In mid-2018 Glencore (a commodities company incorporated in the United Kingdom and headquartered in Switzerland disclosed that it was under scrutiny by the DOJ. (See here for the prior post).
Specifically, the company disclosed:
“Glencore Ltd, a subsidiary of Glencore plc, has received a subpoena dated 2 July, 2018 from the US Department of Justice to produce documents and other records with respect to compliance with the Foreign Corrupt Practices Act and United States money laundering statutes. The requested documents relate to the Glencore Group’s business in Nigeria, the Democratic Republic of Congo and Venezuela from 2007 to present. Glencore is reviewing the subpoena and will provide further information in due course as appropriate.”
As highlighted in this prior post, in mid-2019 the Commodity Futures Trading Commission (CFTC) joined the fray as the company disclosed:
“Glencore has been informed by the United States Commodity Futures Trading Commission (“CFTC”) that the CFTC is investigating whether Glencore and its subsidiaries may have violated certain provisions of the Commodity Exchange Act and/or CFTC Regulations through corrupt practices in connection with commodities. Glencore understands that the CFTC’s investigations are at an early stage and have a similar scope in terms of subject matter as the current ongoing investigation by the US Department of Justice (“DOJ”). Glencore will cooperate with the CFTC. Glencore’s response will be managed by its Investigations Committee, which was set up in July 2018 to oversee Glencore’s response to the investigation by the DOJ.”
Thereafter, the company disclosed (see here) the following: (1) the United Kingdom Serious Fraud Office is investigating the Group in respect of suspicions of bribery in the conduct of business of the Group; (2) the Brazilian authorities are investigating the Group in relation to “Operation car wash”, which relates to bribery allegations concerning Petrobras; and (3) the Office of the Attorney General of Switzerland is investigating Glencore International AG for failure to have the organisational measures in place to prevent alleged corruption.
As highlighted here, in July 2021 Anthony Stimler (a United Kingdom citizen and resident who was a trader at a Glencore subsidiary who worked on the West Africa desk) pleaded guilty to FCPA and money laundering offenses. According to the DOJ, “In that role, Stimler had responsibility for crude oil purchases from, among other places, Nigeria, and acted on behalf of Company 1 [Glencore] in procuring crude oil from Nigeria.”
Yesterday, the DOJ announced and the CFTC announced enforcement actions against Glencore. (See here for the press conference by DOJ and other officials).
The DOJ enforcement action, as well as the CFTC enforcement action, involved both bribery conduct as well as a commodity price manipulation conspiracy.
This post discusses the DOJ’s FCPA enforcement action against Glencore. A future post will discuss the CFTC’s separate enforcement action finding violations of the Commodity Exchange Act based on bribery and corruption and a future post will discuss the U.K. Serious Fraud Office’s enforcement action against Glencore which was also announced earlier this week.
The FCPA enforcement action against Glencore resulted in a net approximate $443 million settlement (not a $700 million as some have suggested). The $443 million settlement amount consists of an approximate $262 million criminal fine and an approximate $181 million forfeiture amount.
In summary fashion, this criminal information alleges:
“From at least in or about 2007 up to and including in or about 2018, Glencore, through certain of its employees and agents, while acting on behalf of Glencore, together with its co-conspirators, knowingly and willfully conspired and agreed with others to corruptly provide more than $100 million in payments and other things of value to various intermediaries with the intent that a significant portion of these payments would be used to pay bribes to and for the benefit of foreign officials to secure an improper advantage and to influence those foreign officials in order to obtain or retain business in Nigeria, Cameroon, Ivory Coast, Equatorial Guinea, Brazil, Venezuela, and the Democratic Republic of Congo.”
Under the heading “Bribes Paid to Officials in West Africa,” the information alleges that between 2007 and 2018, Glencore, through certain of its employees and agents, including various Glencore U.K. subsidiaries, Stimler, Executive 1 (a U.K. citizen with responsibilities over Glencore’s sale and purchase of oil worldwide), Executive 2 (a U.K. citizen), Trader Y (a U.K. citizen who was a trader at Glencore and then a consultant for Glencore), Trader Z (a U.K. citizen who was a trader at Glencore), and others, caused approximately $79.6 million in payments to be made to West Africa Intermediary Company (a Nigerian company used by Glencore and its subsidiaries) and Nigeria Intermediary Company (a Cyprus-incorporated intermediary used by Glencore) with the intent that a significant portion of the payments would be used to pay bribes to and for the benefit of foreign officials in order to secure improper advantages to obtain and retain business with state-owned and state-controlled entities in Nigeria, Cameroon, Ivory Coast, and Equatorial Guinea.”
