19 05 14 GW- Glencore pumped president’s friend with cash as it took over prize Congo mine
London-listed company, which holds its AGM tomorrow, funnelled the cash to Dan
Gertler, a controversial billionaire linked to a string of mining scandals. It
did so through complex transactions involving secretive offshore firms
registered in the British Virgin Islands. In all, Glencore advanced Gertler’s
offshore companies more than half a billion dollars and allowed him to make at
least $67 million in risk-free profit, our new research
shows.
Global
Witness’s revelations, detailed in its report
“Glencore and the Gatekeeper”,
come as Gertler’s deals attract growing scrutiny.
Shares
in New York-based hedge fund company Och-Ziff Capital Management Group crashed
by as much as 11 per cent on 28 April after its backing of some of
Gertler’s deals in Congo was
reported by the Wall Street Journal. US authorities have launched a corruption
investigation into
Och-Ziff’s investments in Africa. This investigation is looking into the Congo
deals, according to a new class action
suit against
the firm.
Last
year the UK’s Serious Fraud Office announced a criminal investigation into the
Eurasian Natural Resources Corporation, including at least one of its deals with
Gertler. Despite this, both Glencore and Gertler deny any corruption risk and
insist their relationship is problem-free
“Glencore
appears to have knowingly entered loss-making deals with the president’s friend,
a man who is central to all its investments in Congo,” said Leigh Baldwin of
Global Witness. “The corruption risks here are obvious. Glencore should now face
up to them and commission an independent and detailed investigation into its
Congo deals.”
Glencore
said in an e-mail to Global Witness that all its transactions with Gertler’s
companies have been “conducted on arm’s length terms” and that he was not given
preferential treatment over other co-investors. “These
transactions were entirely proper,” it added.
Gertler’s
spokesman, the UK’s Lord Mancroft, said that any suggestion “that Glencore
offered Mr Gertler preferential treatment is wholly misconceived”. He said
“there are legitimate commercial reasons for every transaction we are involved
in”.
Our
latest analysis examines three transactions, each designed in a way that
concealed cash flows to Gertler. In one example, Glencore sold him shares at
less than half the market rate only to buy them back a few months later at full
price.
Last
year, Kofi Annan’s Africa Progress Panel
estimated that
just five of Gertler’s deals lost the Congolese state at least $1.4 billion –
twice Congo’s annual spending on health and education combined. Global Witness
has previously reported on “potentially corrupt”
transactions involving
Gertler and Glencore. Our new report heightens concerns over the
Glencore-Gertler relationship.
Glencore’s
copper and cobalt mines are key to Congo’s future growth but corruption is rife
in the country. There are few mining assets as coveted in the country as those
held by Katanga Mining, the Toronto-listed company at the centre of the
transactions detailed in our new report.
Canadian
regulators should examine the deals to ensure stock market rules were not abused
by the way in which Glencore and Gertler took over Katanga Mining. This should
include examining the loopholes that allowed Glencore to avoid takeover
regulations and favour one shareholder above all others.
Global
Witness has been calling on Glencore to commission an investigation into its
Congo deals since mid-2012, meeting repeated refusals. At tomorrow’s annual
general meeting, investors should ask the company:
- why
it continues to work hand in glove with a businessman whose dealings have
attracted the attention of law enforcement bodies in both the United Kingdom and
United States; - why
it was prepared to enter loss-making deals with him; - when
it is going to commission an independent review into the corruption risk of its
Congo deals.
Contact:
Daniel
Balint-Kurti , dbalint-kurti@globalwitness.org;
+44 207 492 5872; +44 7912 517 146
Leigh
Baldwin, lbaldwin@globalwitness.org; +44 207
492 5889; +44 7715 068 300
Notes
to editors:
A
14 May response from Glencore to Global Witness’s most recent questions can be
found here: http://bit.ly/1gaBjMv.
A
response from Lord Mancroft, on behalf of Dan Gertler’s holding company
Fleurette, can be found here: http://bit.ly/1gaBqrx.
Glencore and the
Gatekeeper (PDF)