LONDON – Glencore said it’s under investigation by the US Commodity Futures Trading Commission for possible corrupt practices, the latest legal headache for the world’s biggest commodity trader.
The probe comes after the London-listed company was subpoenaed last year by the US Justice department for documents relating to its dealings in Nigeria, the Democratic Republic of Congo and Venezuela since 2007.
Glencore said Thursday that the CFTC had notified it of investigations into whether the company and its subsidiaries "may have violated certain provisions of the Commodity Exchange Act and/or CFTC Regulations through corrupt practices in connection with commodities".
The company said it believes the CFTC’s investigations "have a similar scope in terms of subject matter" to the DOJ probe, which became public last July. CFTC spokeswoman Erica Elliott Richardson didn’t return a request for comment on the probe.
The commodity trading industry is facing a multitude of bribery and corruption investigations in jurisdictions ranging from Brazil to the US, drawing comparisons with the early 1980s when Glencore’s founder Marc Rich was prosecuted for tax evasion.
This is “clearly an unhelpful headline for Glencore, which reminds the market of the outstanding DOJ investigation", said Macquarie Group analyst Grant Sporre. “However I don’t think this will impact the size of the fine or sanction due to agreements on not duplicating fines.”
James McDonald, the director of enforcement at the CFTC, said last month in a speech that the agency was investigating overseas fraud and manipulation under the Commodities Exchange Act. While he didn’t refer to any specific investigation, he gave several examples of types of behavior the regulator was looking into, including:
Paying bribes to secure business in connection with activities like trading, advising, or dealing in derivatives. Using corrupt practices to manipulate benchmarks that serve as the basis for derivatives contracts. Altering through corrupt practices prices in commodity markets that drive US derivatives prices.
"Companies and individuals engaging in foreign corrupt practices should recognize that this sort of misconduct might constitute fraud, manipulation, false reporting, or a number of other types of violations under the CEA, and thus be subject to enforcement actions brought by the CFTC," he said in the speech in New Orleans.
In its annual report, Glencore disclosed that it incurred $24-million of legal costs last year related to the DOJ investigation. Glencore’s shares have declined about 8% since that probe began last year, even as most miners gained. Investor sentiment is still negative regarding Glencore, analysts at Jefferies noted last week.