According to the information:
“To conceal the bribe payments, Glencore and the Glencore U.K. Subsidiaries, together with their co-conspirators, entered into sham consulting agreements, paid inflated invoices, and used West Africa Intermediary Company and Nigeria Intermediary Company to make corrupt payments to numerous foreign officials. Glencore, the Glencore U.K. Subsidiaries, and others agreed to use, and did use, purported ‘commissions’ for oil cargoes, at least in part, to conceal bribe payments to government officials in exchange for obtaining and retaining business on behalf of Glencore and its affiliates.
Glencore and the Glencore U.K. Subsidiaries’ employees and agents, including Stimler and Executive 2, facilitated and approved bribe payments, and engaged in other acts in furtherance of the bribery scheme, while in the United States.
In addition, Glencore made and caused to be made at least approximately $39,900,000 of the payments using correspondent bank accounts held at financial institutions in the Southern District of New York, to West Africa Intermediary Company and Nigeria Intermediary Company with the intent that a significant portion of the payments would be used to pay bribes to and for the benefit of foreign officials.”
As to Nigeria, the information alleges that Glencore and the Glencore UK Subsidiaries entered into multiple agreements to purchase crude oil and refined petroleum products from the NNPC (the Nigerian National Petroleum Corporation) and its subsidiaries and that in total Glencore paid more than $52 million through intermediaries, intending that those funds be used, at least in part, to pay bribes. The information alleges that as a result of these payments, Glencore earned profits of approximately $124 million. According to the information, when communicating with West Africa Intermediary Company, employees at the Glencore UK subsidiaries used coded language to conceal their discussion of bribe payments, referring to bribe payments as “newspapers,” or “journals” or “pages.” The information alleges that Glencore agents, including Stimler and Executive 2, while in the territory of the U.S. approved bribe payments to be made through West Africa Intermediary Company.” Among the allegations in the information is the following: “On or about September 25, 2014, an employee of Nigeria Intermediary Company sent an e-mail to Stimler stating that Nigeria Official X (a high ranking official in the Nigerian Ministry of Petroleum Resources) had asked that all companies or ‘customers’ of NNPC give an ‘advance’ of $300,000 to the re-election campaign of a senior Nigerian official in exchange for receiving crude oil cargoes.”
As to Cameroon, Ivory Coast, and Equatorial Guinea, the information alleges that Glencore and its subsidiaries and affiliates made, and caused to be made, approximately $27 million in payments to West Africa Intermediary Company knowing that the funds would be used, at least in part, to make corrupt payments to foreign officials in Cameroon, Ivory Coast, and Equatorial Guinea. According to the information, as a result of these payments, Glencore obtained more than $92 million in profits in transactions associated with state-owned and state-controlled entities.
Under the heading “Bribes Paid to Officials in Brazil,” the information alleges:
“In July 2011, Glencore, through certain of its employees and agents, including Employee X (a Brazilian citizen involved in business development for Glencore Brazil), Employee Y (a Mexican citizen who was a senior employees at Glencore Mexico), Brazil Consultant (a Brazilian citizen and intermediary), and others, caused approximately $147,202 to be used, at least in part, as corrupt payments to be made to, and for the benefit of, Brazilian officials, in order to secure improper business advantages. Specifically, Employee X negotiated with Brazil Consultant to pay approximately $147,202 to Brazil Consultant, knowing that a portion of the funds would be paid in bribes to Petrobras officials, in exchange for Glencore having the opportunity to buy oil cargo from Petrobras.”
According to the information, “to conceal discussions of the bribery scheme, Employee X used a personal email address to communicate with Brazil Consultant and arranged with Brazil Consultant to disguise the ‘delta” or bribe payment as an inflated service fee of $0.50 per barrel of the purchased cargo” and that “from this payment, Brazil Consultant subsequently paid bribes in the following approximate amounts: $40,000 to Brazil Official 1 (an oil trader for Petrobras), $31,000 to Brazil Official 2 (a trading manager for Petrobras), and $40,000 to Brazil Official 3 (a fuel oil trader for Petrobras).
Under the heading “Bribes Paid to Officials in Venezuela,” the information alleges:
“Beginning in 2011 and through approximately 2014, Glencore, through certain of its employees and agents, including Venezuela Intermediary Company and others, caused corrupt payments to be made to, and for the benefit of, a Venezuelan official, in order to secure improper business advantages.
