Glencore’s murky deals in the DRC

© Per-Anders Pettersson/Getty
In December 2017, Public Eye filed a criminal complaint with the Office of the Attorney General of Switzerland on account of the activities carried out by Swiss commodities giant Glencore in the Democratic Republic of the Congo (DRC). We are calling on it to launch a legal investigation into numerous indications surrounding embezzlement around the awarding of licences for copper and cobalt mines, which the media and NGOs have long suspected took place.

This story is reminiscent of a Hollywood blockbuster: a diamond tycoon, who has connections with “the biggest company you never heard of” (Reuters), i.e. Glencore. For more than five years, the press and NGOs have been dissecting the murky deals involving the Zug-based giant and Dan Gertler in the DRC, a country that embodies the devastation caused by the resource curse. In November 2017, the Paradise Papers, published by the International Consortium of Investigative Journalists, shed light on new explosive elements regarding this risky partnership.

Dodgy partners

Here’s the story in a nutshell. In 2009, Glencore secured mining permits awarded by the Congolese government to extract copper and cobalt on very favourable terms. For this, the Zug-based company did not hesitate to partner with Dan Gertler, a businessman with a dodgy reputation. Glencore has repeatedly claimed to have conducted extensive due diligence before joining forces with Gertler. However, his bad reputation was already infamous back in 2007, when the mining giant entered into collaboration with him. Gertler’s close ties with President Kabila, – to whom he had allegedly delivered weapons in 2001 in exchange for a monopoly on the sale of DRC diamonds – and with second-in-command Augustin Katumba Mwanke had already been pinpointed by the UN and the Congolese parliament. In 2001, an expert report prepared for the Security Council even referred to Gertler’s transactions in the diamond industry as a “nightmare” for the DRC’s government.

Glencore's influence in the DRC
Glencore's influence in the DRC

Fresh revelations

The Paradise Papers have unveiled new elements showing Gertler’s key role in the multinational company’s operations in the DRC. In particular, through Katanga Mining, a company that Glencore was about to take over, the Zug-based giant issued a mandate to the Israeli businessman on several occasions between 2008 and 2009 for him to negotiate with the Congolese authorities. These decisions were taken in the presence of Aristotelis Mistakidis, Glencore’s “Mr. Copper.”

Following a USD 45 million loan that Glencore granted to Gertler, conditional upon the success of the negotiations, Katanga secured a substantial reduction in the signing bonus, or ‘pas de porte’ as is known in French, which went from USD 585 to USD 140 million. According to Resource Matters, an NGO, the Swiss firm allegedly paid Gécamines, the Congolese state company whose responsibility it is to award licenses, a sum that was four times lower than that of most of its competitors. A very bad deal for the DRC, as it reportedly lost the equivalent of one-tenth of its budget. This is a country where nearly 80% of the Congolese population lives on less than two dollars a day. Glencore and Gertler deny any wrongdoing.

When a business partner becomes a burden

The close ties between Glencore and Gertler remained until February 2017. However, the Swiss company eventually decided to distance itself from him, following a “deferred prosecution agreement” issued by a US court in September 2016. The reason was corruption in connection with investment fund Och-Ziff, which showed that more than USD 100 million in bribes had been paid to Congolese officials by an Israeli businessman, along with others, over the course of ten years. This businessman has been identified by several media as being Dan Gertler.

  • © Simon Dawson/Bloomberg/Getty Images
  • © Simon Dawson/Bloomberg/Getty Images
  • © Meinrad Schade
Dan Gertler on a tour of the Katanga Mining facilities, Glencore headquarters in Baar.

For Glencore, this saga becomes more and more unpleasant. Recently, the Canadian stock market regulator, where Katanga is listed, has taken an interest in it, too. The Ontario Securities Commission is now investigating whether the mining company has taken the appropriate measures to inform investors of the risks of corruption associated with its operations in the DRC. In the meantime, Aristotelis Mistakidis has resigned in November 2017 from Katanga’s board of directors. And it gets worse: in early July 2018, the US Department of Justice demanded that Glencore publish documents on its activities in the Democratic Republic of the Congo, Nigeria and Venezuela. Washington is investigating allegations of corruption and money laundering. The British anti-corruption authorities, the Serious Fraud Office, are - according to media reports - also planning to examine Glencore.

Swiss justice must take action

The Swiss authorities have long been aware of the murky deals between Glencore and Gertler, brought to the fore by British NGO Global Witness in 2012. When asked about this issue, the Federal Council said that it expected such companies to comply with “particularly stringent due diligence requirements.” It added that:

the potential risk to Switzerland's reputation depends on our country's efforts to combat this type of crime.

Yet neither the federal authorities nor the criminal prosecution authorities have, so far, showed an interest in this case.

Public Eye has called upon the Office of the Attorney General of Switzerland to open legal proceedings in order to investigate the issues surrounding the embezzlement in connection with the activities carried out by Glencore in one of the world’s poorest countries. It must determine whether, as part of operations that have proven to be very lucrative, Glencore may have actually failed to prevent acts from taking place which may be deemed unlawful. Public Eye will be closely monitoring the progress of this complaint.

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