Glencore admits to oil market manipulation, bribery schemes, agrees to pay $1.1 billion

Divisions of Glencore PLC have pleaded guilty to price manipulation in the Houston and Los Angeles fuel oil markets and to paying intermediaries to bribe foreign officials for crude oil contracts and other purposes, the Justice Department announced May 24.

The company agreed to a $1.1 billion penalty, including $485 million for many years of price manipulation and $700 million for the violations of the Foreign Corrupt Practices Act. The price tag is a combination of criminal fines and forfeiture.

“This represents the Justice Department’s largest criminal enforcement action to date for a commodity price manipulation conspiracy in oil markets,” said US Attorney General Merrick Garland at a May 24 press conference on the cases.

The corporate guilty pleas were entered by Glencore Ltd. in the federal district court for Connecticut in the price manipulation case and by Glencore International AG in the federal court for the Southern District of New York.

“In addition to these corporate enforcement actions, the Justice Department has secured guilty pleas from two individuals—former Glencore traders—for their involvement in this conduct,” Garland said.

Price manipulation case

According to the Justice Department and court documents, the price manipulation involved orders to buy and sell (bids and offers) submitted to artificially manipulate two benchmark price assessments published by S&P Global Platts for fuel oil in Houston and Los Angeles.

The specific benchmarks were RMG 380 high-sulfur fuel oil at Houston and 380 CST intermediate fuel oil at Los Angeles. The manipulation occurred approximately from January 2011 to August 2019 and involved not only Glencore staff but employees at Chemoil Corp., which was majority owned by Glencore and then fully acquired by Glencore in 2014.

As an example, the Justice Department said that if Glencore had a contract to buy fuel oil, employees would submit offers during the daily Platts pricing “window” for the express purpose of pushing down the price assessment and hence the price of the fuel oil that Glencore purchased.

In addition to the financial penalties, Glencore agreed to continue to cooperate in any ongoing investigations relating to the price manipulation, to modify its compliance program, and to retain an independent compliance monitor for 3 years.

Money for foreign officials

Glencore also admitted to a decade-long practice of bribing government officials in seven countries—Nigeria, Cameroon, Ivory Coast, Equatorial Guinea, DR Congo, Brazil, and Venezuela. The Justice Department indicated that in most cases Glencore was paying third parties who bribed officials.

In Nigeria, Glencore engaged two intermediaries to pursue business opportunities, including the award of crude oil contracts, while knowing that the intermediaries would make bribe payments to Nigerian government officials to obtain such business, the Justice Department said.

Oil is the only commodity mentioned by the Justice Department in its public statements on the case, although Glencore is a diversified conglomerate with dealings in many commodities around the world.

The activities in various countries opened up Glencore to prosecution under the Foreign Corrupt Practices Act, which allows US prosecution of foreign activities where the governments involved might have weaker legal systems. Resolution of case involved coordinated investigation by criminal and civil authorities in the US, Britain, and Brazil.

“The scope of this criminal bribery scheme is staggering,” said US Attorney Damian Williams for the Southern District of New York. “Glencore paid bribes to secure oil contracts. Glencore paid bribes to avoid government audits. Glencore bribed judges to make lawsuits disappear.”

Williams added, “And it did so with the approval, and even encouragement, of its top executives.”

Glencore is based in Baar, Switzerland. It is one of the largest commodity trading companies in the world and also has made investments in minerals production.

The company was founded in 1974 as Marc Rich & Co. by Marc Rich and Pincus Green, two oil traders who met while both worked at the Philipp Brothers trading firm. In 1983, when both men faced indictment primarily on tax evasion charges connected to trading with Iran, they fled the US and lived as wealthy exiles in Switzerland, where Rich died in 2013.