As part of its business dealings in Venezuela, Glencore and its subsidiaries sold oil products to, and purchased them, from PDVSA. If PDVSA di not pay Glencore’s invoices on time, PDVSA incurred interest that was owed to Glencore because of late payments. Additionally, if PDVSA did not load or discharge a Glencore Vessel with an agreed upon time frame, PDVSA incurred demurrage (i.e. a charge payable to Glencore for the delay.
By 2011, PDVSA owed millions of dollars to Glencore and its subsidiaries related to late payments for accrued interest and demurrage. Due to difficulties in obtaining payment from PDVSA, Glencore used intermediaries, including Venezuela Intermediary Company, to assist in obtaining payment priority from PDVSA over other similarly situated companies. Glencore paid the intermediaries a percentage fee based on the total amount of money obtained from PDVSA.
For example, on December 11, 2012, Glencore Energy UK Ltd. paid Venezuela Intermediary Company’s invoice in the amount of $18,605.19 as a fee for recovering a late interest payment from PDVSA.
In total from 2012 through 2014, Glencore paid at least approximately $1,286,057 to Venezuela Intermediary Company, with the intent that a portion of the payments be used as bribes to, and for the benefit of, a PDVSA official, in order to obtain payment priority from PDVSA. Glencore and its subsidiaries obtained a total of approximately $11,981,164 in payments from PDVSA through Venezuela Intermediary Company.”
Under the heading “Bribes Paid to Officials in the Democratic Republic of Congo” the information alleges:
“Between 2010 and 2013 Glencore, through certain of its employees and agents, including Executive 3 (a Greek and U.K. citizen who was employed by Glencore’s copper and zinc department), Employee Z (a senior executive at Glencore Mining Company 1), Glencore Mining Company 1 (a direct subsidiary of Glencore which held interests in copper and cobalt mining operations in the DRC), Glencore Mining Company 2 (an indirect subsidiary of Glencore which held interests in copper and cobalt mining operations in the DRC), and others, knowingly and willfully conspired and agreed to corruptly offer and pay more than approximately $27,500,000 to third parties with the intent that a portion of the payments be used as bribes to, and for the benefit of, DRC officials, in order to secure improper business advantages by reducing liabilities related to government audits and litigation costs. Glencore and its affiliated companies obtained at least $43 million in benefits related to their mining operations from the corrupt resolutions with the DRC government and its agencies.”
Based on the above, the information charges one count of conspiracy to violate the FCPA’s anti-bribery provisions – specifically the dd-3 portion of the FCPA. Pursuant to this plea agreement, Glencore pleaded guilty.
The plea agreement sets forth the following individual facts and circumstances.
“(a) the nature, seriousness, and pervasiveness of the offense conduct … including a scheme to pay over one hundred million dollars to intermediaries with the intent that a significant portion of the payments be used for bribes to government officials in numerous countries for over a ten year period carried out by high-level employees and agents of the company;
(b) The defendant did not receive voluntary disclosure credit pursuant to the FCPA Corporate Enforcement Policy … because it did not voluntarily and timely disclose to the Offices the conduct …;
(c) The defendant received credit for cooperation … because it cooperated with the Offices’ investigation and demonstrated recognition and affirmative acceptance of responsibility for its criminal conduct; the defendant also received partial credit for its cooperation pursuant to the FCPA Corporate Enforcement Policy … by, among other things, providing information obtained through its internal investigation, which allowed the government to preserve and obtain evidence as part of its own independent investigation, making regular and detailed factual presentations to the Offices, producing a significant amount of documents located outside the United States to the Offices in ways that did not implicate foreign data privacy laws, collecting and producing voluminous evidence and information to the Offices, accompanied by translations of documents, and producing an analysis of complex trading activity conducts by the company’s outside foreign accounting firm; in addition, the defendant also provided to the Offices all relevant facts known to it, including information about the individuals involved in the conduct …;
(d) the defendant did not receive full credit pursuant to the Corporate Enforcement Policy … for its cooperation, because the Defendant did not at all times demonstrate a commitment to full cooperation and was delayed in producing some relevant evidence, or for its remediation, because it did not timely and appropriately remediate with respect to disciplining certain employees involved in the misconduct;
