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Glencore antes up US$1.1 billion for bribery and market manipulation schemes

"Bribery," "corporate greed" built into the corporate culture, say U.S. investigators
Nickel rim Glencore
Glencore's Nickel Rim mine in Sudbury (Company photo)

Glencore International AG and Glencore Ltd, a Swiss-headquartered international miner and commodities trader, pleaded guilty this week to charges of bribing foreign officials and engaging in an oil market manipulation scheme.

As a result, Glencore has agreed to pay more than US$1.1 billion in criminal fines and forfeiture of all of its estimated profits.

The guilty pleas are part of a coordinated resolution with criminal and civilian authorities in the U.S., the United Kingdom and Brazil. It’s the culmination of a global, five-year investigation involving the U.S. Department of Justice (DOJ), FBI, U.S. Postal Inspection Service, the U.S. Attorney Office for the Southern District of New York and Connecticut in coordination with the United Kingdom’s Serious Fraud Office and the Brazilian Public Prosecutor’s Office.

The charges filed by the DOJ arise out of a decade-long scheme by Glencore and its subsidiaries to make, and conceal, payments to foreign officials in multiple countries.

The DOJ said Glencore entered a guilty plea for its conduct in bribing officials in Nigeria, Cameroon, Ivory Coast, Equatorial Guinea, Brazil, Venezuela and the Democratic Republic of Congo. Glencore has agreed to pay approximately $700 million in penalties.

Separately, Glencore Ltd., its U.S. commodities trade arm, admitted to engaging in a scheme to manipulate oil prices at two major U.S. ports over the course of eight years. The company has agreed to pay $485 million in penalties.

A further penalty to the company will likely be assessed next month following bribery charges brought against Glencore Energy UK by the UK Serious Fraud Office. The company has pleaded guilty to those charges. A sentencing hearing is scheduled for June 21.

Glencore is a multinational natural resources company employing 135,000 employees in more than 35 countries. In Canada, its assets include the Sudbury Integrated Nickel Complex, the Kidd base metal mine in Timmins, the Raglan and Matagami base metals mines in northern Quebec, General Smelting Company of Canada in Lachine, Que., and the Sukunka open-pit coal mine project in British Columbia.

“Corporate greed motivated this pervasive misconduct,” the DOJ’s assistant attorney, General Kenneth Polite, said during the news conference. “Glencore engaged in these crimes to make hundreds of millions of dollars.”

He explained Glencore bribed officials for its own competitive advantages across the globe, and its U.S. traders manipulated oil benchmarks to set prices for oil at two U.S. ports to make the company’s contracts more profitable.

Polite said Glencore has agreed to pay twice its estimated profits for these crimes and is “committed to cleaning up its corporate culture that enabled widespread criminality.”

In addition, the DOJ has secured guilty pleas from two former Glencore traders for their involvement in this conduct. DOJ officials would not comment if further charges will be laid against other Glencore executives as part of the ongoing investigation.

According to the DOJ, sentencing in the market manipulation case is set for June 24. A control date for sentencing in the bribery case is slated for Oct. 3.

“Glencore made hundreds of millions of dollars in profits from these crimes including $272 million from the foreign bribery scheme and $144 million from the commodity price manipulation scheme,” added DOJ Attorney General Merrick Garland.

“And these crimes exacted great cost across the globe perpetuating trans-national corruption and manipulating oil prices in two of the largest fuel markets in America.”

In a statement, Glencore chair Kalidas Madhavpeddi vows the company will clean up its act. “Glencore today is not the company it was when the unacceptable practices behind this misconduct occurred. The board and the management team are committed to operating a company that creates value for all stakeholders by operating transparently under a well-defined set of values, with openness and integrity at the forefront.”

Glencore CEO Gary Nagle acknowledged the misconduct identified with the investigations and pledged their cooperation with authorities. “This type of behaviour has no place in Glencore, and the board, management team and I are very clear about the culture that we want and our commitment to be a responsible and ethical operator wherever we work. We have taken significant action towards building and implementing a world-class Ethics and Compliance Programme to ensure that our core controls are entrenched and effective in every corner of our business.”

The Department of Justice is also imposing two independent compliance monitors on Glencore, both in the U.S. to ensure that that’s the case. These monitors are put in place by the DOJ when companies haven’t devoted the appropriate resources to put their own internal corporate monitors in place to detect potential corporate misconduct. The monitors will report their findings back to the DOJ.

Damian Williams, the U.S. attorney for the southern District of New York, described the scope of Glencore’s bribery scheme as “staggering.”

He said Glencore “cheated the market” for more than a decade to gain a competitive edge, paying more than $100 million in bribes to foreign government officials in a scheme that spanned the globe.

Bribes were paid to secure oil contracts, to avoid government audits, to judges “to make lawsuits disappear” as part of a global money-making scheme to make hundreds of millions of dollars with the approval and encouragement of top executives.

Williams said Glencore tried to cover up the bribery scheme with code words and bribes paid through third-party consultants.

“Bribery was built into the corporate culture,” said Williams, with the “tone” from upper management being “whatever it takes.”

Brian Turner, the FBI's associate deputy director, said these results send a message that even “the largest, most well-known and successful international companies will be held accountable for their corrupt and illegal behaviour.”

Vanessa Roberts Avery, U.S. attorney for the District of Connecticut, said Glencore’s market prices manipulation threatened not only financial harm but undermined participants' faith in the fair and efficient function of the commodities market. She said a significant component of Glencore’s criminal conduct took place at the company’s Stamford office in her state.

“The deceptive and corrupt conduct was deliberate, longstanding and egregious,” said Rostin Behnam, chairman of the Commodity Futures Trading Commission, involving individuals at all levels of Glencore’s oil trading group, including senior leadership, to undermine the pricing mechanisms upon trillions of dollars in financial derivative contracts are based.

Behnam emphasized Glencore is one of the world’s largest commodity trading firms and a major participant in world oil markets.

Their conduct to manipulate price benchmarks for multiple fuel oil products was intended to benefit Glencore’s position and boost profits to more than $320 million. Market manipulation, he said, drives up the cost people pay at the pump or heat their homes.

Craig Goldberg, deputy chief of the U.S. Postal Inspection Service, commented that fair and honest trade is “the bedrock of American commerce,” adding it’s an insult to shared traditions and values when individuals or corporations use power, wealth and influence “to stack the deck unfairly in their own favour.

Manipulating the price of essential commodities for personal gain is not only illegal, he added, but it undermines the integrity of international commerce and erodes public confidence in the supply and demand economy.

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