Bitcoin hit a new record high this week after smashing through the $8,000 level for the first time over the weekend, marking an almost 50 percent climb in just eight days.
The new high came after leading U.S. payments company Square Inc said late last week that it had started allowing select customers to buy and sell bitcoins on its Cash app.
Bitcoin traded as high as $8,197.81 on the Luxembourg-based Bitstamp exchange, up over 2 percent on the day and around 48 percent up since dipping to $5,555 on Nov. 12.
An eye-watering eightfold increase in the value of the volatile cryptocurrency since the start of the year has led to muliple warnings that the market is in a bubble, and institutional investors are broadly staying away.
Retail investors, however, as well as some hedge funds and family offices, are piling into the market. The “market cap” of all cryptocurrencies hit an all-time high of over $242 billion on Monday, according to trade website Coinmarketcap.
Whether ratings agencies will cut South Africa’s rand-denominated debt to junk status split economists in a Reuters poll, just three days before an announcement that could trigger a selloff in local bonds and currency.
Downgrades to sub-investment grade could trigger forced selling of up to $12 billion of South African bonds and put more pressure on the rand.
Fitch has already downgraded ratings of debt priced in foreign and local currency to junk status. S&P Global has cut only the foreign debt rating and Moody’s is still one notch above sub-investment grade in both cases.
Thirteen of 25 economists surveyed on Monday said at least one of the major agencies would cut the local currency rating to junk on Friday. The other 12 said there won’t be a downgrade.
If both S&P Global and Moody’s cut local currency ratings to junk, South Africa will be ejected from Citi’s World Government Bond Index (WGBI).
“Following the medium term budget policy statement which did not deliver on fiscal consolidation, avoiding credit ratings downgrades on Friday has become less likely,” wrote Annabel Bishop, a chief economist at Investec.
However, South Africa is set for a potential game-changing period in coming months and credit agencies may wait.
Kim Silberman, an economist at Standard Bank, said because the outlook is based on the African National Congress leadership conference next month, it may make sense for agencies to wait until after the conference to make a decision.
“Three months just takes you past the February budget, allowing ratings agencies to make a more informed decision after the elective conference,” Silberman said.
Economists suggest the rand could fall five percent and benchmark 10-year bond yields rise 50 basis points immediately after a cut to junk for the local rating.
However, they indicated it is hard to say just how much bonds and the rand would sell off.
Ejection from the crucial bond indexes means passive investors mandated to invest in local bonds would automatically have to withdraw from those investments.
Agencies normally announce reviews after markets have closed, so Monday could be a busy morning for markets. (Reuters)
Editing by Larry Kign
Accra City Hotel has been awarded the Best City Hotel in Africa at the 2017 Africa Tourism Awards hosted by the World Tourism Forum – African Summit, in Accra.
This brings to five, the number of awards the Hotel has won within the last two years. The Hotel is the reigning Best 4-Star Hotel in Greater Accra (by Ghana Tourism Authority), the Best 4-Star Hotel in Ghana (by Ghana Hotels Association) and the Best Hotel in Customer Service. Meanwhile, the Hotel is awaiting the public announcement of an award it has won at the World Luxury Awards held recently.
The objective of the Africa Tourism Awards is to identify, recognize and reward establishments and individuals who have strived to promote Africa as an attractive tourist destination. The Awards serves as benchmark for excellence in the promotion of tourism in Africa.
In an interview with the media after receiving the Award, the Executive Director of Accra City Hotel and Group CEO of CDH Financial Holdings Limited, Emmanuel Adu-Sarkodee, said the honor is a testimony of the success of the strategic change that happened to the Hotel, nearly two years ago.
“Since the takeover of the brand, we have positioned it as a preferred destination for tourists and business travelers who visit our country. I believe we have done well to position, not just Accra City, but Ghana to attract footfall from tourists and tourism stakeholders,” Mr. Adu-Sarkodee said.
“Going forward, we will continue to do things that will put Ghana and Accra in the radar of travelers, through international hotel best practices, while serving as the microcosm of the popular Ghanaian hospitality,” the Executive Director added.
