Trouble in Paradise Dan Gertler, Glencore, the DRC and Secret Loans

Israeli billionaire Dan Gertler

Dear Reader:

The Paradise Papers have brought us a wealth of information on some of our most reprehensible of “philanthropic” figures, not the least of which is Dan Gertler. As an ode to Dan, we decided that we would publish his story as the first of the Paradise Papers publications.

It is an remains our position that Gertler  pilfered (raped was the word we initially wanted to use) an entire country out of mining rights to the detriment of the citizens of that country. It is and remains our position that his dealings with high-powered players in the Congo lead to the death of one such player (Katumba) and to the slaughter of people in the region.  

Revealed: Glencore’s secret loan to secure DRC mining rights

https://www.theguardian.com/business/2017/nov/05/revealed-glencore-secret-loan-drc-mining-rights-paradise-papers

The world’s largest mining company, Glencore, secretly loaned tens of millions of dollars to an Israeli billionaire after it enlisted him to secure a controversial mining agreement in the Democratic Republic of the Congo, the Paradise Papers reveal.

The documents show in forensic detail how the mining magnate Dan Gertler held Glencore’s imprimatur as key negotiator with DRC authorities.

The Paradise Papers, a leaked cache of documents including more than 6m from within Appleby, one of the world’s leading and most secretive offshore law firms, lay bare the arcane multi-jurisdictional dealings of Glencore, a scandal-plagued Swiss multinational with mining interests across the globe, but particularly in Africa.

The documents confirm that in 2009, Glencore loaned Gertler $45m with the caveat that it would be repayable if agreement with DRC authorities was not reached to secure a mining contract for a company linked to Glencore.

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He is also alleged to be the unnamed “DRC Partner” cited in a 2016 US Department of Justice deferred prosecution agreement who, along with others, paid more than $100m in bribes over a decade to DRC government officials “to obtain special access to and preferential prices for opportunities” in the country’s mining sector for a US hedge fund.

 

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The Paradise Papers confirm that several times over 2008 and 2009, Gertler was called in to negotiate with DRC authorities over the struggling Katanga copper mine in the south-east of the country, which was mired in stalled talks to secure a joint-venture agreement with DRC’s state-run miner Gécamines.

In 2009, Glencore, through a loan offer, took effective control of Katanga, but also kept Gertler’s interest in the company by secretly loaning his company Lora Enterprises $45m in pledged shares for him to take part in the loan. Gertler, known for his close relationship with DRC’s president and key adviser, was also tasked with securing the mining agreement.

“Glencore shall use its vote at the board of Katanga to have Dan Gertler exclusively mandated to assist Katanga in finalising the terms of the joint venture agreement,” the finance document shows.

But the Paradise Papers also reveal that the terms of the loan meant it could be recalled if the mining agreement was not secured. The term sheet states that it will be “immediately repayable on demand” if the agreement “is not finalised within three months”.

 

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Glencore, and its forerunner company, have been accused of sanctions-busting in Saddam Hussein’s Iraq, apartheid South Africa and Iran. In 2004, Glencore was cited by the CIA as having paid $3.2m in illegal kickbacks in violation of sanctions to Iraq’s state-run oil monopoly. It has also been accused of environmental pollution, poisoning rivers, and allowing child labour in its African mines. Glencore denies the allegations.

In February, Glencore bought Gertler out of their shared assets in DRC for $534m, a move described by analysts as an attempt by the company to disassociate itself from Gertler.

DRC is ranked by the UN as one of the least developed countries and has been blighted by near-constant civil war for decades. The massive landmass, as large as western Europe, is rich in mineral resources, making it a target for foreign powers and heavily armed rebel groups seeking to control lucrative assets.

The country remains mired in turmoil. Kabila, who took over the role from his father, Laurent-Désiré Kabila, in 2001 after he was assassinated by his bodyguards, refused to hold constitutionally mandated elections last year.

