Glencore fined $1B, placed under three-year monitorship for FCPA violations

As part of settlements announced Tuesday with the Department of Justice (DOJ), the Commodity Futures Trading Commission (CFTC), and authorities in Brazil, Glencore said in a statement it has agreed to enhance its ethics and compliance program with the creation of “a centralized, independent, and empowered compliance function” that will be supported with increased staffing and funding.

The settlements cover alleged violations of the Foreign Corrupt Practices Act (FCPA) in the form of bribes to officials in countries including Nigeria, the Democratic Republic of the Congo, and Venezuela from 2007-18. The coordinated agreements also resolve market manipulation charges lodged by the CFTC related to past market conduct in certain U.S. fuel oil markets and corrupt practices in certain overseas jurisdictions.

The CFTC settlement, at $1.186 billion before offsets, is the largest by money value in the agency’s history.

Glencore will also pay $39.6 million to Brazilian authorities to resolve charges related to allegations its affiliates bribed officials at the Brazilian state-owned energy company Petrobras uncovered as part of the “Operation Car Wash” investigation.

The settlements also involved Glencore Ltd. and Chemoil Corporation, both Glencore subsidiaries. Glencore International pleaded guilty to one count of conspiracy to violate the FCPA, while Glencore Ltd. pleaded guilty to one count of conspiracy to commit commodity price manipulation. The violations resulted in criminal fines of more than $428 million and more than $341 million, respectively, the Justice Department announced.

Another subsidiary, Glencore Energy UK Limited, indicated it would plead guilty on seven bribery charges announced Tuesday by the U.K.’s Serious Fraud Office, but a penalty amount won’t be decided by the court until June 21. Investigations by law enforcement agencies in Switzerland and the Netherlands are ongoing.

The DOJ’s probe into Glencore’s alleged use of bribes to win contracts and influence public officials began in 2018, with the United Kingdom launching an investigation a year later and Switzerland following suit in 2020. Glencore’s misconduct was chronicled extensively in the Paradise Papers investigation published by the International Consortium of Investigative Journalists in 2017.

Compliance enhancements: The independent compliance monitor, who must be approved by the DOJ, will “assess and monitor the company’s compliance with the agreements and evaluate the effectiveness of its compliance program and internal controls,” Glencore said in its statement.

Glencore said in a separate Q&A it is in the process of identifying candidates for submission to the DOJ.

The company has taken “extensive remediation actions,” including firing or disciplining employees involved in the paying of bribes and overhauling its board of directors and management team.

Glencore said it has allocated “substantial resources towards developing a best-in-class ethics and compliance program” and is dedicated to fostering “a culture of integrity, responsibility, and transparency.”

In 2020, the company hired a new, dedicated head of compliance, Daniel Silver, and launched a global awareness and training campaign to “set expectations and ensure accountability for all employees.” Silver previously had more than 10 years of experience as a chief compliance officer with the Royal Mail Group and BG Group, both based in the United Kingdom, according to his LinkedIn profile.

In addition, the company has established a comprehensive business partner management program aimed at “significantly reducing the company’s use of third-party business generating intermediaries and employing end-to-end controls to oversee their engagement.”

Extensive monitoring and testing mechanisms will help Glencore assess whether the controls put in place will be “entrenched and effective across the group and ensure continuous improvement.” Data analytics and an outside consultant will be used to verify controls are working as intended, the company said.

Glencore this year published its first ethics and compliance report that provides a detailed overlook of its revamped compliance program and its commitment to “promote an ethical culture.”

Company response: “Glencore today is not the company it was when the unacceptable practices behind this misconduct occurred,” said Glencore Chairman Kalidas Madhavpeddi in a statement. “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.”