US probes oil firm over bribery in Nigeria, other countries

Global oil trader, Glencore is under investigation by the Commodity Futures Trading Commission of the United States over potential corrupt practices linked to commodities, the company said on Thursday, revealing a new avenue of possible liability in the US.

The Financial Times, reported on Friday that the Swiss-based trading company has previously disclosed an investigation by the US Department of Justice into possible violations of the Foreign Corrupt Practices Act related to its operations in Nigeria, Venezuela and the Democratic Republic of Congo.

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“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,” the company said, adding that it would co-operate with the CFTC.

The CFTC investigation is another headache for Glencore, the world’s most powerful commodity trader, and a further sign of the scrutiny the commodities trading industry is facing in a number of jurisdictions.

In December, the former head of Glencore’s copper business was fined $1.8m by Canadian regulators and banned from serving as a company director for four years, after the company’s subsidiary in the Congo was found to have issued misleading financial statements.

The investigation by the Ontario Securities Commission also found Katanga Mining, which is majority-owned by Glencore, failed to disclose its relationship with Israeli businessman Dan Gertler, who has been sanctioned by the US for his “opaque and corrupt mining and oil deals” in the DRC.

The company and rivals Trafigura and Vitol are also under investigation in Brazil regarding alleged bribery involving Petrobras, the Brazilian oil company.

Glencore revealed a US justice department subpoena last July that demanded records going back as far as 2007. In its annual report, the group said the investigation as it related to Nigeria and Venezuela was focused on oil deals.

Tony Hayward, Glencore’s chairman and formerly the boss of oil company BP, has been overseeing the company’s response to the justice department investigation as part of an investigations committee of Glencore board members set up in July 2018. The committee will also oversee Glencore’s handling of the CFTC probe, the company said.

Shares in Glencore are down around 8 per cent since it disclosed the justice department subpoena, lagging most of its peers as the investigation has made some investors wary of the company.

Ivan Glasenberg, Glencore’s chief executive, has repeatedly declined to comment on the DoJ investigation.

The fact that its activities in Venezuela and Nigeria, two big oil producing countries, are under scrutiny suggests a broader interest in the company’s operations. Glencore is the world’s third-biggest independent oil trader, handling more than 4.5m barrels per day.

Foreign bribery cases in the US have historically been led by the justice department, which can bring criminal charges, often in partnership with the Securities and Exchange Commission, which has civil authority.

The announcement by Glencore is the first disclosure of a CFTC investigation involving potential corruption since the US derivatives regulator announced it was expanding its enforcement remit in March.

The CFTC does not have the power to bring criminal prosecutions, but can seek civil penalties and trading bans through its authority under the Commodity Exchange Act.

In a speech last month, James McDonald, the director of enforcement at the CFTC, said his agency would avoid piling on to existing investigations and that any fines imposed would take into account penalties required by other authorities.

A CFTC spokeswoman did not immediately return a request for comment on Glencore’s disclosure.

Paul Gait, analyst at Bernstein Research, said the CFTC’s move smacked of a political land grab to “show that we are a player”.

“Clearly this is not helpful for Glencore. But it’s difficult to see this making a difference to investors who hold the shares and have weathered [the DoJ] storm”.

He added: “Even if the DoJ does uncover something how would the CFTC prove it had an impact on US commodity markets. It’s hard enough trying to prove supply and demand fundamentals impact the market.”

Glencore was among the companies that won the two-year crude lifting contracts given to traders by the Nigerian National Petroleum Corporation in May 2018.

The NNPC issued in 2018 crude export contracts expected to last two years instead of the usual one year.

A partial preliminary list, according to Reuters, had shown 30 companies, including the world’s largest energy traders, Vitol, Trafigura and Glencore.

In the annual report, Glencore’s auditor, Deloitte, was said to have noted that the company’s activities in Nigeria within this period were “limited primarily to oil offtake agreements.”