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Dan Gertler: Glencore, Katanga Mining and Ellesmere Global Limited (BVI) – Trust for Gertler’s Family (2012)

To read this article in its entirety: http://foreignpolicy.com/2012/04/23/glencore-what-the-documents-tell-us/

Glencore: What the Documents Tell Us

“Ken Silverstein’s riveting investigation of Glencore, the “biggest company you never heard of.” Below are some of the documents he uncovered in his year of reporting on the hyper-secret, shady global commodities giant.”

It is big, very big. The 1,637-page initial public offering (IPO) prospectus Glencore released last year revealed just how vast its reach is: The company controls more than half the international tradable market in zinc and copper and about a third of the world’s seaborne coal; is one of the world’s largest grain exporters, with about 9 percent of the global market; and handles 3 percent of daily global oil consumption. All of this, the prospectus says, helped the firm post revenues of $186 billion in 2011. Click here to see the prospectus document.

It is not afraid of operating in high-risk “frontier” regions. In a report on the IPO, Deutsche Bank says the company “benefits directly from the volatility” in global commodity prices — especially in poor countries. Consider what the bank identifies as Glencore’s “key drivers” of growth: copper in the Democratic Republic of the Congo (DRC), coal in Colombia, oil and natural gas in Equatorial Guinea, and gold in Kazakhstan. Deutsche Bank delicately calls these places “frontier regions” or “challenging political jurisdictions” — put simply, they all offer a dangerous mix of extraordinary natural wealth and various degrees of instability. (See page 12.)

It is well-connected in failed states. Glencore has managed to do business in the DRC, the poster child of the resource-cursed failed state, with the help of Dan Gertler, a diamond businessman from Israel who is known for his intimate ties to President Joseph Kabila. (He even reportedly has lent Kabila his private jet.) Glencore and Gertler are, through subsidiaries, shareholders in Katanga Mining. In 2009, Glencore sold stock in Katanga at roughly 60 percent of its market value to Ellesmere Global Limited, a British Virgin Islands firm whose “ultimate owner is a trust for the benefit of the family members of Dan Gertler,” according to Canadian insider-trading records. Ellesmere quickly sold the stock back to Glencore at close to full market price, netting a profit of about $26 million.

It pays associates in unusual deals. In another example, detailed in this March 2011 contract, Samref Congo Sprl, a subsidiary 50 percent owned by Glencore, waived its rights of first refusal to acquire an additional stake in Mutanda Mining, a copper and cobalt producer, from Gecamines, Congo’s state-owned mining company. Samref instead recommended that the shares be sold to Rowny Assets Limited, one of the offshore firms owned by Gertler’s family trust. (See clauses C and D on pages 3-4 of the Gecamines contract.) It’s not clear why Samref would have passed on the Gecamines offer, because business records and documents suggest that Gertler’s trust picked up the Mutanda shares for a fraction of their value. Plus, the president and vice president of the Panama-registered Samref Overseas S.A., which owns Samref Congo Sprl, are both Glencore officials, and the vice president, Aristotelis Mistakidis, is even one of the handful of Glencore executives who became billionaires after the IPO. “We preferred to invest our money in developing Mutanda — building the mines and the plant,” Glencore spokesman Simon Buerk said in an e-mail explaining why the firm did not buy the shares.

It knows how to look the other way. In Congo-Brazzaville, Glencore bought oil from shell companies set up by the state oil company’s head, Denis Gokana (conveniently trained at its London office), according to a lawsuit by Kensington International, a Cayman Islands-based corporation. Glencore complied with court orders and was not charged, but the ruling judge wrote that he “did not consider that Glencore’s personnel … could not have appreciated that Sphynx Bermuda [another company named in the suit that had contracted with Glencore] was somehow linked to the Congo (although ignorant of the exact nature of the link) and that payment would ultimately go to the SNPC [National Petroleum Company of the Congo].)

