By Scott Patterson and Ben Dummett
This article is being republished as part of our daily
reproduction of WSJ.com articles that also appeared in the U.S.
print edition of The Wall Street Journal (July 28, 2017).
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.
Write to Scott Patterson at scott.patterson@wsj.com and Ben
Dummett at ben.dummett@wsj.com
(END) Dow Jones Newswires
July 28, 2017 02:47 ET (06:47 GMT)
Copyright (c) 2017 Dow Jones & Company, Inc.
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