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.