It has a criminal past. Leveraging ties to dictators has always been at the heart of the business empire built by famous fugitive Marc Rich. Although Rich left the firm in the 1990s, Glencore profited handsomely by dealing with Saddam Hussein under the 1996-2003 U.N. Oil-for-Food Program, which allowed the Iraqi dictator to trade limited quantities of oil in exchange for humanitarian supplies. The U.N.’s Independent Inquiry Committee reported in 2005 that Hussein had awarded special “allocations” to companies and individuals who were friendly to the regime — including Pakistani businessman Murtaza Lakhani, a Glencore agent and conspicuous regime sycophant. The Iraq Survey Group, the U.S.-led fact-finding mission sent after the invasion, concluded that Glencore was “one of the most active purchasers” of oil under the Oil-for-Food Program and had paid $3,222,780 in “illegal surcharges.” Glencore was not charged in the scandal. It claimed it was unaware surcharges were being paid and that Lakhani’s high fees reflected the extra risk of doing business with Iraq, not slush money for bribes. (See page 144.)

It stashes money in tax havens. Another reason Glencore is so rich: Its effective global tax rate for 2010 was just 9.3 percent, in large part because nearly half its 46 subsidiaries are incorporated in “secrecy jurisdictions,” opaque financial havens like the Netherlands, according to a report by the NGO Publish What You Pay.

Its business partners have been investigated for bribery. Glencore’s shady dealings reach around the world. To take just one example, a 2008 U.S. Senate report revealed that an unidentified client of the LGT Group, a bank owned by Liechtenstein’s royal family, discussed setting up a Panamanian shell corporation and bogus foundation to pay bribes on Glencore’s behalf. “A small portion of the payments go … to the USA and Panama and may be classified as bribes,” reads an internal LGT memo. The client, a Glencore agent, had set up the account in 2002; prior to that, Glencore had made such payments directly, the memo says. An LGT executive refused to testify to the Senate about whether the bank had set up the Panamanian corporation or foundation as requested.

It has worked with Romanian criminals. In the mid-2000s, Glencore used an Israeli agent named Yoav Stern, who also represented the Romanian interests of Yakov Goldovsky, who had previously been convicted in Russia for asset-stripping state-run enterprises. Another Glencore business partner here was Romanian businessman Marian Iancu. Glencore sold him crude oil through an offshore company he controlled, Faber Invest & Trade, for processing at the Rafo refinery in Romania. Iancu was indicted for tax evasion and money laundering in 2006 and convicted in late 2011. A WikiLeaked U.S. State Department cable described Rafo as “embroiled in a web of corruption, money laundering, fraud and criminal charges” and included Faber among its “shady entities.”

It has done deals with oligarchs. Glencore funneled roughly $2 billion through an offshore company to the oligarch Mikhail Gutseriev, described in a WikiLeaked cable as “not known for his transparent corporate governance.” Reportedly booted by the Kremlin as chief of the state-owned oil firm Slavneft for resisting the company’s privatization, Gutseriev made a comeback with Glencore’s help. The cash infusion allowed Gutseriev to establish RussNeft, now one of Russia’s largest oil companies. Glencore owns nearly half the equity of four of RussNeft’s oil production subsidiaries and has sole rights to market its oil.

It has high-level political protection:  In Kazakhstan, Glencore owns slightly more than half of Kazzinc, a huge gold, lead, and zinc producer. Because corruption can make the country treacherous terrain for foreign investors, they often require a powerful local sponsor with close contacts to the resident, Nursultan Nazarbayev. Glencore’s is one of the best: Bulat Utemuratov, a major investor in Verny Capital, Kazzinc’s second-largest shareholder with a 42 percent stake. In March 2011, a group of opposition politicians issued a public letter complaining that Kazzinc and other former state firms had been privatized under murky conditions that allowed Utemuratov and other insiders to pick up vast stakes thanks to their ties to the ruling family. Glencore could be stripped of its assets in the country, said the letter, adding, “Upon any change of regime in Kazakhstan to a democratic one, any acquisition of any shares in Kazzinc … will be subject to review.”

