Serving Northern St. Louis County, Minnesota

Justice Dept. launches investigation into Glencore

Seeking records in probe of alleged money laundering and corrupt practices by PolyMet’s primary financial backer

Marshall Helmberger
Posted 7/3/18

REGIONAL—The biggest shareholder in the planned PolyMet mining venture near Hoyt Lakes has taken a hit in international stock trading after revealing it was under investigation by the U.S. Justice …

This item is available in full to subscribers.

Please log in to continue

Log in

Justice Dept. launches investigation into Glencore

Seeking records in probe of alleged money laundering and corrupt practices by PolyMet’s primary financial backer

Posted

REGIONAL—The biggest shareholder in the planned PolyMet mining venture near Hoyt Lakes has taken a hit in international stock trading after revealing it was under investigation by the U.S. Justice Department for money laundering and corrupt practices.

Swiss-based Glencore made the revelation early Tuesday after U.S investigators subpoenaed records related to its African and South American mine holdings. The records requested date from 2007 to the present. Glencore’s stock price dropped as much as 13 percent in the immediate aftermath of the announcement, although it recovered some ground later in the day.

The company is reportedly being investigated for violations of the Foreign Corrupt Practices Act and U.S. laws prohibiting money laundering stemming from its acquisitions of mining properties in Nigeria, the Democratic Republic of the Congo (DRC), and Venezuela.

Glencore is the primary backer of PolyMet’s proposed NorthMet project, having loaned over $225 million to the project. Glencore also owns about one-third of PolyMet’s stock, has representation on the board of directors and has an off-take agreement giving the company rights to 100 percent of the production of the mine.

While Glencore has yet to be charged with any crime in the case, Tuesday’s announcement certainly raises the possibility. Glencore was founded by fugitive financier and hedge fund magnate Marc Rich, whose controversial pardon by former President Bill Clinton raised widespread protest in the United States. U.S. prosecutors had indicted Rich in the 1980s on 65 criminal counts, including tax evasion, wire fraud, racketeering, and trading with Iran. According to the New York Times, one of the hallmarks of Glencore’s business approach is a “higher tolerance for politically murky situations, which translates into a willingness to venture into countries where rivals will not. That has enabled it to set up shop in Congo and Venezuela, securing valuable footholds in mineral-rich countries.”

More recently, the company has taken criticism for its relationship with Dan Gertler, an Israeli businessman who runs mining businesses in the Congo and is suspected of defrauding the Congolese government of hundreds of millions of dollars with the apparent involvement of DRC president Joseph Kabila. The Trump Treasury Department, in December, imposed sanctions on Mr. Gertler, who the department describes as having amassed his fortune “through hundreds of millions of dollars’ worth of opaque and corrupt mining and oil deals in the DRC.”

In one example cited by the Treasury Department, Gertler sold the DRC government rights to an oil block in 2013 for $150 million, having just purchased the block from the government for $500,000, a loss of $149.5 million in potential revenue to the cash-poor government. 

That, along with similar arrangements, led to a reported $1.36 billion loss in revenues to the Congolese government, according to the Treasury Department.

Gertler denies the allegations and Glencore cut its ties to the businessman in the wake of the sanctions.

In addition to corrupt practices, a number of nonprofit human rights groups have accused Glencore of human rights abuses and of allowing widespread toxic pollution at its mining operation in the Congo.

Comments

No comments on this story | Please log in to comment by clicking here
Please log in or register to add your comment