US$1.5 billion is a lot of money by any measure. However, the reality is that Glencore is gaining so much in this climate of metal shortages and high prices, that they probably won’t have a hard time accepting the fine. So when the news from the metals market broke their massive three-country fine, there was not much reaction. But as we will see, the money may not be the real concern.
Glencore is now a FTSE 100 company, meaning it is much more scrutinized by the public than when it was a freewheeling private trader. Of course, this period is also where much of the culture that led to their current fall from grace evolved. Even so, the stock price was slightly hit by the news, but it is still up substantially over the month. What may be more difficult for Glencore to digest is the damage that the joint rebuke of the US, Brazil and the UK will have on their reputation.
A host of accusations
According to a report in the Financial Times, the current president of Glencore, Kalidas Madhavpeddi, does not take the information on the ground. “Glencore today is no longer the company it was when the unacceptable practices behind this misconduct occurred,” he said.
So what exactly were these “unacceptable practices”?
Investigations began in 2018 and ’19. The company has since pleaded guilty to several counts of bribery and market manipulation. This included violating money laundering laws and the US Foreign Corrupt Practices Act in Nigeria, the Democratic Republic of Congo and Venezuela. They have since agreed to pay fines of $700 million for corruption. To resolve the market manipulation investigations, the company will pay $485 million.
Meanwhile, in the UK, a Serious Fraud Office prosecution accused the company of paying bribes of €10.5 million to influence officials from the National Hydrocarbons Company and the National Refining Company. The aim, according to the UK, was to benefit Glencore’s operations in Cameroon. The company is also accused of bribing agents to “help them obtain shipments of crude oil or to obtain an unduly advantageous price for these shipments”.
Fines are yet to be set for these latest cases, but are included in the estimated total of $1.5 billion.
Not exactly “victimless crimes”
Many of us have read tales of how trading companies and their “filibuster ways” were back then. In fact, like Robin Hood, some of us may have some admiration for their boldness. However, it is important to remember that these were not victimless crimes. In many cases, payments have been made to corrupt regimes and individuals. This influx of cases has only tightened the grip of despotic governments on their countries.
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In February, the Guardian reported that Glencore had set aside $1.5 billion to cover potential fines and costs related to bribery and corruption investigations in the UK, US and Brazil. While the settlement is significant, it remains less than the $4 billion the company said it would return to shareholders after record profits.
Whatever happens in the meantime, it won’t be the end of Glencore’s bad press. Dutch and Swiss authorities are reportedly investigating suspected wrongdoing. Some of this is thought to be related to operations in the Democratic Republic of Congo, where Glencore is a major player in cobalt and copper mining.
Nothing new in the metal market news
In fairness, Glencore is no exception to such shenanigans. Although this article has no direct evidence to offer, it is likely that all major trading houses engage in such practices from time to time. In many cases, this was the only way to compete with each other for resources and cargo.
Robin Hood stole from the rich to give to the poor. However, in the case of commercial companies, they kept it to themselves. Unsurprisingly, there are now calls for senior executives retired from the time these bribes were paid to be held accountable. That said, we recommend that you don’t hold your breath.
If you are the type who likes to follow such unscrupulous events, we recommend that you read The world for sale by Javier Blas. If you lived through those years when Glencore stirred the global financial pot, you’ll appreciate it even more.
By AG Metal Miner
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