reached out to Baxter, who declined to comment.

Reporters then contacted Michael Schoenfeld, vice president for public affairs and government relations. After we presented him with our findings, he said that Duke had invested a total of $10.3 million in the company and that its current holdings are valued at approximately $1 million.

Read the investigation here.


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