Glencore Pleads Guilty And Agrees To $1.1 Billion Penalty To Resolve Manipulation And Foreign Corruption Allegations
On May 24, 2022, Glencore International A.G. of Switzerland (“Glencore”), an energy and commodities trading firm, and its affiliates Glencore Ltd. of New York and Chemoil Corporation of New York resolved long-running investigations by the Department of Justice (“DOJ”), the Commodity Futures Trading Commission (“CFTC”), and regulators in the UK and Brazil related to alleged foreign bribery and market manipulation schemes. The companies agreed to pay total fines and monetary penalties in excess of $1.1 billion, including the largest penalty and disgorgement ever ordered by the CFTC, for conduct that spanned over ten years. As part of its resolutions with the CFTC and the DOJ, Glencore and Glencore Ltd. have agreed to retain independent compliance monitors for three years and continue to cooperate fully and expeditiously with both enforcement agencies. In addition to the corporate resolutions, two Glencore former employees have previously been charged. A Glencore Ltd. senior fuel oil trader, Emilio Jose Heredia Collado, pleaded guilty in March 2021 to one count of conspiracy to engage in commodities price manipulation. His sentencing is scheduled for June 17, 2022. Similarly, in July 2021, a senior trader in charge of Glencore’s West Africa crude oil desk pleaded guilty to one count of conspiracy to violate the FCPA and one count of conspiracy to commit money laundering.
Glencore entered a plea of guilty in the Southern District of New York to one count of conspiracy to violate the anti-bribery provisions of the Foreign Corrupt Practices Act (“FCPA”) in connection with a plea agreement it reached with the DOJ. Glencore agreed to a criminal fine of $428,521,173 and the forfeiture of an additional $272,185,792 to resolve the DOJ’s FCPA allegations. DOJ has agreed to credit nearly $256 million in payments that Glencore makes to resolve related parallel investigations by other domestic and foreign authorities.
According to the documents filed as part of the guilty plea, Glencore admitted to paying bribes to foreign agents and judicial officials from 2007 through 2018 to secure oil contracts, avoid government audits, and make pending lawsuits disappear in Nigeria, Cameroon, Ivory Coast, Equatorial Guinea, Brazil, Venezuela, and the Democratic Republic of the Congo (DRC). The corrupt payments Glencore admitted to making totaled more than $100 million. Specifically, in Nigeria, the firm and its subsidiaries engaged two third-party intermediaries to pursue business opportunities and other improper corporate advantages, such as the award of crude oil contracts. The firm paid more than $52 million to those intermediaries, which also included bribes to Nigerian officials. In the DRC, Glencore admitted to engaging in a similar scheme, offering and paying an estimated $27.5 million to third parties to secure improper business advantages. Glencore also misappropriated confidential information from employees and agents of certain state-owned entities in Mexico.
Market Manipulation Resolution
In response to a separate criminal case filed in the District of Connecticut, Glencore Ltd. entered a plea of guilty to one count of conspiracy to engage in commodity price manipulation. Glencore agreed to pay a criminal fine of $341,221,682 and criminal forfeiture of $144,417,203 in connection with the criminal market manipulation charges. In a parallel civil enforcement action, the CFTC ordered Glencore, Glencore Ltd., and Chemoil Corporation of New York to pay a total of $1.186 billion, including a civil monetary penalty of $865,630,784 and a disgorgement of $320,715,066, the highest of any CFTC settlement, for manipulative and deceptive conduct in the United States and the global oil market. The amounts owed to the DOJ will be off-set in part by funds paid to the CFTC.
According to the CFTC and DOJ, from 2007 to 2018, Glencore allegedly engaged in conduct which involved manipulating or attempted manipulation of four Unites States based S&P Global Platts physical oil benchmarks and related futures and swaps, in an effort allegedly to benefit the firm’s trading positions. Specifically, Glencore allegedly increased profits and reduced costs on contracts to buy and sell physical oil and derivative positions that it held. Furthermore, firm personnel allegedly engaged in such conduct with the requisite intent to manipulate the price of fuel oil products in interstate commerce and ultimately, to create artificial prices. Glencore allegedly furthered this scheme in three different United States geographic markets. On pricing days, according to the CFTC and documents filed in connection with the criminal case, the firm’s employees allegedly submitted orders to buy and sell bids and offers to Platts during the daily trading “window” for the Platts price assessments with an intent to artificially push the price assessments up and down. For example, between September 2012 and August 2016, Glencore employees allegedly conspired and manipulated the price of fuel oil bought from and sold to a particular counterparty, referred to as Company A in court documents, through private, bilateral contracts, by allegedly manipulating the Platts price assessment.