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Tuesday, June 21, 2022

Profit over People

Lay Mohan delves into the devious dealings of a multinational corporation

Last week, Glencore Plc pled guilty to charges of bribery and market manipulation in the US, agreeing to pay $1.1bn in criminal fines and forfeiture, including $700million in penalties relating to a scheme of foreign bribery spanning seven countries.

Glencore is a multinational commodity trading and mining company, ranked tenth in the Fortune Global 500 list of the world’s largest companies. It controls over half the global copper and zinc trade, nearly a quarter of all barley and 10% of the world’s wheat trade, so if it didn’t help make the battery in your car or phone it probably still put the cornflakes on your breakfast table this morning.

As part of the scheme, millions in bribes were paid to foreign officials in Mexico, Brazil, Venezuela and the DRC, amongst others, in order to earn commodities contracts and avoid regulations and audits. As one U.S. Attorney, Damian Williams, stated whilst delivering the announcement of Glencore’s guilty pleas, ‘Glencore paid bribes to make money’, and did so in the many millions.

The details exposed through the investigation paint a picture of an at-times cartoonishly underhand operation, with code words like ‘newspapers’ and ‘chocolates’ reportedly being used by traders when discussing bribes in writing, with one intermediary emailing a correspondent that ‘the newspapers will be delivered’ by them in person, and so-called ‘cash-desks’ being run out of offices in Switzerland and London as recently as 2016, where, one can only imagine, wads of cash and gold bars were stuffed into grey briefcases and carried nimbly away by long-coated, cigar-smoking, bowler hatted men with beady eyes and whiskery moustaches.

“As one U.S. Attorney, Damian Williams, stated whilst delivering the announcement of Glencore’s guilty pleas, ‘Glencore paid bribes to make money’, and did so in the many millions.”

As far as poor business practices go, this is certainly not Glencore’s first rodeo. Unethical and corrupt, or as headlines love to describe them: ‘murky’ and ‘sleazy’, tactics have been essential to the Glencore way since its founding in 1974. The NYT describes Glencore’s methods in the following characteristically cautious terms: “Among the hallmarks of its business approach is a higher tolerance for politically murky situations, which translates into a willingness to venture into countries where rivals will not.” The list of Glencore’s bed fellows bring together some of the most despicable regimes and crises of the last half century, from apartheid South Africa to the Iraq war- were there oil in Flanders Fields you could be certain Glencore would bribe both sides to make a buck, if only they were around then – thank goodness they weren’t. These days, when it’s not outright dismantling the foundations of democracy in developing countries, it still dabbles in illegal toxic waste disposal and labour rights violations, including the use of child labour, as well as regular tax fraud on the milder side of things.

From its conception, Glencore has been a company that not only places profit over people and planet, but actively disregards the value of the latter two unless serving some purpose in the pursuit of the former. Glencore founder Marc Rich once famously said of corporate transparency due to public listing that it “limits your activity, to be sure, but it’s just a new strategy to which they have to adapt”. The Glencore business model is essentially just endless exploitation and expansion, executed ruthlessly and with a presumptuous disregard for the law of any and all governments. Its founder created and embodied this model, making over $2.5bn with the company by selling oil and minerals on behalf of the likes of Saddam Hussein before going on the run for over 17 years having been indicted on 65 criminal counts, only to be pardoned by Bill Clinton on his [Clinton’s] last day in office. It’s unclear exactly how much like his predecessor the new chief exec. Ivan Glasenberg is, but considering this headline from a 2011 Times article regarding his conduct that reads ‘Billionaire ignored children’s pleas to stop toxic pollution from mine’, the chances of seeing either of them at Heaven’s pearly gates seems slim.

Glasenberg, who oversaw the company during the period the scheme was in operation, could alone pay off all the fines out of pocket and still have a neat £7.4bn left in the bank. Attorney Damian Williams stated on behalf of the US Justice department that bribes were paid by Glencore in the millions not due to the negligence, but ‘the approval, and even encouragement, of its top executives’. Reports of the investigation mention three executives, all unnamed who condoned and oversaw illicit payments and transactions. Two of the three are easily identified as Alex Beard, head of oil from 2007 to 2019, and Telis Mistakidis, head of copper till 2018. (Consider ‘Executive 1’, for example, as one unnamed exec is referred to in reports, who the DOJ said had agreed to the use of $14mn to pay bribes to Nigerian officials and who is described as a ‘UK citizen’ who, in their role, ‘had responsibility over Glencore’s sale and purchase of oil worldwide’ from 2007 to 2019. Who might that be? I guess we’ll never know.) Of Beard, Mistakidis and Glasenberg, not one has faced so much as a slap on the wrist.