The General Manager of Accra City Hotel, Roman Krabel, said, "We're ecstatic that Accra City Hotel continues to be rewarded by the travel industry, and more importantly, by the guests themselves, for delivering a true experience of style, service and connection.”
¬¬Accra City Hotel also enjoys the pride as the first and only hotel brand with ISO certification in West Africa. This feat has attracted the confidence and trust of stakeholders of the hospitality industry in Ghana and beyond.
For 29 years, the brand led the way in positioning Ghanaian hospitality on the global stage. Reports say, the Hotel will soon construct a modern, multipurpose conference facility to serve the Ghanaian and international hospitality market.
A vast new trove of 13.4 million leaked documents dubbed the Paradise Papers have been published by the International Consortium of Investigative Journalists (ICIJ) exposing the offshore banking activities of more than 120 politicians around the world.
Included in the leak are documents connecting U.S. Commerce Secretary and billionaire financier Wilbur Ross to a shipping company that does business with Russian President Vladimir Putin’s son-in-law.
The leak is the latest to draw back the curtain on the shadowy world of offshore banking where shell companies allow the wealthy, kleptocrats, or anyone else with something to hide to conduct business largely in secret in known tax havens. This trove, which comes largely from Bermuda-based Appleby law firm, reveals offshore ties of a dozen Trump Cabinet members, advisors, and donors. It also shows the connections between a major investor in Twitter and Facebook with Russian state-owned businesses.
The documents very much resemble the massive Panama Papers leak of 2016, and were obtained much the same way: an anonymous source leaked them to the German newspaper Suddeutsche Zeitung, which shared them with the International Consortium of Investigative Journalists and several other news organizations which published their reports simultaneously Sunday afternoon.
Like the “Panama Papers,” the new trove of documents will provide source material for investigations that may last for months. It comes at an awkward time for the Trump administration as Special Counsel Robert Mueller’s team is issuing indictments and Facebook and Twitter are facing questions of how they were used as tools by Russian interests to influence the 2016 election.
Here are the big takeaways:
WILBUR ROSS’ CONNECTION TO PUTIN “CRONIES”
Secretary of Commerce Wilbur Ross, a long-time business partner of President Donald Trump, still has investments in a shipping firm with significant ties to Russian President Vladimir Putin’s son-in-law and a Russian oligarch under American economic sanctions — “cronies of Putin,” in one analyst’s words to The Guardian
Ross divested himself of many of his investments upon entering the Trump administration where he has been a strong supporter of the president’s “America First” agenda. But the leaked documents reveal that Ross kept a multi-million dollar investment in Navigator Holdings, a shipping company that makes millions every year moving gas for Russian energy company Sibur. The owners of Sibur include Putin’s son-in-law Kirill Shamalov and Gennady Timchenko, the Russian president’s close friend and Judo partner.
Ross’ holdings in Navigator were disclosed at the time of his confirmation hearings in front of this Senate earlier this year but the holdings did not receive additional scrutiny. Ross’ spokesman claimed the deal had been signed in February 2012 before Ross joined on March 31 of that year. But a press release to the Securities and Exchange Commision on March 2 stated that Ross was already on the board, according to reporting by The Guardian.
Before entering the Trump administration, Ross’ net-worth was estimated to be in the billions of dollars. His appearance in the Paradise Papers is another example of the labyrinth of financial tools the ultra-rich use in order to gain leverage and at odds with Trump’s populist promises to stop the elites from ripping off American workers.
Ross is just the latest member of Trump’s orbit to have close financial ties with Kremlin-aligned actors. The federal government indicted and arrested Trump’s former campaign chairman Paul Manafort this past week in part for his work lobbying on behalf of the Russia-friendly president of Ukraine. Manafort also had an intricate maze of offshore accounts where he hid money from U.S. scrutiny.
There is no evidence that Ross is under scrutiny by special prosecutor Robert Mueller but yet another Russia connection is not welcome news for the Trump administration.