Please read the article in its entirety from Foreign Policy: http://foreignpolicy.com/2012/04/23/glencore-what-the-documents-tell-us/

Repayments for a Loan? Required Disclosure – Dan Gertler and Glencor PLC

Bloomberg Markets March 2, 2017

https://www.bloomberg.com/news/articles/2017-03-03/glencore-paid-gertler-firm-100-million-congo-funds-group-says

Glencore Paid Gertler’s Firm $100 Million Congo Royalties

Glencore Plc paid more than $100 million previously owed to the Democratic Republic of Congo’s state mining business to a company controlled by billionaire investor Dan Gertler, according to advocacy group Global Witness.

It’s the first time the value of the payments made to Gertler have been made public, after London-based Global Witness reported in November that government-owned Gecamines signed over its royalties from the Kamoto copper project in southeastern Congo to Gertler in January 2015. Gertler’s privately held Fleurette Group said the payments were made on instruction from Gecamines to help repay a loan.

Glencore’s Katanga Mining Ltd. made the royalty and contractual bonus payments over the past four years to Africa Horizons Investments Ltd., a unit of Fleurette, Global Witness said in a report published Friday. Glencore confirmed the payments to Gertler’s company in a letter to the advocacy group. In previous filings, Katanga Mining either said the payments went to Gecamines or didn’t specify the recipients.

“The discrepancy between Katanga Mining’s filings and the real recipient of these huge payments runs the risk of misleading investors,” Pete Jones, a campaigner with Global Witness, said in the statement. “Investors need to ask Glencore why it felt comfortable making these payments and why it didn’t clearly disclose Gertler as the recipient.”

In Compliance

Glencore said in an emailed response to questions it complied with all disclosure obligations relating to Katanga Mining. Glencore made the payments to Gertler’s Africa Horizons at Gecamines’ request, it said.

Fleurette “always discloses anything that it is obligated to disclose,” it said in an emailed response to questions. Gecamines instructed Kamoto to make the payments to Africa Horizons in “partial-satisfaction” of a $196 million 2013 loan from Fleurette, it said.

Gecamines hasn’t yet responded to an emailed request for comment. It didn’t comment when the first Global Witness report was issued in November.

Katanga Mining paid royalties worth a combined $41.9 million to Africa Horizons in 2013 and 2014, according to Global Witness. In addition, Katanga Mining paid contractual bonus payments originally intended for Gecamines to Africa Horizons worth $60.5 million between 2013 and 2015, it said, citing company filings.

At the time of the payments, Gertler held a 10.3 percent stake in Toronto-listed Katanga Mining. Gecamines owns 25 percent of the Canadian company’s local operating unit, Kamoto Copper Co.

Gecamines Instructions

The transfers were made to Africa Horizons in accordance with payment instructions from Gecamines and a subsequent royalty agreement signed by Kamoto, Gecamines and Africa Horizons in 2015, Glencore said on Thursday.

The royalty payments underline Glencore’s successful but complicated relationship with Gertler. The pair began investing in mines in Congo almost a decade ago, acquiring stakes in Katanga Mining and combining assets to create Mutanda Mining, now the world’s biggest cobalt mine and a major copper producer. They announced the end of their partnership last month, when the commodities trader agreed to buy Gertler’s stakes in both projects for a combined $960 million. The deal came four months after Glencore said it was reviewingbribery allegations by U.S. authorities said to implicate the billionaire. Gertler denies any wrongdoing and hasn’t been charged.

Legacy agreements, including the Kamoto royalty arrangement, mean Gertler will continue to earn millions of dollars from the Glencore mines despite exiting the projects.

Underlying Basis

The Swiss commodities trader in November said it was satisfied there was an underlying basis for the assignment of the Kamoto revenue by Gecamines to Gertler, but has disclosed no further information on the particulars of the deal.

Africa Horizons bought the royalty-revenue stream from Gecamines, Fleurette said at the time, but declined to comment on whether it was linked to the earlier loan and made no mention of the contractual bonus payments that it has also received.

Gecamines has faced criticism in the past five years from the International Monetary Fund and advocacy groups including Global Witness for selling assets in non-transparent procedures.

TO READ THE REMAINDER OF THE ARTICLE IN ITS ENTIRETY CLICK, HERE.