Billions in Fines for Corruption, and Glencore Admits Guilt
For many years, top executives at Glencore had claimed that the company had done nothing wrong, and certainly nothing illegal. Long-term boss and major shareholder Ivan Glasenberg had also firmly rejected any criticism of his company. But now, the law enforcement authorities of the countries involved have exposed all this as blatant lie. This is how United States Attorney for the Southern District of New York, Damian Williams, puts it:
"The scope of this criminal bribery scheme is staggering. Glencore paid bribes to secure oil contracts. Glencore paid bribes to avoid government audits. Glencore bribed judges to make lawsuits disappear. At bottom, Glencore paid bribes to make money - hundreds of millions of dollars. And it did so with the approval, and even encouragement, of its top executives."
Corruption is not a trivial matter: it destroys trust in state institutions and causes severe suffering. Especially in the world's poorest countries, which is where Glencore prefers to carry out its activities.
More precisely, according to the US Department of Justice (DoJ), between 2007 and 2018 Glencore paid over $100 million to various middlemen, with full knowledge that a large part would end up being used for the bribery of foreign officials. According to the judicial documents, officials in Nigeria, Cameroon, Ivory Coast, Equatorial Guinea, Brazil, Venezuela, and the Democratic Republic of Congo were bribed. British proceedings also showed links to South Sudan. In total, Glencore's corrupt practices spanned over a decade and eight countries.
The payment of $52 million in bribes in Nigeria between 2007 and 2018 alone resulted in a profit of $124 million for the Swiss commodity trader. Apparently, the profits in Cameroon were even higher. No wonder that the accounting item for bribes in the 1990s was still called "useful expenses".
The US law enforcement authorities were able to rely on the confession of the former trader in charge of Glencore’s West Africa desk for the crude oil business. He admitted bribing foreign officials. In return for his collaboration, he received a lesser sentence and the prosecutors were able to rely on him as a key witness.
Lucrative market manipulation
The US Commodity Futures Trading Commission (CFTC) and the DoJ also concluded an investigation into oil price manipulation. According to the investigation, between 2011 and 2019 Glencore manipulated price assessments for oil products published by the information service S&P Global Platts. This involved Glencore employees submitting offers with the sole purpose of lowering the valuation, and thus the price of the oil products purchased by Glencore. In this competition law case too, the authorities were able to rely on the confessions of a former Glencore trader.
Crown v Glencore
Shortly after the US DoJ investigation, the UK’s Serious Fraud Office (SFO) also announced that Glencore pleads guilty to bribery charges. According to the anti-corruption agency, the company had paid bribes of over $28 million in order to obtain privileged access to crude oil – in Nigeria, Cameroon, Ivory Coast, Equatorial Guinea and South Sudan. On 21 June 2022, Glencore admitted all of the SFO's allegations. The final amount of the penalty they face will be decided at the beginning of November 2022.
High penalties and supervision abroad
In the US, Glencore has to pay more than a billion US dollars. And that's not all: by means of the so-called "Compliance Monitor", for three years, the DoJ will monitor the implementation of its requirements for Glencore's internal legal department and risk management. The DoJ usually entrusts this monitoring task to specialised law or consulting firms, which in turn report regularly to the US judicial authorities. This means that until 2025, external supervision of a Swiss commodity trading company will take place – something that Public Eye has been demanding for years, for the entire high-risk sector, with its "Rohma".
And in Switzerland?
As you will be aware, Glencore’s registered office is in Zug, where, at least in part, its senior management was approving the bribes. However, the judicial documents contain further references to Glencore’s home country. In addition to transfers from Swiss bank accounts, individual foreign officials also appear to have been bribed with cash. And according to the US investigators, Glencore employees ”withdrew” the money from a cash desk at Baar's headquarters until 2016!
Based on the revelations in the Paradise Papers, Public Eye called upon Swiss justice to take action against Glencore with the Federal Prosecutor's Office in December 2017. On this basis, the latter opened criminal proceedings against Glencore in June 2020. Why the Swiss prosecutors were not able to conclude their proceedings jointly with their foreign colleagues remains a mystery. Nonetheless, the US DoJ already promised Glencore a reduction in its fine of around §30 million if there is a conviction in Switzerland within a year.
Huge reputational risk for the Swiss commodity hub
The only solace for Glencore may be that the Federal Prosecutor's Office punished Geneva oil dealer Gunvor in 2019 for bribery in the Republic of Congo and the Ivory Coast. Since last year, Gunvor has been facing further convictions for alleged bribery in Ecuador. Vitol, also based in Geneva, agreed a penalty with the US judicial system in 2020 for its guilty conduct in the bribery of foreign public officials in Brazil, Ecuador and Mexico.
For Switzerland, all these proceedings and judgments for corruption in international commodity trade represent major reputational damage. Public Eye has long called for effective measures to mitigate the risks of illicit financial flows in this sector. It is imperative for Switzerland to introduce due diligence obligations, particularly with respect to transactions with state-owned enterprises and companies linked to politically exposed persons (PEPs). Furthermore, a supervisory authority is needed to monitor compliance with such due diligence obligations and, if necessary, take enforcement measures. As long ago as 2014, Public Eye envisaged such a Commodity Market Supervisory Authority in the form of its ‘Rohma’. Now it is up to the Federal Council and Parliament to finally fulfil their obligation to guarantee that Switzerland’s commodity trading hub can be ethical.