A spokesman for Ross told the New York Times that the commerce secretary “recused himself from any matters focused on transoceanic shipping vessels, but has been generally supportive of the administration’s sanction of Russian and Venezuelan entities.”
FACEBOOK, TWITTER WERE PARTLY FUNDED WITH RUSSIAN MONEY
The Paradise Papers link the Russian government to investments in Facebook and Twitter through the firm of Russian-American billionaire and Silicon Valley impresario Yuri Milner.
Records indicate that two Kremlin-controlled entities — VTB Bank and the energy conglomerate Gazprom — partnered with Milner’s investment fund DST Global to acquire sizable chunks of Facebook and Twitter. VTB bank paid $191 million for a stake in Twitter in 2011, and a Gazprom subsidiary financed a company that worked with DST Global on the Facebook deal.
Milner, Gazprom, and VTB Bank all made a killing on the deals, selling their stakes after Facebook’s 2012 initial public offering and when Twitter went public in 2013. Milner’s funds, the New York Times notes, controlled more than 8 percent of Facebook and 5 percent of Twitter before the stakes were sold off.
Though the Russian government appears not to have used its stakes to affect the decision making at Facebook or Twitter, the revelation comes amid growing scrutiny of how Russian agents used the social networks to influence the 2016 election.
Facebook, Twitter, and DST Global did not immediately respond to requests for comment from VICE News. In interviews with ICIJ, Milner stressed that the Russian government entities were passive investors and that “it never even occurred to me back then that VTB Bank was not just another investor for us.”
On Glencore, one of the world’s largest mining and agriculture companies.
The Glencore Room at Appleby’s Bermuda office wasn’t much to look at.
Across from the women’s bathroom, the room dedicated to one of the offshore law firm’s most important clients held a filing cabinet, a computer, a telephone, a fax machine and a checkbook. Once, in 2009, it was turned into a party space. “It’s my B-Day,” wrote the party giver. “Cake is on the 2nd floor in the Glencore Room.”
But, modest as it was, the room held plenty of secrets.
“Glencore” is Glencore PLC, one of the world’s largest mining and agriculture conglomerates, ranked 16th on the Fortune Global 500 list of largest corporations, with revenue last year of more than $170 billion. It is the world’s largest commodity trader, a supplier of zinc and cobalt, a trader of wheat and a merchant of chickpeas; its products touch virtually anyone who has driven a car, held a smartphone or eaten a slice of bread.
Glencore has also been a major presence inside the offices of government investigators who have probed, fined and criticized the commodity giant for years.
Now, a leak of offshore financial data from the Glencore Room and beyond has yanked back the curtain, and some of Glencore’s biggest secrets are open to scrutiny.
The data, called Paradise Papers, comes from the offices of the offshore law firm Appleby and corporate services provider Estera, which operated together under the Appleby name until 2016. Copies of 6.8 million of files documenting decades of activity inside the Bermuda main office and other offices were obtained by German newspaper Süddeutsche Zeitung and shared with the International Consortium of Investigative Journalists and 94 media partners.
The files on Glencore contain confidential emails, board minutes, tax restructuring diagrams, billion-dollar loan contracts, sales agreements and frank conversations about what rules could and could not be bent as part of a “risk/reward debate.”
The records shed light on how a global colossus, aided by a trusted offshore law firm, uses financial havens to cloak its lucrative dealings in secrecy even as it wields vast influence in resource-rich but corruption-plagued parts of the world. The Appleby documents show that Glencore diverted millions of dollars through Bermuda and other tax havens and fought off lawsuits and tax bills in Europe and the Caribbean.
But it is in the world’s poorest country – the Democratic Republic of the Congo, where Glencore acquired an interest in major copper mines – that Glencore’s history is revealed in greatest detail through the leaked documents. Over the years, investigators have tried to piece together the full extent of the relationship between Glencore and Daniel Gertler, an Israeli businessman with friends in high places in the DRC, who helped Glencore negotiate access to the sprawling Katanga mine. The new revelations, unearthed in more than a thousand pages of documents, set out how Glencore provided a $45 million loan to a Gertler-controlled company while he helped Glencore strike a deal for the mine with DRC officials.
