US probes Glencore’s role in possible corruption
Print Edition
US authorities have demanded the US arm of Glencore Plc hand over documents relating to its business in Nigeria, the Democratic Republic of Congo and Venezuela, sending shares in the parent company down more than 10 percent.
The Swiss-based commodities trader and miner received a subpoena from the US Department of Justice requesting documents and records on compliance with the Foreign Corrupt Practices Act and US money-laundering statutes.
Shares in Glencore, a major exporter of Nigerian and Venezuelan crude oil, fell as much as 13 percent, their biggest one-day fall in more than two years.
The documents requested from subsidiary Glencore Ltd relate to the group’s business in the three countries from 2007 to present, Glencore said, adding it was reviewing the subpoena.
The US Foreign Corrupt Practices Act makes it a crime for companies to bribe overseas officials to win business.
Analysts at Barclays and Credit Suisse viewed the share price drop as steeper than warranted.
“From our perspective, while it is clearly a risk factor, we stress that these types of requests are more common than perhaps the aggressive drop in the Glencore share price today suggests,” a note from Credit Suisse said.
Jefferies lowered its target price for Glencore but maintained its buy rating.
“The news today regarding a subpoena from the US increases the geopolitical overhang on Glencore shares, even if there are no charges against the company in the end,” analysts at the financial services company wrote.
Glencore accounts for more than a quarter of the world’s cobalt output, most of it from Congo, which itself is the source of around 60 percent of global supplies.
Congo accounts for about 25 percent of Glencore’s net present value, Jefferies said, while analysts said Venezuela’s contribution to the bottom line was smaller.
Washington slapped sanctions on 13 “human rights abusers and corrupt actors” in December last year, including Israeli billionaire Dan Gertler, who was Glencore’s former partner in the DRC and is a close friend of Congo’s president.
Glencore said last month that it had agreed to pay Gertler royalties it still owed in euros instead of US dollars after litigation threats.
In May, Bloomberg News reported that Britain’s Serious Fraud Office was preparing to open a formal investigation into Glencore’s activities in the DRC.
Separately, the US Department of Justice has been investigating suspected bribery plots involving payments to Venezuela’s state oil firm PDVSA and charged five individuals last year.
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