(e) the defendant engaged in remedial measures, including: (i) terminating and separating certain employees who were involved in the conduct; (ii) established a centralized compliance function, hiring a Head of Compliance, and significantly increasing the number of employees in compliance functions; (iii) enhancing its business partner management, including reducing the number of third-party business partners engaged and implementing due diligence procedures, payment controls, and post-engagement monitoring measures; (iv) investing in increased head count and data analytics to support real time compliance monitoring and risk assessment and continuous improvement; and (v) requiring global anti-corruption compliance and business ethics training as well as additional risk-based training for high-risk and control employees, directors, and business partners;
(f) although the defendant had inadequate anti-corruption controls and an inadequate compliance program and policies during the period of the conduct …, the defendant has enhanced and has committed to continuing to enhance its compliance program and internal controls, including ensuring that its compliance program satisfies the minimum elements set forth in Attachment C to the plea agreement;
(g) because certain of the defendant’s compliance enhancements are new and have not been fully implemented or tested to demonstrate that they would prevent and detect similar misconduct in the future, the imposition of a Monitor is necessary to reduce the risk of recurrence of misconduct;
(h) the defendant has no prior criminal history, although some of the defendant’s subsidiaries have been the subject of prior enforcement actions, including the convictions of its Rotterdam subsidiary in 2012 related to bribes paid to a European Union official to obtain non-public information, and a regulatory enforcement action involving a civil settlement by Katanga Mining Ltd. with the Ontario Securities Commission in 2018;
(i) the defendant is entering into a resolution with the U.S. Commodity Futures Trading Commission through a cease and desist proceeding relating to the conduct … and other conduct;
(j) the defendant is entering into a resolution with authorities in the United Kingdom and Brazil relating to certain of the conduct …; and
(k) the defendant has agreed to continue to cooperate with the Offices in any ongoing investigation;
(l) accordingly, after considering (a) through (k) above, the Offices believe that the appropriate resolution of this case is for the defendant to plead guilty to one count of conspiracy to violate the anti-bribery provisions of the FCPA …; a discount of 15 percent off the bottom of the applicable U.S. Sentencing Guidelines fine range pursuant to the FCPA Corporate Enforcement Policy …; and the imposition of a Monitor.”
According to the plea agreement, the “gross pecuniary gain resulting from the offense is $315,089,098” and the plea agreement sets forth an advisory fine range of approximately $504 million to $1.008 billion.
According to the plea agreement, the appropriate total criminal fine is $428,521,173 (“Total Criminal Fine”) which reflects a 15 percent discount off of the bottom of the applicable Sentencing Guidelines fine range for the defendant’s partial cooperation and remediation. Pursuant to the plea agreement, Glencore will pay the U.S. $262,590,214 equal to approximately 60 percent of the Total Criminal Fine. The DOJ agreed to credit the remaining amount of the Total Criminal Fine as follows:
(1) up to $136,236,140 of the Total Criminal Fine will be credited against the amount the defendant pays to authorities in the United Kingdom … pursuant to the defendant’s separate resolution with United Kingdom authorities related to bribery conduct in Nigeria, Cameroon, Equatorial Guinea, and Ivory Coast …;
(2) up to $29,694,819 of the Total Criminal Fine will be credited against the amount the defendant pays to authorities in Switzerland … pursuant to the defendant’s separate resolution with Swiss authorities related to conduct … concerning the Democratic Republic of Congo …;
The plea agreement sets forth a Total Forfeiture Amount of $272,185,792. Pursuant to the plea agreement, the DOJ agreed that payments made by Glencore in connection with its concurrent settlement of a related regulatory action brought by the CFTC shall be credited against the Total Forfeiture Amount in the amount of $90,728,597. Accordingly, Glencore agreed to forfeit to the U.S. $181,457,195.
As a condition of settlement, Glencore agreed to retain a compliance monitor for a three year period.
In the DOJ release, Attorney General Merrick Garland stated:
“The rule of law requires that there not be one rule for the powerful and another for the powerless; one rule for the rich and another for the poor. The Justice Department will continue to bring to bear its resources on these types of cases, no matter the company and no matter the individual.”
Damian Williams (U.S. Attorney for the S.D.N.Y) stated:
“The scope of this criminal bribery scheme is staggering. Glencore paid bribes to secure oil contracts. Glencore paid bribes to avoid government audits. Glencore bribed judges to make lawsuits disappear. At bottom, Glencore paid bribes to make money—hundreds of millions of dollars. And it did so with the approval, and even encouragement, of its top executives. The criminal charges filed against Glencore in the Southern District of New York are another step in making clear that no one – not even multinational corporations—is above the law.”