The leaked files provide the most detailed evidence yet of the behind-the-scenes lobbying and the money flows that helped Katanga, in which Glencore was just a shareholder at the time, acquire mining licenses. The files also raise questions about how Katanga, which was later taken over by Glencore, managed to pay a price that critics have viewed as less than the licenses’ real value.
In response to questions from ICIJ, Glencore said that the price for the mining licenses was agreed to before Gertler entered the negotiations and that its loan to the company controlled by Gertler was “made on commercial terms” with standard provisions in place.
Glencore also said that it had recently moved most of its Bermuda entities to Switzerland or the United Kingdom.
The Katanga mine
As a new century began, the Democratic Republic of the Congo was a chaotic place. A long-running civil war ended in 2003, and the country’s first elections in 40 years were held in 2006. Under the leadership of President Joseph Kabila, the DRC set up a panel to review mining contracts with foreign companies. The review spread confusion through corporate headquarters in Europe, Asia and the Americas, including the offices of Katanga Mining Ltd.
The Canadian-headquartered mining company held rights to valuable copper deposits in the DRC, and Glencore, already a Katanga shareholder, was eying the mine with ever greater enthusiasm.
By early 2008, with the DRC’s contract review looming and with hundreds of millions of dollars in investment at stake, Katanga and its shareholders had to act.
Initially, Katanga had believed that it had little to worry about, according to one of hundreds of fly-on-the-wall revelations found in meeting minutes from Appleby’s client archive. Despite the “political overtones” of the government’s review panel, Katanga’s chief executive told board members in February 2008, the country was unlikely to want a bigger stake under an existing joint venture agreement.
Months later, however, the DRC state mining company that negotiated mining contracts with private investors began to insist on changes to Katanga’s proposals as to how the mine would be run. The Congolese government mining company made a series of counterproposals that were “quite unacceptable,” the Katanga board agreed at a June 2008 meeting.
Then the board hit on a plan.
“Dan Gertler, who had a substantial indirect interest in the Company, should be given a mandate from the Board to negotiate with the DRC authorities,” Katanga’s board agreed at the June 23 lunchtime meeting, held at the Hilton hotel by the Zurich airport. Among the Katanga board members was Glencore shareholder and director Aristotelis Mistakidis.
Gertler, an Israeli diamond and copper dealer who held his shares in Katanga through an offshore trust, was well-connected in the DRC. He was particularly close to President Kabila’s righthand man, Augustin Katumba Mwanke. Lawyers for Gertler told ICIJ that the two men only became acquainted “on a personal basis” after Katumba’s retirement from government.
Known to many Congolese as “God the Father,” Katumba was also known as the man to see for anyone seeking access to the DRC’s enormous natural resources reserves.
On one occasion, Gertler, Katumba and their families vacationed together aboard a yacht on the Red Sea before Katumba was to check into an Israeli hospital for an operation. After the operation went awry and Katumba slipped into a coma, Gertler rushed in 13 doctors, including three from London.
“In the 12 days I spent in the hospital, Dan didn’t leave me,” Katumba later wrote in his memoirs. “He left everything, his business, his family, his life. He was at my bedside day and night.” In Katumba’s telling, Gertler saved his life.
Gertler’s closeness to the regime has drawn international scrutiny. In 2001, two related United Nations reports on the exploitation of the DRC’s natural resources – including “conflict diamonds,” or precious stones that are traded to finance feuding armies – had described Gertler’s friendliness with Kabila and reported that one of Gertler’s companies received a lucrative diamond-mining monopoly. One of the reports alleged that, as part of the deal, Gertler agreed to exchange diamonds for the delivery of weapons to Congolese armed forces at a time when human rights observers reported that feuding national armies, militias and warlords were killing and raping indiscriminately.
