GLNCY Glencore Plc (PK)

By Scott Patterson 

A mining company run by Glencore PLC in the Democratic Republic of Congo made millions of dollars in undisclosed payments to a company owned by an Israeli businessman accused by U.S. authorities of paying more than $100 million in bribes to Congolese officials.

The firm of businessman Dan Gertler has received payments meant for Congo's state-run mining company, Gecamines, according to Glencore and Mr. Gertler's holding company Fleurette Group.

Details of the payments, which hadn't previously been disclosed by Glencore, Fleurette or Gecamines, were first cited in a Tuesday report by Global Witness, a London-based anticorruption nonprofit that often targets mining and oil companies' practices. Global Witness said its findings are based on documents detailing the payments, which mirror financial records from 2014 that have been reviewed by The Wall Street Journal.

The payments are fresh evidence of financial ties between Switzerland-based Glencore, one of the biggest publicly traded mining companies in the world, and Mr. Gertler, who is the subject of a U.S. Justice Department investigation, according to people familiar with the matter. Mr. Gertler has repeatedly denied paying bribes.

Under a deal with the Congolese government, Gecamines is allocated a slice of annual sales from a mining company known as KCC, short for Kamoto Copper Co., Fleurette said. KCC is majority-owned by Katanga Mining, which in turn is owned by both Glencore and Fleurette. According to the companies and the documents seen by the Journal, the royalty payments were instead diverted to a Cayman Islands company called Africa Horizons Investment Ltd., which Fleurette owns.

Fleurette, speaking also for Mr. Gertler, said in response to the Global Witness report that it paid Gecamines for the royalty stream in a private agreement and that the accord was vetted by independent international institutions. It said the deal resulted in a "considerable loss" to Fleurette because of the collapse in commodity prices and Glencore's decision to suspend operations at the Katanga mine in September 2015.

A person familiar with the matter said Fleurette paid more than $100 million for the royalties.

Glencore said that KCC acted according to the instructions it received from Gecamines and wasn't involved in discussions involving the payments. Arthur Katalayi, senior executive adviser to the chairman of Gecamines, declined to comment.

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 found in its investigation that 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. Congolese government officials haven't responded to requests for comment about the allegations. Prosecutors are weighing whether to charge Mr. Gertler in the alleged bribery matter, the people familiar with the matter have said.

Daniel Och, chairman and chief executive of Och-Ziff, said the events were "deeply disappointing" and called Och-Ziff's conduct "inconsistent with our core values and not representative of our hundreds of employees world-wide."

An Och-Ziff background check on Mr. Gertler found that he "is happy to use his political influence against those with whom he is in dispute...[and] keeps what can only be described as unsavory business associates," according to the Justice Department's settlement.

A Fleurette spokesman said the company and Mr. Gertler dispute "all accusations of wrongdoing in any of our dealings" in Congo, including deals with Och-Ziff.

Mr. Gertler got his start in Congo as a diamond merchant toward the end of the country's long civil war in the 1990s, befriending its ruler, Laurent Kabila, and his son Joseph, who became president after his father's assassination in 2001.

Glencore and Mr. Gertler became partners in 2007, when Glencore invested in a Congo-focused mining company called Nikanor PLC, partly owned by the Israeli businessman. A year later, Nikanor merged with Katanga Mining, owner of KCC, forming one of Congo's largest copper-mining operations.

Katanga Mining has struggled to turn a profit. In September 2015, amid a steep decline in copper prices, Glencore said it would shut down operations at Katanga Mining and spend nearly $1 billion to modernize it. It isn't expected to become productive again until mid-2017.

Glencore and Mr. Gertler are also partners in another big copper-mining business near Katanga Mining in Congo, Mutanda Mining.

In a response to a 2014 Global Witness report on Glencore's connections to Mr. Gertler, Glencore said all transactions with Mr. Gertler's companies "have been conducted on arm's-length terms."

Write to Scott Patterson at scott.patterson@wsj.com

(END) Dow Jones Newswires

November 16, 2016 02:47 ET (07:47 GMT)

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