Glencore settles corruption and bribery charges in US, UK and Brazil

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Glencore GLNCY 2.32%

PLC said on Tuesday it would pay at least $1.2 billion and two business units would plead guilty to UK bribery and conspiracy to breach US anti-corruption laws, resolving criminal investigations that weigh on the company. global mining and trading activity for years.

The long-awaited guilty pleas and fines, covering a range of wrongdoings, including market manipulation and bribery, are linked to Glencore’s past business conduct in developing countries where it and other commercial powers obtain minerals and other resources and transport them around the world.

Glencore International AG will pay about $700 million to resolve a U.S. Department of Justice foreign bribery investigation and $39.6 million to settle bribery allegations in Brazil, according to the company. Another unit has agreed to pay $485 million to settle U.S. criminal and civil investigations into fuel oil price manipulation, Glencore said.

Britain’s Serious Fraud Office has charged another unit, Glencore Energy UK Ltd., with seven counts of corruption in connection with payments of $24 million for preferential access to oil in Africa.

As part of its settlement of US investigations, Glencore International pleaded guilty to one count of conspiracy to violate the Foreign Corrupt Practices Act, the company said.

In the separate market manipulation criminal case, another unit, Glencore Ltd., pleaded guilty to one count of conspiring to rig commodity prices.

The Brazilian fine stems from Glencore’s participation in a corruption investigation known as Operation Car Wash, which involved payments linked to state-controlled Petróleo Brasileiro SA, or Petrobras.

Corporate penalties over $1 billion are relatively rare but not unprecedented in cases involving foreign misconduct and law enforcement from different countries. One of Allianz SE’s U.S. investment divisions agreed this month to pay about $6 billion in fines and restitution to resolve a federal securities fraud investigation.

“Corporate greed drove this widespread misconduct. Glencore engaged in these crimes to earn hundreds of millions of dollars,” Kenneth Polite, head of the Justice Department’s criminal division, said in announcing the settlement. “He bribed foreign officials for business advantages around the world, and his traders here in the United States manipulated oil credentials to make the company’s contracts more profitable.”

In an email to staff, Glencore CEO Gary Nagle said investigations had identified serious instances of past misconduct in parts of the business.

“The consequences of such conduct are damaging and costly, not only financially, but also to our reputation,” he wrote, according to a copy of the email seen by The Wall Street Journal.

The Anglo-Swiss company revealed that it has set aside $1.5 billion to cover settlement costs in the US, UK and Brazil.

Glencore has told its shareholders it faces criminal and civil investigations from the Department of Justice, the Commodity Futures Trading Commission, the UK Serious Fraud Office and Brazil’s federal prosecutor’s office.

Glencore said on Tuesday it still expects to pay no more than $1.5 billion, including any additional penalties related to the resolution of its UK case.

The settling of investigations removes a distraction for Glencore as it seeks to portray itself as best placed among major mining companies to capitalize on a global push to decarbonise transport and energy. Although it remains a strong competitor in the coal sector, the company has a significant business in metals such as cobalt, copper and nickel, which are considered essential for electric vehicle batteries and power transmission. ‘electricity.

Under the agreements announced Tuesday, business units that have pleaded guilty to U.S. criminal charges will have to hire independent compliance monitors for three years. Monitors examine a company’s governance and compliance systems, pointing out weaknesses and recommending ways to improve them.

The Serious Fraud Office said it exposed bribery and corruption in Glencore’s oil operations in Cameroon, Equatorial Guinea, Ivory Coast, Nigeria and South Sudan. There, Glencore agents and employees paid bribes for preferential access to rough with the company’s approval, the Serious Fraud Office said in a statement.

The London court is due to convict Glencore on June 21, the Serious Fraud Office has announced.

In addition to the corruption allegations, Glencore has faced the US investigation into market manipulation. A former Glencore oil trader pleaded guilty last year to conspiring to manipulate a reference related to fuel oil used by ships.

The Department of Justice and the Commodity Futures Trading Commission investigated allegations of manipulation and found misconduct that spanned from 2007 to 2018. Traders attempted to rig four U.S.-based physical oil benchmarks that could influence profits on futures and swaps tied to those benchmark prices, according to the CFTC.

Another former Glencore trader pleaded guilty last July to conspiring to launder money and pay millions of dollars in bribes to officials in Nigeria and elsewhere in exchange for favorable contracts with a state oil company , in violation of the US Foreign Corrupt Practices Act.

Anthony Stimler, a British citizen, was involved from 2013 to 2015 in funneling hundreds of thousands of dollars to intermediaries to facilitate Glencore’s access to Nigerian oil, court records show. Authorities alleged Mr Stimler was working with co-conspirators, including other former Glencore traders.

Several executives who held their positions during the period examined by the authorities, including former Glencore CEO Ivan Glasenberg, have left the company. Mr. Glasenberg, who ran the company for 19 years, declined to comment.

The investigations weighed on Glencore’s share price for several years and resulted in legal costs for the company. For example, legal costs for the first half of 2020 reached $56 million.

Glencore is still under investigation by Swiss and Dutch authorities.

Glencore’s share price rose 1.3% in London on Tuesday.

Over the past year, the company’s share price has soared 70% amid a major rise in the price of the raw materials it extracts, such as coal, cobalt and nickel, and as market volatility brings profits to its large trading division.

Mr. Nagle, who took over from Mr. Glasenberg last year, sought to simplify the sprawling business, selling smaller assets.

The settlements are “good news for Glencore, but there are still excesses on the stock,” said Liberum analyst Ben Davis. These include the company’s step-by-step decision to wind down its hugely profitable coal division, Davis said.

Write to Dave Michaels at [email protected] and Alistair MacDonald at [email protected]

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