Years later, in 2013, an expert panel led by former U.N. Secretary-General Kofi Annan alleged in a report that Gertler’s companies had acquired mining assets from the DRC for an average of one-sixth of their commercial value.
Gertler’s lawyers told ICIJ that he denied allegations in the 2001 U.N. reports and that he had not been given an opportunity to comment before publication. The United Nations has not cited him since 2001, his lawyers said. Gertler’s lawyers told ICIJ that his companies were not given the opportunity to respond to allegations made in the 2013 report, allegations that the companies “categorically refute.”
“Mr Dan Gertler is a respectable businessman who contributes the vast majority of his wealth and time to the needy and to different communities amounting to huge sums of money,” his lawyers told ICIJ. “He transacts business fairly and honestly and strictly according to the law.”
Optimism, gloom, persistence
The Financial Times, Bloomberg, anti-corruption nonprofit Global Witness and others have spent years piecing together deals involving Glencore, Gertler and the DRC’s leaders as part of an effort to understand how one of the world’s wealthiest countries in terms of its natural resources has remained so poor. Now the leaked files from Appleby’s archives have revealed month-by-month accounts of the ways Glencore relied on Gertler’s assistance.
Soon after the June 2008 agreement in Zurich to enlist Gertler, Katanga celebrated some good news. “Dan Gertler had fulfilled his mandate very well,” the company’s outgoing CEO told the board of directors in a conference call a month later, according to Appleby’s internal files. “The meetings over the last 2 days had been extremely productive.”
A new memorandum of understanding called for an additional $10 million in future royalties to be paid the government, but, all in all, Katanga’s board expressed its approval of the agreement.
In October 2008, Glencore appointed a Glencore managing director, Steven Isaacs, interim CEO of Katanga. And soon, the DRC’s state mining company was back with more demands, including “additional monies” totaling $585 million for a signing bonus.
To resolve this “vitally important matter,” the board decided that four Katanga directors, including Isaacs and Mistakidis, “would have a discussion with Dan Gertler” again.
As the directors worried over the government’s demands for more money, the company was hurting for cash. Records show Katanga was seeking money from potential investors to help it continue trading.
Then a windfall came through.
A timely loan
In February 2009, Katanga announced to the Toronto Stock Exchange a sizable loan from Glencore and others, including Lora Enterprises, a British Virgin Islands company owned by a trust that benefits Gertler’s family. Details were sparse.
In 2014, Global Witness, the U.K.-based anti-corruption nonprofit group, published documents showing that Glencore had lent the capital that Gertler’s company in turn lent to Katanga. Gertler’s company and Glencore then acquired new shares in Katanga.
Now documents and exchanges discovered in Appleby’s files provide further insight into how Glencore’s loan to Gertler’s company kept the well-connected Israeli by Glencore’s side as a Katanga stakeholder as Katanga entered the final months of negotiation with the DRC government.
Here’s how the loans came about: On Jan. 9, 2009, when negotiations with the DRC were still flailing, Glencore sent its Bermuda lawyers documents that included one called a term sheet. “Glencore shall use its vote at the board of Katanga to seek to have Dan Gertler exclusively mandated to assist Katanga in finalising the terms of the joint venture,” the term sheet stated.
One document authorized Glencore’s in-house counsel and Mistakidis, the Glencore director who also sat on Katanga’s board, to approve a $45 million two-year loan to Lora Enterprises.
The term sheet shows that Glencore had the right to demand repayment of the loan if the joint venture Gertler was helping to negotiate with the DRC wasn’t finalized within a few months. In other words, Glencore’s $45 million loan to Gertler was contingent on the DRC authorities agreeing to a deal with Katanga.
“The Lora loan agreement reflects appropriate terms negotiated on an arm’s length basis,” lawyers for Gertler told ICIJ and its partners, adding that it was not uncommon in African mining transactions for the lender to demand repayment of a loan if a joint venture fails. The Lora loan was repaid in full in 2010 and “neither Lora Enterprises nor Mr. Gertler nor any company or person related to them received the loan funds directly,” lawyers said.
