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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Katanga Mutanda; Mining and Dan Gertler, Glencore Canada Probe

Glencore Payments Face Canada Probe — WSJ

LONDON — Glencore PLC is under investigation by Canadian regulators looking into more than $100 million in payments a subsidiary made to a company owned by an Israeli businessman who has been accused of bribing Democratic Republic of the Congo officials, said people familiar with the investigation.

The investigation stems from payments that a Canada-based copper-mining company controlled by Glencore and that operates in Congo was expected to make to Congo’s state-run mining company, Gecamines, but instead sent to a Caymans Island company owned by the Israeli businessman, Dan Gertler. Glencore has acknowledged the shift in payments and said it was done at the request of Gecamines.

Canada’s Ontario Securities Commission, the country’s biggest regional securities regulator, is investigating whether the Glencore subsidiary, Katanga Mining, violated rules requiring that companies disclose business done with their own investors, said the people familiar with the investigation. Katanga is listed in Toronto and Mr. Gertler’s company has invested in its business.

Glencore and Gecamines declined to comment. A spokesman for Mr. Gertler’s company said it disputed any allegations of bribery and follows all disclosure obligations.

A spokeswoman for the Ontario Securities Commission said the agency had a policy against commenting on the “existence, nature or status of any investigation.” Investigations by securities agencies don’t necessarily result in regulatory action.

The payments began in 2013, according to Global Witness, a nonprofit investigative group that works to publicize allegations of resources-industry corruption and brought the payments to light.

Both Gecamines and Mr. Gertler’s company, Fleurette Group, have for years been large investors in Katanga Mining’s business, according to Canadian public records. That could make them so-called related parties to Katanga, meaning that each has a significant stake in the company and therefore is potentially subject to disclosure requirements under Canada’s law, said experts on Canadian securities regulations.

Katanga had disclosed payments to Gecamines, which it described as a related party, in regulatory filings until 2014. Starting that year, Katanga disclosed no further payments to Gecamines, nor did it report the payments to Mr. Gertler’s company, according to a review of its filings by The Wall Street Journal.

Under a deal with the Congolese government, Gecamines is allocated a slice of annual sales from Katanga Mining subsidiary Kamoto Copper Co., known as KCC. But rather than send the royalties to Gecamines, KCC has been sending them to Mr. Gertler’s Cayman Islands-based company, Africa Horizons Investment Ltd., Glencore and Fleurette have said.

Glencore and Fleurette have said Gecamines wanted the money shifted to Mr. Gertler’s company to pay back a $196 million loan Fleurette made to Gecamines in 2013. The payments are ongoing, they said.

Glencore is the world’s third largest copper producer behind Chile’s state-owned copper mining company, Codelco, and Freeport-McMoRan Inc., according to CRU Group, a commodity research firm. Katanga ranks among Glencore’s largest copper operations, though work there has been suspended for the past 18 months as the company undertakes a $1 billion upgrade.

The probe represents a new risk posed by Glencore’s longtime relationship with Mr. Gertler, from whom the company has sought to distance itself in recent months.

Mr. Gertler was a central figure in a $412 million settlement in September 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 alleged in a criminal case that Och-Ziff, in pursuit of investment profit, 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 Mr. Gertler paid more than $100 million in bribes to Congolese officials, including President Joseph Kabila, in exchange for access to some of the nation’s best mineral assets. Mr. Gertler hasn’t been charged.

“We dispute any allegation of bribery” in Congo, a Fleurette spokesman said.

Congolese government officials haven’t responded to requests for comment about the allegations.

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.”

In response to the Justice Department findings, a Glencore spokesman said that the firm “takes ethics and compliance very seriously and is considering this information.”

Glencore and Mr. Gertler joined forces in Congo in 2007 when Glencore invested in a Congo-focused mining company called Nikanor PLC, partly owned by the Israeli businessman. Nikanor merged with Katanga a year later, forming one of Congo’s largest copper-mining operations.

Glencore in February purchased Mr. Gertler’s stake in Katanga Mining, as well has his stake in another jointly run Congo copper mine, Mutanda Mining, for nearly $1 billion, a move analysts said helped distance the company from Mr. Gertler.

The buyout, as well as rising copper and cobalt prices, have turbocharged Katanga Mining’s stock, which has surged nearly 500% in the past 12 months, according to FactSet.