Glencore Faces Bribery Probe Over Congo Unit -- Update
21 November 2017 - 10:19AM
Dow Jones News
By Scott Patterson
LONDON -- Glencore PLC is reshuffling the board of one of its
giant African copper operations following an internal review that
the company said found weaknesses in its controls over financial
reporting.
The move comes amid an investigation by Canada's Ontario
Securities Commission, or OSC, the country's biggest regional
securities regulator, into the governance practices of the Glencore
copper subsidiary, Katanga Mining, which is based in the Democratic
Republic of Congo. Investigators are probing financial statements
and disclosures by Toronto-listed Katanga related to international
bribery and anticorruption laws, Glencore and Katanga Mining said
in separate statements disclosing the investigation on Monday.
Three Katanga directors, including Glencore's billionaire copper
chief, Aristotelis Mistakidis, are stepping down from its board
following an internal review that found "material weaknesses" in
the company's controls over financial reporting, Glencore said.
Glencore nominated three new directors to the board, including
its Chief Financial Officer Steven Kalmin. Katanga's CFO, Jacques
Lubbe, resigned, Katanga said. Glencore, in a separate statement
Monday, said it plans to implement "various structural and control
changes" across its copper department.
Monday's disclosures reveal a chaotic situation at the giant
Congolese copper mine, which Glencore first invested in 2008 as it
ramped up operations. Recurring spills, power outages and plant
modifications from 2010 to 2013 resulted in the inadvertent dumping
of a large amount of copper into a nearby waste dam.
Glencore suspended operations at Katanga in 2015 to revamp its
infrastructure and boost production.
The Wall Street Journal reported in July that Glencore is
subject to an investigation by Canada's OSC regarding more than
$100 million in payments Katanga Mining made to a company owned by
an Israeli businessman. An OSC spokeswoman confirmed that the
agency has an active investigation regarding Katanga Mining.
The OSC investigation stems from payments Katanga was expected
to make to Congo's state-run mining company, Gecamines, that were
instead sent to a Caymans Island company owned by the businessman,
Dan Gertler, the Journal reported. Glencore had acknowledged the
shift in payments and said it was done at the request of
Gecamines.
Mr. Gertler was a central figure in a $412 million settlement in
September 2016 between the U.S. Justice Department and the
Securities and Exchange Commission with New York hedge fund
Och-Ziff Capital Management Group LLC.
The Justice Department said Och-Ziff went into business with Mr.
Gertler despite a consultant's warnings that he used political
connections in Congo to benefit himself and his associates.
The Justice Department said a business associate of Och-Ziff's,
who people familiar with the matter said is Mr. Gertler, paid more
than $100 million in bribes to Congolese officials, though he
hasn't been charged.
A spokesman for Mr. Gertler's company, Fleurette, has denied
allegations of bribery. Daniel Och, chairman and chief executive of
Och Ziff, has said the firm's conduct scrutinized by the Justice
Department was "inconsistent with our core values."
Glencore in February purchased Mr. Gertler's stake in Katanga
Mining, as well as his stake in another jointly run Congo copper
mine, for nearly $1 billion including debt.
Write to Scott Patterson at scott.patterson@wsj.com
(END) Dow Jones Newswires
November 20, 2017 18:04 ET (23:04 GMT)
Copyright (c) 2017 Dow Jones & Company, Inc.
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