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20 Nov 2018

Rights and Accountability in Development (RAID)

Glencore’s Growing Legal Troubles With Katanga Mining

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A year ago, Katanga Mining Limited...a subsidiary of Glencore...was forced to publish an embarrassing internal audit after its activities were probed by Canada Ontario Securities Commission (OSC), which oversees the Toronto Stock Exchange. The audit found "material weaknesses" in financial reporting relating to the company's activities in the Democratic Republic of the Congo, where Katanga Mining operates one of the richest copper and cobalt mines in the world. Since then the legal and regulatory troubles of Glencore and its subsidiary have deepened...The OSC probe into Katanga Mining continues and new investor lawsuits have been filed against both companies and senior managers. In December 2017, United States authorities sanctioned one of Glencore's key business partners, notorious Israeli billionaire Dan Gertler, and in July 2018 the U.S. Department of Justice (DOJ) issued Glencore with a subpoena for information as part of a corruption investigation. Glencore also faces the prospect of a UK Serious Fraud Office (SFO) investigation. All this raises important questions about how one of the world's largest mining companies is conducting business...The legal pressure is mounting. In December 2017, under the Global Magnitsky Human Rights Accountability Act, the U.S. imposed financial sanctions on Gertler and his affiliated companies, whose partnership with Glencore dates back to 2007 and who previously controlled Katanga Mining. The US Treasury stated that Gertler "amassed his fortune through hundreds of millions of dollars' worth of opaque and corrupt mining and oil deals in the Congo". On 15 June 2018, Glencore and Katanga Mining announced that they would, through subsidiaries, continue paying royalties to Gertler-associated companies, despite U.S. sanctions designed to prevent such payments. The same day, the US Treasury Department added a further 14 entities affiliated with Gertler to the sanctions list...In July 2018, further legal troubles followed. Glencore was subpoenaed by the DOJ for compliance with the FCPA and money-laundering statutes in Congo and elsewhere.