Glencore Faces Bribery Probe Over Congo Unit -- Update

By Scott Patterson Features Dow Jones Newswires

Glencore PLC's copper operations in the Democratic Republic of Congo face scrutiny from Canadian regulators over financial statements and disclosures related to international bribery and anticorruption laws, the company said Monday.

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Canada's Ontario Securities Commission, or OSC, the country's biggest regional securities regulator, is also investigating the governance practices of Glencore copper subsidiary Katanga Mining and the related conduct of certain directors and officers, the company said. Katanga is listed in Toronto and owned by Glencore, the Swiss commodity giant.

Three Katanga directors, including Glencore's billionaire copper chief, Aristotelis Mistakidis, are stepping down from its board following an internal review that found "material weaknesses" in the company's controls over financial reporting, Glencore said.

Glencore nominated three new directors to the board, including its Chief Financial Officer Steven Kalmin. Katanga's CFO, Jacques Lubbe, resigned, Katanga said. Glencore, in a separate statement Monday, said it plans to implement "various structural and control changes" across its copper department.

Monday's disclosures reveal a chaotic situation at the giant Congolese copper mine, which Glencore first invested in 2008, as it ramped up operations. Recurring spills, power outages and plant modifications from 2010 to 2013 resulted in the inadvertent dumping of a large amount of copper into a nearby waste dam.

Glencore suspended operations at Katanga in 2015 to revamp its infrastructure and boost production.

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The Wall Street Journal reported in July that Glencore is subject to an investigation by Canada's OSC regarding more than $100 million in payments Katanga Mining made to a company owned by an Israeli businessman. An OSC spokeswoman confirmed that the agency has an active investigation regarding Katanga Mining.

The OSC investigation stems from payments Katanga was expected to make to Congo's state-run mining company, Gecamines, that were instead sent to a Caymans Island company owned by the businessman, Dan Gertler, the Journal reported. Glencore had acknowledged the shift in payments and said it was done at the request of Gecamines.

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 said Och-Ziff 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 a business associate of Och-Ziff's, who people familiar with the matter said is Mr. Gertler, paid more than $100 million in bribes to Congolese officials, though he hasn't been charged.

A spokesman for Mr. Gertler's company, Fleurette, has denied allegations of bribery. 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."

Glencore in February purchased Mr. Gertler's stake in Katanga Mining, as well as his stake in another jointly run Congo copper mine, for nearly $1 billion including debt.

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

LONDON -- Glencore PLC is reshuffling the board of one of its giant African copper operations following an internal review that the company said found weaknesses in its controls over financial reporting.

The move comes amid an investigation by Canada's Ontario Securities Commission, or OSC, the country's biggest regional securities regulator, into the governance practices of the Glencore copper subsidiary, Katanga Mining, which is based in the Democratic Republic of Congo. Investigators are probing financial statements and disclosures by Toronto-listed Katanga related to international bribery and anticorruption laws, Glencore and Katanga Mining said in separate statements disclosing the investigation on Monday.

Three Katanga directors, including Glencore's billionaire copper chief, Aristotelis Mistakidis, are stepping down from its board following an internal review that found "material weaknesses" in the company's controls over financial reporting, Glencore said.

Glencore nominated three new directors to the board, including its Chief Financial Officer Steven Kalmin. Katanga's CFO, Jacques Lubbe, resigned, Katanga said. Glencore, in a separate statement Monday, said it plans to implement "various structural and control changes" across its copper department.

Monday's disclosures reveal a chaotic situation at the giant Congolese copper mine, which Glencore first invested in 2008 as it ramped up operations. Recurring spills, power outages and plant modifications from 2010 to 2013 resulted in the inadvertent dumping of a large amount of copper into a nearby waste dam.

Glencore suspended operations at Katanga in 2015 to revamp its infrastructure and boost production.

The Wall Street Journal reported in July that Glencore is subject to an investigation by Canada's OSC regarding more than $100 million in payments Katanga Mining made to a company owned by an Israeli businessman. An OSC spokeswoman confirmed that the agency has an active investigation regarding Katanga Mining.

The OSC investigation stems from payments Katanga was expected to make to Congo's state-run mining company, Gecamines, that were instead sent to a Caymans Island company owned by the businessman, Dan Gertler, the Journal reported. Glencore had acknowledged the shift in payments and said it was done at the request of Gecamines.

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 said Och-Ziff 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 a business associate of Och-Ziff's, who people familiar with the matter said is Mr. Gertler, paid more than $100 million in bribes to Congolese officials, though he hasn't been charged.

A spokesman for Mr. Gertler's company, Fleurette, has denied allegations of bribery. 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."

Glencore in February purchased Mr. Gertler's stake in Katanga Mining, as well as his stake in another jointly run Congo copper mine, for nearly $1 billion including debt.

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

(END) Dow Jones Newswires

November 20, 2017 14:10 ET (19:10 GMT)