In March, two months after agreement was reached on the term sheet, Katanga’s CEO announced to a board meeting that he had met with Gertler in Kinshasa, the Congolese capital. “As a result . . . revised proposals were made by Katanga which has resulted in the resolution of most issues” with DRC authorities, according to the minutes of the meeting.
Not only was the deal moving ahead, the CEO said, but Katanga had persuaded the DRC to accept a signing bonus worth $140 million, instead of more than $580 million. The reduced bonus meant that Katanga would pay one quarter of what almost all other mining companies would have paid, on average, per ton of copper at the time, according to Elisabeth Caesens, an expert in Congolese mining deals who reviewed the leaked documents.
The Katanga-DRC deal was inked in July 2009, weeks after Glencore had increased its stake in Katanga again, to near total control.
“The documents reveal that if Gertler failed to get that contract amended, Glencore could have demanded immediate repayment of the $45 million loan,” Caesens said.
“In doing so, Glencore disregarded the many red flags Mr. Gertler’s connections and track record should have raised and exposed itself to the risk of non-compliance with anti-corruption rules,” said Caesens, who advises the Carter Center, the nonprofit human rights group founded by former U.S. President Jimmy Carter.
Glencore’s chairman told ICIJ media partners during the company’s 2017 annual meeting that its background checks on Gertler were “extensive and thorough.” In a written response, Glencore also said the signing bonus deal was decided before Gertler’s mandate.
Lawyers for Gertler said “clearly and unequivocally” that allegations that loans were used to make corrupt payments are “false and without any basis whatsoever. . . . Mr. Gertler vehemently rejects them absolutely.”
Katanga did not receive preferential treatment for the joint venture as a result of Gertler’s involvement, his lawyers told ICIJ and media partners. All negotiations were carried out on a legitimate basis, the lawyers said.
In February 2017, Glencore bought Gertler’s stake in major DRC mines, including Katanga, for more than $500 million.
After 10 years of business negotiations and thousands of pages of documents circulated through offshore companies, Glencore and the DRC now own the Katanga mines almost in their entirety.
Five months before Glencore bought out Gertler, the U.S. Justice Department settled a bribery case brought against the New York-based hedge fund Och-Ziff Capital Management Group under the Foreign Corrupt Practices Act. The Justice Department’s discussion of the case made mention of Lora Enterprises, which the settlement described as controlled by an unnamed Israeli “DRC partner” widely believed to be Gertler.
The Justice Department alleged that an Och-Ziff company lent Lora Enterprises $110 million in November 2010 and that between then and February 2011, “DRC Partner caused approximately $20 million in corrupt payments to be made to various DRC officials,” including to unnamed “DRC official 2,” believed to be Augustin Katumba Mwanke. In Sept. 2016, an Och-Ziff subsidiary pleaded guilty and agreed to pay $413 million in penalties and fines.
The Justice Department’s agreement with Och-Ziff “does not constitute evidence of anything against Mr. Gertler,” his lawyers said. “To the extent such agreement is alleged to relate to Mr. Gertler, it did so without any participation by him or any opportunity to provide any comment whatsoever. … Mr. Gertler rejects absolutely any allegations of wrongdoing or criminality by him.” DRC President Joseph Kabila did not respond to repeated requests for comment. Katumba died in a plane crash in 2012.
Lora Enterprises was not charged in the Och-Ziff case, which did not involve Glencore.
Marc Rich a ‘Corporate Titan’
Glencore’s sharp-elbowed business practices in post-conflict central Africa surprise no one familiar with the company and its history.
Glencore is the corporate successor to the trading firm founded by Marc Rich, the notorious financier who spent years as a fugitive on the FBI’s “most wanted” list before being pardoned by President Bill Clinton on his last day in office, in 2001.
A child refugee from Nazi-occupied Belgium, Rich attended private schools in Manhattan before dropping out of New York University to work at a metals trading firm, Philipp Brothers, now PhiBro, where he met his future partner Pincus Green. In 1974, they moved to Switzerland to form Marc Rich + Co AG – later changed to Glencore Xstrata PLC – trading iron and metals before expanding into Russian and African oil, European grain and more.