Sensational details of code names, cash desks, ridiculous pay checks and CEO’s on the run can obscure the more plainly tragic truth of Glencore’s actions and their consequences. The reality is that these bribes propped up despotic regimes in failing states and disrupted the already fragile political ecosystems of many developing countries by compromising judges, politicians, regulators, and other members of those essential institutions that form the bedrock of democracy. In the name of securing lucrative contracts, dodging government audits and ultimately of making money, Glencore toyed with some of the most volatile countries in the world, ultimately leaving the poorest and most vulnerable of these worse off.

“Of Beard, Mistakidis and Glasenberg, not one has faced so much as a slap on the wrist.”

The DRC lost at least $1.4bn as state-owned mines were undersold to Glencore who made the purchases with the aid of billionaire Gertler who is accused of having made his $2.5bn fortune by “looting Congo at the expense of its people”. Whatever aid Gertler gave, he is still receiving royalties from Glencore, all in euros though, of course, since Gertler has been cut out of the US financial system entirely following sanctions placed on him by the US in 2013. More recently, Glencore has been enjoying the spoils of the former state mines rich in the increasingly in-demand cobalt and copper used to make batteries in electric cars, amongst other things. This has, of course, not be done without a fair share of tragedy and scandal, with 43 illegal miners being killed at a Glencore facility in just one week in 2019.

One might defend Glencore’s practices in developing countries in particular by saying that the company is just doing as the Romans do – doing what it takes to do business with already corrupt state officials, and domestic firms. Their profiting off of resources in developing countries like the DRC is necessary because the state does not have the technology nor the expertise to do this nearly as efficiently itself, and don’t the local people gain too by the jobs created by Glencore’s mines and factories?

“It is almost as if Glencore gains when these countries continue to be unstable and corrupt.”

Without getting into a full-blown denunciation of the neo-liberal global supply chain, to these defences of Glencore I have to say no. Of the jobs Glencore brings, they are often those that existed before that are unsafe, underpaid and nothing to be grateful for, especially considering what conditions Glencore could give some of these workers at the small expense of some miniscule fraction of the average $200mn revenue it rakes in each year. Also, the DRC may not be able to employ the same expertise as firms like Glencore but it’s worth noting that neither did Britain or the US when they were first industrialising in the 19th and early 20th century, and yet, somehow, they did it. Still, sharing valuable information about how to exploit these resources would be useful, yet the cost of such an education should not be the nation’s democracy which, invariably the people lose faith in each time another prospective election candidate sells off a slice of the country’s wealth in return for a hefty anonymous campaign donation. The damage done to countries’ political fabric might just be the hardest to recover from, since it is the health of these state mechanisms that determines how successfully countries can respond to concerns around health regulations in mines or the underselling of state contracts, for example. It is almost as if Glencore gains when these countries continue to be unstable and corrupt.

The fact is that corruption costs the world at least 5% of its net GDP and developing countries shoulder $1.26trn of this loss every single year. Ultimately developing countries, often former colonies, unstable and still grappling with the effects of empire and/or war, are bearing the burden of a scheme of which the lion’s share of profits will be wired back to the already-filthy-rich executives and shareholders of western trans-national corporations like Glencore and sit in Swiss banks without the people of the countries to which much of this wealth is arguably entitled seeing so much as a penny. Glencore’s model is a neo-colonial one, albeit more pragmatically profit-oriented, which places exploitation of the global south at the heart of its growth model and excludes its people entirely from net value calculations. Each penny made off a country’s resources or cheap labour was made at the expense of the future of that country’s people. The company is not the only culprit in such a scheme, but it remains one of the biggest to date.

Gary Nagle, who took over from former Chief executive Ivan Glasenberg just last year has said that Glencore ‘is a different company today that it was when these unacceptable practices occurred.’ With $1.1bn under the bridge, and shareholders quick to declare the matter closed, it appears little, besides the retainment of ‘independent compliance monitors both in the United States and overseas’ and a new chief, separates the old Glencore with the new.

In the end, without so much as leaving a dent in this year’s balance books, it’s hard to say how effective the justice department’s efforts will be in changing the company’s practices. A decade on, it seems Glencore is doing better than ever; indifferent, as always, to all but the profit margins.

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