Swiss mining giant Glencore GLNCY -0.60% PLC provided nearly $1 billion in loans and advances to companies associated with an Israeli businessman accused of having corrupt ties to government officials in the Democratic Republic of Congo, according to documents reviewed by The Wall Street Journal.
The loans, made over a roughly 10-year period starting in 2007, were designed in part to help finance investments by the businessman, Dan Gertler, in copper-mining operations in Congo alongside Glencore, the documents show.
The amount of the loans—more than previously reported—highlights the financial ties between Glencore and Mr. Gertler during their decadelong partnership in Congo. The relationship has been a focus of U.S. and Canadian authorities, who have been investigating the company’s Congo operations and ties to Mr. Gertler.
Glencore, the globe-spanning mining behemoth and trading house run by Chief Executive Ivan Glasenberg, for years has pushed back against complaints about its ties to Mr. Gertler. Mr. Gertler and his main company in Congo, Fleurette Group, have denied wrongdoing.
Analysts say mounting concerns about Glencore’s Congo operations have contributed to a decline in the Swiss company’s share price.
The details about the loans are contained in the Paradise Papers, a trove of documents from a Bermudan law firm obtained by the International Consortium of Investigative Journalists and the German newspaper Süddeutsche Zeitung, and shared with The Wall Street Journal. The papers first surfaced in late 2017.
Glencore has disclosed some of the lending to Mr. Gertler in broad strokes. A 2017 deal to buy out Mr. Gertler’s stakes in two Congo mines, for instance, folded in $556 million in debt—including $120 million in interest—that Mr. Gertler owed Glencore, the company said at the time. The cash payment in the deal was about $534 million.
The documents, though, detail a series of specific transactions in which Glencore helped to finance Mr. Gertler’s business interests in Congo. Glencore’s chief financial officer frequently signed off on documents associated with the loans.
The overall value of the loans and many of their details haven’t previously been reported.
A spokesman for Glencore declined to comment on the specifics of the loan agreements. In response to a 2014 report by London-based corruption watchdog Global Witness about Glencore’s mining deals in Congo with Mr. Gertler, Glencore said all transactions with the Israeli businessman’s companies “have been conducted on arm’s-length terms, and all public disclosure requirements applicable to us have been complied with.”
A spokesman for Fleurette Group said, “Loans made to Fleurette and its related companies were negotiated on arms-length commercial terms.” Any implication that the loans were improper is wrong, the spokesman said. “Fleurette has operated transparently and in line with all applicable laws during its interactions with Glencore,” he said, adding that all loans were used for legitimate purposes and were repaid.
Documents reviewed by the Journal show that in 2011 a company controlled by Mr. Gertler owed $300 million to a Bermuda affiliate of Glencore, Limajo International Inc., a previously undisclosed debt.
By the end of 2014, Mr. Gertler’s company owed Limajo $510 million, the documents show.
Glencore’s ties to Mr. Gertler date to the mid-2000s, when both invested in Nikanor PLC, a London-listed Congolese copper operator. In 2007, Glencore lent about $250 million to a company controlled by Mr. Gertler, and that company used the funds to purchase a stake in Nikanor, according to the documents.
Mr. Gertler later used about $61 million in Glencore funds to amass shares in another Congo mine operator, Katanga Mining Ltd. , after it merged with Nikanor, the documents show. Glencore invested in Katanga alongside Mr. Gertler and eventually came to control it.
In total, Glencore provided nearly $900 million in loans and advances to Mr. Gertler’s companies, according to the documents. Some of that amount likely included accrued interest on some of the loans, the documents show.
Glencore’s Katanga Mining, in addition, made about $80 million in advances to a company controlled by Mr. Gertler from royalties he was entitled to receive, according to Katanga’s public filings. Glencore purchased Mr. Gertler’s stake in Katanga in 2017.
The U.S. Treasury Department in December 2017 sanctioned Mr. Gertler, accusing him of trading on a friendship with Congo President Joseph Kabila to amass a fortune through “opaque and corrupt” deals on behalf of multinational companies seeking to do business in Congo. Mr. Gertler has declined to comment on the specifics of the allegations.
