Glencore fails to disclose royalty payments for US-sanctioned businessman Dan Gertler

Report suggests car and electronics makers struggling to manage corruption risks in supply chains, as required by OECD

PARIS – April 24, 2019 – Glencore owed US-sanctioned middleman Dan Gertler an average of more than $200,000 a day in royalties throughout 2018 for its cobalt projects in Democratic Republic of Congo, Resource Matters revealed today (1). The Swiss multinational failed to disclose how much it paid despite recent penalties on its subsidiary for insufficiently informing shareholders about its financial links with Gertler.

The revelation comes in a report detailing how major companies sourcing cobalt from DRC are not doing enough to mitigate potential corruption risks linked to Gertler and Glencore in their supply chains. This is inconsistent with their public support for OECD due diligence guidance on responsible mineral supply chains. This requires companies buying from high-risk zones like Congo to show they have taken steps to ensure their suppliers are not engaging in potentially corrupt activities. In 2018 Glencore supplied about one third of the world’s cobalt, a mineral that is key for rechargeable batteries in cars and electronics.

Gertler, Glencore’s longtime partner in DRC, has attracted scrutiny for his friendship with former President Joseph Kabila and allegations of bribery in mining asset sales. Glencore has kept paying Gertler royalties despite the US sanctioning him in December 2017, and despite an ongoing US investigation into Glencore’s potential violations of anti-corruption laws. In December 2018, a Glencore-controlled company settled with Canadian regulators after admitting it had not disclosed earlier contracts with and payments to Gertler-affiliated entities.

Glencore declined to comment on the measures it has taken to make sure the Gertler royalty payments are not used for illicit purposes, instead refering to its general anti-corruption policies. Gertler has systematically denied any wrongdoing.

The report, See No Evil, Speak No Evil launches at the OECD’s Forum on Responsible Mineral Supply Chains in Paris today. In collaboration with The Sciences Po Law School Clinic Program on Corporate Social Responsibility and Innovation, Resource Matters surveyed 14 companies (2) for which there is reason to believe they may directly or indirectly source cobalt from Glencore in Congo. Resource Matters asked them to explain what steps they had taken to contain the corruption risks arising from Glencore’s payments. None of them could show that they had adequately addressed this problem (3).

“For every $100 spent on cobalt from Glencore, more than $2 is owed to a company under US sanctions. Companies that want to make sure they’re not linked to illicit deals need to look at the Glencore-Gertler connection first,” said Elisabeth Caesens of Resource Matters. “Put simply, if they can’t show they have asked tough questions of Glencore about payments to Dan Gertler and got satisfactory answers, they can hardly claim to be clean. This report suggests they can’t.”

Resource Matters is calling for all big car and electronics makers to more rigorously identify and report on corruption risks and to conduct an independent audit of Glencore’s compliance with their ethics standards. As part of this process they should ask Glencore for proof that it has audited the payments it makes to Gertler-affiliated entities to ensure they haven’t been used for illicit practices.

“There are practical steps that companies sourcing minerals from Congo can take, as recommended in the OECD guidelines and specified in our report. With risks this stark, it’s not good enough to accept evasive or unsatisfactory answers.They must take responsibility.”

/ENDS

Notes to editors:

  • The report shows how two Glencore subsidiaries in DRC – Mutanda Mining and Kamoto Copper Company (KCC) – owe royalties to Ventora Development Sasu, a Gertler-affiliated company. The Glencore group has reported that KCC owes royalties amounting to 2.5% of net sales. A conservative estimate of these royalties after charges in 2018 is US$ 28.46 million. According to Glencore, Mutanda owes royalties amounting to 2.43% of gross sales, which comes an estimated US$ 45.75 million for the year. This estimate is slightly lower than Glencore’s own – it had planned to pay about 10.5 million euros per quarter, about US $47,45 million. Note that these amounts reflect what is owed, not what was actually paid, since some of the payments may have been offset against prior royalty advances. For full methodology, see the report at resourcematters.org.
  • The companies surveyed are Apple, BMW, CATL, Daimler, Ecopro, GEM, LG Chem, NEVS, Peugeot, Renault, Samsung SDI, Umicore, Volkswagen and Volvo.
  • Resource Matters asked Glencore’s 14 cobalt buyers what steps they have to mitigate the corruption risk resulting from Glencore’s ongoing payments to Gertler, despite the sanctions. 75 per cent would not say how they handled the situation, while the remaining 25 per cent had accepted Glencore’s response that no convictions had happened yet. Given Glencore was still due to make payments to Gertler, who had been sanctioned, this approach is   insufficient.

 

Categories

Categories:

Regions:

Resources:

Project: ,

Types:

Languages:

Matters:

Conpanies: