According to the news report by Bloomberg Quint, the share price of Glencore Plc. fell to its lowest in two years after the US Department of Justice subpoenaed the company to hand over documents in relation to possible money laundering and corruption.
The largest commodity trader on the globe revealed the subpoena issued by the DOJ to hand over documents basis the Foreign Corrupt Practices Act as well as the US money laundering laws. The documents in question are related to Glencore’s business dealings in The Democratic Republic of Congo, Nigeria and Venezuela from 2007 till date.
After this reveal, Glencore’s shares dropped by as much as 13% during day trading before recouping some of these losses. However, the company lost £6.7 billion (~$8.8 billion) in market value, which is more than half of the £11.2 billion (~$14.8 billion) profit that Glencore had made in 2017.
It wasn’t just the company’s shares that declined. Glencore’s €500 million (~$583 million) worth of notes that are due to mature in April 2026 fell more than 2 cents to 109 cents on the Euro. This is also the biggest drop the company’s bonds have seen in more than two years.
The year so far has been extremely rocky, most of the challenges being due to its businesses in the Congo, where Glencore operates massive cobalt and copper mines. The company is already facing possible charges of bribery because of its association with Israeli billionaire Dan Gertler, who is a close friend of the Congolese President Joseph Kabila.
According to a Leigh Day lawyer in London, Daniel Leader, being subpoenaed is a worrying development considering how the US Department of Justice is known for its aggressive prosecution of corruption and money laundering cases, especially in foreign multinationals. According to Leader, the US Justice Department is also very aggressive in its establishment of jurisdiction, to the point where it is enough for the transactions to have been in US dollars for the agency to say it is their jurisdiction to prosecute. And the DOJ usually hands out subpoenas when it is investigating a company.
While Glencore has not specified what the DOJ has issued subpoenas for, the fact that the company is facing legal charges in the Congo, Nigeria and even Venezuela hint at what the US agency is investigating.
Gertler is already under US sanctions for suspected corrupt deals in the Congo, and so Glencore’s close association with him has long been a cause for concern for many. Glencore is also being accused of bribery in Venezuela for allegedly trying to get inside information on oil deals.
To appease investors, Glencore severed ties with Dan Gertler last year, however, suddenly and strangely, the company renewed its royalty payments to the Israeli billionaire in June this year, with the proviso that the sum would be paid out in Euros not US dollars. This agreement almost seems to imply that the US has given its tacit approval of the relationship in a bid to prevent the precious cobalt from reaching Chinese hands.
Bloomberg author Chris Bryant, Glencore’s current problems should not come as a surprise to those who have invested in the company. A company trading in 50 countries and more than 90 commodities would need to do business in places where bribery and corruption are commonplace. In fact, in its 2011 IPO prospectus, the company clearly stated that some of the places where it had businesses were corrupt and that with the massive scale of operations the company had, it was possible for fraudulent or mistaken transactions to be overlooked.