The Swiss commodities group is in the process of shaking off its corrupt past through a multi-billion dollar settlement with American and Brazilian authorities. A credible new beginning?
Bad business practices in Congo-Kinshasa and elsewhere in the world are costing Glencore dearly.
The shadows of the past are becoming expensive for the Swiss commodities group Glencore. The company has been associated with American and Brazilian authorities market manipulation– and allegations of corruption reached an agreement and paid almost 1.1 billion dollars net. The Baar-based energy and raw materials giant pleaded guilty to deliberately influencing prices on the oil market and bribing parties involved in the raw materials business around the world. The now completed investigations have been running since 2018.
Glencore also wants to plead guilty in the proceedings with the British authorities. According to Reporting by the Serious Fraud Office the verdict in the matter is scheduled for June 21.
At the time, the US Department of Justice had requested documents on Glencore’s transactions in Nigeria, Congo-Kinshasa and Venezuela since 2007. At that time, the agency began investigating violations of money laundering regulations and regulations dealing with corrupt practices abroad. When the investigation became known, the company’s share price fell by 13 percent.
Enough deferred for now, but further investigation
Since then, the process has hung over the heads of Glencore managers like the sword of Damocles. After all, Glencore boss Gary Nagle said in February that an agreement was in prospect. The company made a provision of 1.5 billion dollars for this – slightly more than the amount that Glencore is now paying to the American and Brazilian authorities. But even after the UK affair has been closed, the total should not deviate significantly from the amount writes the group.
However, further investigations are still ongoing in Switzerland and the Netherlands. The Swiss Attorney General had launched an investigation in 2020 into the company’s internal rules that should have prevented possible bribe payments in Congo-Kinshasa.
The allegations in London covered not only payments in Nigeria for oil supplies, but also failure to prevent bribery in Equatorial Guinea and South Sudan. Glencore employees and agents paid more than $25 million in bribes, according to the UK Anti-Corruption Agency.
Glencore is one of the largest independent oil traders in the world. According to US court documents, a former employee in the company’s oil trading business pleaded guilty last year to having bribed representatives of the Nigerian state-owned Nigerian National Petroleum Corporation (NNPC) in order to obtain oil supplies and information. He also admitted to having violated money laundering regulations.
Trade, but also copper and cobalt mines in focus
In Congo-Kinshasa, Glencore not only trades in raw materials, but also operates copper and cobalt mines, which were the focus of the authorities’ interest. Among other things, this brought into focus the connection to the Israeli businessman and mediator Dan Gertler, who had been sanctioned by the USA for suspected corrupt deals in Congo-Kinshasa. Gertler, who is said to be a friend of former Congolese President Joseph Kabila, has been accused by Washington of corruption and shady dealings. The Israeli was a long-time business partner of Glencore in the African country.
In this way, Glencore also came under the influence of American investigations. The Baar-based company also had to pay license fees to Gertler. Glencore agreed with Gertler to transfer the license fees in euros and not in dollars. The group expected to comply with the American sanctions regulations. In 2021, Washington unexpectedly lifted sanctions against Gertler under President Donald Trump. However, successor Joe Biden again imposed measures against Gertler.
The Congolese government under President Felix Tshisekedi recently reached an agreement with Gertler. Among other things, the country bought licenses for oil fields and gold mines from the businessman. The licenses should be worth more overall than the purchase price. Gertler hopes that Congo-Kinshasa will help him get Washington to lift the sanctions. “We were looking for a legal solution,” is how Vidiye Tshimanga, an adviser to the Congolese President, justifies the procedure. “We are not friends of Gertler,” he added. However, the agreement between the Congolese government and Gertler did not affect business activities with Glencore.
New start for CEO Nagle?
The agreement with the authorities should come at the right time for Glencore boss Nagle. Last year he replaced Ivan Glasenberg at the helm of the company. Glasenberg, who is still the company’s second-largest shareholder, shaped the group for a long time and also engineered the deals in Congo-Kinshasa. With this, Nagle can claim a fresh start and bid farewell to the past.
This will be made even easier because – also in 2021 – the American Kalidas Madhavpeddi took up his post as the company’s new chairman of the board, replacing the previous chairman Tony Hayward. How credible the skinning of the company is is still in the stars. When the first reports of an agreement came out, at least the share price rose by more than 5 percent. This should also be related to the fact that Glencore can easily cope with the billions in fines. Last year, the company generated free cash flow of around $14 billion.