Last month, Canada’s main stock-market regulator said Katanga Mining hid from investors the risks associated with its reliance on Mr. Gertler. The Ontario Securities Commission said Katanga, which trades in Toronto, paid associates of Mr. Gertler “to maintain relations” with the Congolese government.
by Greg Klein | December 28, 2018
Yet another postponement to already overdue elections can only aggravate the Democratic Republic of Congo’s humanitarian plight. To Westerners remote from danger, the conflict also emphasizes the precarious nature of critical minerals necessary to modern society.
Rich in copper, gold and diamonds, as well as critical metals including cobalt, tin, tantalum and niobium, the country typically chooses governments through coup, rebellion or sham elections. Current president Joseph Kabila has ruled unconstitutionally since December 2016, when his mandate ended. He belatedly scheduled an election for December 23, then pushed it back a week, citing the destruction of ballots in a warehouse fire. On December 26 the government announced voting in the northeastern region would be postponed until March.
The additional delay sparked violent protests in a month that’s already experienced over a hundred deaths in ethnic warfare, as well as battles between police and protesters.
The government blamed its latest postponement on the northeastern region’s Ebola epidemic, the second-worst outbreak in history, the DRC’s tenth since 1976 and the country’s second this year. The previous epidemic, which killed dozens in the west-central province of Equateur, officially ended in July. Confidence in the excuse given for the latest voting delay wasn’t helped by the fact that the health ministry officially recognized the current epidemic on August 1.
Responsible for hundreds of deaths so far, this outbreak takes place amid violence targeting aid workers as well as the local population. Like other parts of the country, the region has dozens of military groups fighting government forces for control, and each other over ethnic rivalries and natural resources. The natural resources can be mined, often with forced labour, to fund more bloodshed.
In 2017 the DRC supplied about 58% of the world’s cobalt, 34.5% of tin and 28.5% of tantalum, the U.S. Geological Survey reports. Both a critical and conflict metal, DRC tantalum presents an especially troubling example for the often unknown origins of its supply. Neighbouring Rwanda, another strife-torn source of conflict minerals, supplied 30% of 2017 global tantalum supply.
Katanga’s failure to disclose the risks related to the nature and extent of its reliance on the Gertler Associates is unacceptable. Investors cannot be given anything short of accurate and truthful disclosure.—Jeff Kehoe,
director of enforcement,
Ontario Securities Commission
Some of the major companies operating in the DRC have failed to rise above the country’s endemic problems. In mid-December Glencore subsidiary Katanga Mining TSX:KAT and its officers agreed to pay the Ontario Securities Commission a settlement, penalties and costs totalling $36.25 million for a number of infractions between 2012 and 2017.
The OSC said Katanga seriously overstated copper production and inventories, and also failed to disclose the material risk of DRC corruption including “the nature and extent of Katanga’s reliance on individuals and entities associated with Dan Gertler, Gertler’s close relationship with Joseph Kabila, the president of the DRC, and allegations of Gertler’s possible involvement in corrupt activities in the DRC.”
A member of a prominent Israeli family of diamond merchants, Gertler has been said to act as a middleman between Kabila and mining companies operating in the DRC. Kabila and his family hold interests in over 80 companies and businesses, according to a 2017 study by New York University’s Congo Research Group and the Pulitzer Center on Crisis Reporting.
TORONTO — Katanga Mining Ltd. will pay $30 million to the Ontario Securities Commission for misleading statements, its failure to properly disclose risks around operating in the Democratic Republic of Congo and its reliance on associates of controversial billionaire businessman Dan Gertler.
A panel at the Ontario regulator approved the settlement Tuesday that will see Katanga, majority owned by Swiss mining giant Glencore Plc, pay $28.5 million plus $1.5 million for costs and submit to an independent consultant review of its reporting procedures.
“Violations of this magnitude seriously undermine investor confidence in the integrity and reliability of public companies’ disclosure and financial reporting,” said Jeff Kehoe, director of enforcement at the OSC, in a statement.
