Glencore to plead guilty to bribery charges and pay $1.5bn penalty

Merrick Garland, US attorney-general, called it the US Department of Justice’s “largest criminal enforcement action to date for commodity price manipulation conspiracy in oil markets”. Keystone / Michael Reynolds

Swiss-based Glencore will plead guilty to multiple counts of bribery and market manipulation and pay penalties of up to $1.5 billion (CHF1.45 billion) following US, UK and Brazilian investigations that uncovered corruption at one of the world’s largest commodity traders.

The UK Serious Fraud Office (SFO) on Tuesday charged the group’s subsidiary Glencore Energy UK with seven cases of profit-driven bribery and corruption in connection to oil operations in Cameroon, Equatorial Guinea, Ivory Coast, Nigeria and South Sudan.

In a statement, the SFO said that its case was that “Glencore agents and employees paid bribes worth over $25 million for preferential access to oil, with approval by the company”.

In the US, Glencore pleaded guilty in two separate criminal cases and agreed to pay approximately $1.1 billion in criminal fines and forfeiture. One case involved what prosecutors described as a decade-long bribery scheme, and in the second, Glencore’s US commodities trading arm pleaded guilty to engaging in an eight-year scheme to manipulate US fuel oil price benchmarks.

Merrick Garland, US attorney-general, called it the US Department of Justice’s “largest criminal enforcement action to date for commodity price manipulation conspiracy in oil markets”.

Glencore said it would pay about $1.5 billion in overall penalties, including the $1.1 billion to US authorities, $40 million to Brazilian prosecutors and an amount due to the UK to be finalised at a sentencing hearing. The company made a $1.5 billion provision for the settlement in February, and said in an update on Tuesday that it does not expect the total fines to “differ materially” from what it has set aside.

The US Department of Justice will also install two independent compliance monitors at Glencore for three years to check its internal controls.

‘Dismal record’

Alexandra Gillies, adviser at the Natural Resource Governance Institute, said “commodity traders including Glencore have a dismal record when it comes to corruption, so it is good to see there are consequences”.

“Glencore’s financial performance won’t suffer much from this fine, especially given the current state of commodity prices. But it is large by anti-bribery standards and that sends an important signal to the industry.”

In 2018, the US Department of Justice launched a wide-ranging investigation and requested the company hand over records related to its compliance with the country’s money-laundering laws and the Foreign Corrupt Practices Act in Nigeria, the Democratic Republic of Congo and Venezuela.

The UK’s SFO followed suit in 2019 and opened an investigation into Glencore over “suspicions of bribery” that it codenamed Operation Azoth.

A barrister for Glencore on Tuesday indicated the company would plead guilty. It faces charges including paying bribes of €10.5 million (CHF10.8 million) to induce officials of companies Société Nationale des Hydrocarbures and the Société Nationale de Raffinage to advantage Glencore’s operations in Cameroon.

Representing the SFO, barrister Faras Baloch said the company had bribed agents to “assist them in obtaining crude oil cargoes or gain an undue favourable price for those cargos”.

Glencore is also charged with paying €4.7 million in bribes between July 2011 and April 2016 to influence officials to favour the company in oil transactions in Ivory Coast, as well as failing to prevent individuals connected to the company from bribing officials concerned with awarding crude oil cargoes in Equatorial Guinea.

Reputation for questionable activity

The investigations have cast a long shadow over the company and drawn scrutiny to the culture of one of the world’s largest commodity traders.

Long-serving chief executive Ivan Glasenberg retired last year, becoming the latest in a line of senior figures to depart the company, including the former head of its oil division, Alex Beard, who left in 2019.

Lisa Osofsky, director of the SFO, said: “This significant investigation, which the SFO has brought to court in less than three years, is the result of our expertise, our tenacity and the strength of our partnership with the US and other jurisdictions.”

The company, which shifts millions of tonnes of metals, minerals and oil across the globe, also faces probes by Swiss and Dutch authorities, the timing and result of which remain uncertain.

Last July, a former Glencore oil trader pleaded guilty in New York over his role in a scheme to bribe government officials in Nigeria in return for lucrative oil contracts.

The allegations in the original US DoJ investigation, which date as far back as 2007, occurred during Glasenberg’s 19-year reign at the top of the company.

Glasenberg and his top lieutenants took the company public in 2011 in what was then one of the largest-ever flotations in London. It partly used the funds to transform the company from a pure commodity trader into a mining company through a merger with Xstrata in 2013 and a series of acquisitions.

But the company has struggled to shake off a reputation for sometimes questionable activity that many investors saw as embedded in its DNA, stretching back to its time as a privately held trading house.

Analysts said resolution of the charges would be a step forward for new chief executive Gary Nagle, who took the helm of Glencore last year after more than two decades with the company.

Kalidas Madhavpeddi, chair of Glencore, said: “Glencore today is not the company it was when the unacceptable practices behind this misconduct occurred.”

Glencore’s shares have rallied this year close to the highest level since its initial public offering 11 years ago, boosted by a rally in oil and metals prices and strong trading results.

Copyright The Financial Times Limited 2022