Kenneth Polite Jr. (Assistant Attorney General of the DOJ’s Criminal Division) stated:
“Glencore’s guilty pleas demonstrate the Department’s commitment to holding accountable those who profit by manipulating our financial markets and engaging in corrupt schemes around the world. In the foreign bribery case, Glencore International A.G. and its subsidiaries bribed corrupt intermediaries and foreign officials in seven countries for over a decade. In the commodity price manipulation scheme, Glencore Ltd. undermined public confidence by creating the false appearance of supply and demand to manipulate oil prices.”
U.S. Attorney Vanessa Roberts Avery (D.Conn) stated:
“Glencore’s market price manipulation threatened not just financial harm, but undermined participants’ faith in the commodities markets’ fair and efficient function that we all rely on. This guilty plea, and the substantial financial penalty incurred, is an appropriate consequence for Glencore’s criminal conduct, and we are pleased that Glencore has agreed to cooperate in any ongoing investigations and prosecutions relating to their misconduct, and to strengthen its compliance program company-wide. I thank both our partners at the U.S. Postal Inspection Service for their hard work and dedication in investigating this sophisticated set of facts and unraveling this scheme, and the Fraud Section, with whom we look forward to continuing our fruitful partnership of prosecuting complex financial and corporate criminal cases.”
FBI Assistant Director Luis Quesada stated:
“These guilty pleas by Glencore entities show that there is no place for corruption and fraud in international markets. Glencore engaged in long-running bribery and price manipulation conspiracies, ultimately costing the company over a billion dollars in fines. The FBI and our law enforcement partners will continue to investigate criminal financial activities and work to restore the public’s trust in the marketplace.”
USPIS Chief Postal Inspector Gary Barksdale stated:
“The idea of fair and honest trade is at the bedrock of American commerce. It is insult to our shared traditions and values when individuals and corporations use their power, wealth, and influence to stack the deck unfairly in their own favor. The resulting guilty plea by Glencore Limited demonstrates the tenacity of the U.S. Postal Inspection Service and its law enforcement partners in holding criminals accountable who try to enrich themselves by undermining the forces of supply and demand.”
In this release, Kalidas Madhavpeddi (Chairman of Glencore) stated:
“Glencore today is not the company it was when the unacceptable practices behind this misconduct occurred. The Board and the management team are committed to operating a company that creates value for all stakeholders by operating transparently under a well-defined set of values, with openness and integrity at the forefront. We want the Glencore of today to be an employer of choice, attracting and retaining the best talent and competing across its sectors not only in terms of the unique value proposition that Glencore has to offer, but also in its commitment to act ethically and responsibly across all aspects of its business.”
Gary Nagle (Chief Executive Officer of Glencore) stated:
“We acknowledge the misconduct identified in these investigations and have cooperated with the authorities. This type of behaviour has no place in Glencore, and the Board, management team and I are very clear about the culture that we want and our commitment to be a responsible and ethical operator wherever we work. We have taken significant action towards building and implementing a world-class Ethics and Compliance Programme to ensure that our core controls are entrenched and effective in every corner of our business.”
The release further stated:
“The Group has bolstered its compliance structures and controls through a comprehensive programme built around risk assessment, policies, procedures, standards and guidelines based on international best practice, associated training and awareness initiatives as well as monitoring systems. This has included:
- Strengthening the Group’s Code of Conduct and launching a comprehensive global awareness and training campaign designed to embed Glencore’s Values throughout its business, set expectations and ensure accountability for all employees;
- Establishing a centralised, independent and empowered compliance function and, in 2020, appointing a new dedicated Head of Compliance;
- Making a significant investment in compliance systems and resources, as well as experienced personnel;
- Significantly enhancing and expanding the Group’s ethics and compliance training programmes;
- Instituting a comprehensive business partner management programme, including significantly reducing the Company’s use of third-party business generating intermediaries and employing end-to-end controls to oversee their engagement;
- Implementing extensive monitoring and testing mechanisms, including through the use of data analytics, to assess whether our controls are entrenched and effective across the Group and ensure continuous improvement; and
- Engaging leading external advisors to review Glencore’s systems and verify that controls are working as intended.”
WilmerHale attorneys Howard Shapiro, Kimberly Parker, Erin Sloane and Christopher Davies represented Glencore.
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