“Katanga’s failure to disclose the risks related to the nature and extent of its reliance on the Gertler Associates is unacceptable. Investors cannot be given anything short of accurate and truthful disclosure,” he said.
Current and former directors and officers of the company, which has copper and cobalt operations in the DRC, will also collectively pay millions of dollars more in penalties and be banned from service as officers of public companies for between two and six years for allowing the conduct and for acting in a manner contrary to the public interest.
Aristotelis Mistakidis, a Katanga director who was also ran Glencore’s copper department until the parent company publicized the OSC investigation last November, will pay the highest individual penalty at $2.5 million. Tim Henderson, Liam Gallagher, Jeffrey Best, Jacques Lubbe, and Matthew Colwill will pay amounts ranging between $400,000 and $1 million.
Johnny Blizzard, who has served as CEO of Katanga since 2015, has agreed to resign from the post as well as pay $450,000 and not serve as an officer for two years.
In the settlement, the company agreed it overstated copper stores and production and misstated its financial position and the results of its operations. It also failed to maintain adequate disclosure controls and failed to disclose material weaknesses in internal controls between 2012 and 2017.
Katanga also agreed that it failed to describe the heightened public sector corruption risk in the Democratic Republic of the Congo and the risks associated with its reliance on associates of Israeli billionaire Dan Gertler, who had close connections with the country’s regime.
Gertler was sanctioned by the U.S. Treasury Department last year after it said he built a fortune on “opaque and corrupt mining and oil deals” in the country and used his close relation with DRC President Joseph Kabila to act as a middleman for mining assets in the country.
Katanga paid US$146 million in royalties and other payments to Gertler associates in recent years, the OSC said.
Human rights group Global Witness, which released the results of its own investigation into Katanga in late 2016, said the settlement confirmed its concerns about the company’s dealings.
“The details provided by Canadian authorities vindicate our concerns that Glencore’s Katanga Mining had failed to comply with rules by not disclosing that it was paying millions to Gertler, a known corruption risk,” Peter Jones, campaign leader at Global Witness, said in a statement
He said the penalties amount to a “slap on the wrist” since they are dwarfed by the royalties paid.
“If there is to be real change in the way that Glencore and its subsidiaries operate, top management must be held accountable for the way these companies handle risk,” said Jones.
Glencore said in a statement that it has acted to implement structural and control changes since the investigation came to light.
“Glencore is disappointed by the conduct that has led to today’s settlement. Glencore has taken appropriate remedial actions in response to this conduct.”
LostMessiah – The Gertler, Fleurette, Katumba, Glencore…. Reported Long Ago
To our faithful readers and to the journalists and law enforcement who read our pages:
We uncovered the abuses portrayed long ago. For a look into our investigations into Dan Gertler, Fleurette, the death of Katumba, Glencore, the various violations and other unsavory practices, please go into our search bar and search the names. We reported about these issues nearly 2 years ago.
Regulator expected to allege Katanga Mining hid risks of doing business with Israeli diamond merchant closely linked to Congolese President Joseph Kabila
A Glencore GLNCY -3.44% PLC-controlled mining company and some of its current and former directors and executives have agreed to pay more than $22 million to settle Canadian allegations that they hid the risks of doing business with a controversial Israeli businessman closely linked to Congolese President Joseph Kabila, according to a person familiar with the matter.
The expected settlement between the Ontario Securities Commission, Canada’s biggest stock-market regulator, and Toronto-listed Katanga Mining Ltd. KAT -1.56% is related to the company’s business activities in Congo between 2014 and 2016, the person said.
The regulator is expected to name several of Katanga’s current and former executives and directors in the settlement and will focus, at least in part, on Katanga’s longstanding ties with Dan Gertler, the Israeli businessman who first invested in Katanga alongside Glencore in 2008, the person said.
The OSC is also expected to allege that Katanga lacked proper internal financial controls, leading it to overstate copper production and understate mining costs, potentially inflating the miner’s performance, according to the person familiar with the matter.
Glencore owns about 86% of Katanga. In 2017, Glencore purchased Mr. Gertler’s stakes in Katanga and another giant copper mine in Congo.
