BM: What the Glencore conviction tells us about corruption and bribery in oil & gas

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Baird Maritime writes:

Last week the Swiss-headquartered and UK-listed mining company and trading house Glencore was sentenced in the UK for seven counts of bribery.

Glencore pleaded guilty to the charges that the company’s agents and employees had paid bribes of US$29 million to win contracts to sell oil on behalf of various state-run energy companies between 2011 and 2016. As a result, the judge, Mr Justice Fraser, announced that Glencore Energy UK must pay fines and restitution of £280 million (US$313 million) as well as all the costs of the Serious Fraud Office (SFO), which led the investigation.

The judge said Glencore had benefited from its criminal conduct by over US$100 million, which will be confiscated and is included in the total penalty above. Glencore has 30 days in which to make payment.

US$1.5 billion sounds a lot…

In June, Glencore admitted to massive bribery in Africa, as we mentioned here. Glencore accepted guilt in this wide-ranging corruption scandal, which stretched across multiple jurisdictions over many years, and involved both kickbacks to win oil shipments in Nigeria, Equatorial Guinea, Ivory Coast, South Sudan, and Cameroon, and the manipulation of American fuel oil price benchmarks.

Following these investigations, Glencore agreed to pay out a total of around US$1.1 billion as a settlement with the authorities in the US, and another US$40 million as a settlement with the Brazilian government. This sentencing hearing has now confirmed the penalties due in the UK.

The total penalties are less than 15 per cent of Glencore’s first half profits of US$12 billion (here) and a drop in the ocean compared to the company plans to return US$8.5 billion to its shareholders in 2022 through dividends and share buybacks.

Rather ironically in light of these large profits and payouts, the British judge said that Glencore’s fine must be “sufficiently large to have a financial impact… otherwise, there is a risk that companies such as Glencore will see penalties for bribery as… merely a potential extra cost of doing business”.

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