The settlement is expected to name Glencore’s former representatives on Katanga’s board, according to this person. Those individuals include Aristotelis Mistakidis, one of Glencore’s most senior executives and two other Glencore executives, Liam Gallagher and Tim Henderson. All three stepped down from the board in November 2017 after Glencore and Katanga confirmed the Canadian investigation. The probe was first reported by The Wall Street Journal.
Katanga and the named individuals have agreed to jointly pay a fine of more than 30 million Canadian dollars ($22 million) to settle the allegations, according to the person.
The people named in the OSC settlement will be banned for certain periods of time from acting as a director or officer of a publicly traded company listed in Ontario, the person said.
The settlement is expected to be announced as early as this week. A panel of the OSC must approve any settlement agreement at a public hearing for it to take effect.
It’s unclear whether Katanga and the individuals admit to wrongdoing in the settlement.
Katanga Chief Executive Johnny Blizzard has also agreed to resign as part of the settlement, the person said.
- Probe Into Glencore Copper Business Nears Settlement (Dec. 3)
- U.S. Probes Ties Between Glencore, Diamond Merchant Under Sanction (July 5)
- Glencore Shares Tumble After U.S. Subpoena (July 3)
- Glencore Upends Board of Congo Unit Amid Probe (Nov. 20, 2017)
- Glencore Under Probe Over Congo Payments (July 27, 2017)
Katanga’s settlement represents another reputational hit for Glencore and its operations in Africa. In July, the London-listed mining giant said it had received a subpoena from the U.S. Justice Department demanding records related to its compliance with American antibribery and money-laundering laws in Congo, Nigeria and Venezuela.
The Wall Street Journal reported that a focus of the probe is Glencore’s ties to Mr. Gertler.
Mr. Gertler in recent years has become a lightning rod for controversy. In 2016, he was a central figure in a $412 million settlement between the U.S. Justice Department and the Securities and Exchange Commission with New York hedge fund Och-Ziff Capital Management Group LLC. A businessman people familiar with the matter said is Mr. Gertler paid more than $100 million in bribes to Congolese government officials, including Mr. Kabila, to get beneficial terms for deals in the Central African country, the DOJ and SEC alleged.
A spokesman for Fleurette Group, Mr. Gertler’s main company in Congo, said it “has always acted appropriately and with integrity in the DRC. Nothing has ever been proven against the company or its executives in a court of law.”
A year ago the U.S. Treasury Department sanctioned Mr. Gertler, alleging he traded on a friendship with Mr. Kabila to amass a fortune through “opaque and corrupt” deals on behalf of multinational companies seeking to do business in Congo. Mr. Gertler has denied wrongdoing and has declined to comment on the Treasury allegations and Justice Department investigation.
The OSC is expected to allege that Katanga breached Canadian securities law by not disclosing the risks it faced by relying on Mr. Gertler to maintain relationships with Mr. Kabila, Congo’s president, according to the person familiar with the matter.
Israeli Diamond Billionaire Sanctioned By U.S. Anti-Corruption Law
WASHINGTON (JTA) — Dan Gertler, an Israeli with extensive investments in the Democratic Republic of the Congo, is among the first people targeted for sanctions under a new U.S. anti-international corruption law.
Dan Gertler is among “13 serious human rights abusers and corrupt actors,” the Treasury Department said in a release Thursday, who would be sanctioned under the Global Magnitsky Act passed in 2016. It is the first time the law is being applied.
Gertler “is an international businessman and billionaire who has amassed his fortune through hundreds of millions of dollars’ worth of opaque and corrupt mining and oil deals in the Democratic Republic of the Congo,” the release said. “Gertler has used his close friendship with DRC President Joseph Kabila to act as a middleman for mining asset sales in the DRC, requiring some multinational companies to go through Gertler to do business with the Congolese state.”
As a result, mining assets are consistently underpriced upon sale to Gertler or his fronts, and then resold at real value, Treasury said, with the resultant kickbacks to Gertler and Kabila costing the Congo upward of $1 billion.
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
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.
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.
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”.
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.
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.