Rich, as a Vanity Fair profile would later put it, “flourished as a lender and a barterer with Third World and Eastern-bloc countries which were strapped for cash or in debt, and which had commodities for collateral that Rich could get hold of and sell for fat profits.”
In 1983, Rich and Green were indicted in the United States on charges related to tax evasion and evasion of an embargo against trade with Iran during the Iranian hostage crisis. Rather than face the 65-count indictment, Rich fled.
He continued to lead the company until 1993, when an audacious attempt to corner the global zinc market went awry, leaving the firm with $172 million in debt. Pressured by partners, Rich sold his majority stake in 1994 for a reported $600 million. The company was reborn as Glencore, the name reportedly drawn from the first two letters of each word in Global Energy Commodities and Resources.
Glencore thrived without Rich and, in 2011, was listed on the London Stock Exchange. Overnight, a handful of its shareholder directors became multimillionaires. CEO Ivan Glasenberg became so rich that the Swiss village where he lives, Rüschlikon, was able to cut municipal taxes for all other residents as a result of the increased taxes he paid. In 2013, Glencore completed its takeover of mining giant Xstrata in one of the largest-ever corporate mergers in the natural resources sector, creating one of the world’s biggest commodity traders and mining companies.
The Swiss-based company has worked hard to improve its image. It has funded antimalaria programs in Zambia, sponsored a turtle research boat for indigenous Australians and helped deworm cows, alpacas and llamas in Peru.
Still, Glencore is never far from negative headlines. In recent years, protesting employees have alleged dangerous working conditions and unfair wages in Canada, Australia, Burkina Faso, Namibia and Colombia. Australian scientists linked the company’s mining operations to air and soil contamination that had caused lead poisoning in children. After allegations of tax evasion in Zambia, the European Union’s development bank suspended loans in 2011 to a company subsidiary with a copper mine in Zambia. In the Philippines in 2012 and 2013, paramilitary forces killed three villagers during protests against a Glencore copper and gold mine, and in Argentina in 2017, a court suspended gold and copper mining operations partly owned by the company after pollution complaints. Glencore has denied allegations of wrongdoing in all of these instances.
And Appleby is there
Through it all, Glencore’s high-end offshore lawyer of choice has been Appleby.
Appleby had worked for Marc Rich for years on business matters, including real estate, even after his 1983 indictment in the United States. When news broke of Rich’s death in June 2013, a senior Appleby lawyer emailed Glencore’s top lawyer: “On behalf of the partners and staff of Appleby, please accept our sincerest condolences upon the passing of Mr Marc Rich. A true Corporate Titan of our times.”
Glencore was a longtime major client of Appleby, which spun off a large part of its corporate services and private wealth management business in 2016 as an independent company named Estera. Taken as a group, Glencore’s stable of 107 offshore companies made the conglomerate one of Appleby’s top clients.
Glencore has worked with Appleby on major projects with code names such as Project USA (when it bought Canada’s largest grain handler in 2012), Project Great Game (a business deal in Russia) and projects Ranger, Sunset, Everest and Pebble. A Glencore employee told Appleby that the company did not have a complete chart showing all its offshore entities “mainly because it would take up one wall :).”
The Glencore Room was intended to offer the company a “robust physical footprint” on the zero-tax island of Bermuda, according to a 2014 email from an Appleby managing director. The special room could have helped Glencore keep its taxes in check by convincing any curious tax collectors that the company was doing real business from the island, experts told ICIJ.
Glencore employs 800 people at its home office in Switzerland, according to Appleby’s files. At its financial subsidiary in Bermuda, the company had only an Appleby employee who moonlighted as an official stand-in Glencore director for a “very limited number of hours.” The employment contract was designed to keep the stand-in director below thresholds that would invoke payroll taxes and social security insurance coverage, according to a file note prepared by Appleby in May 2014.
Appleby’s files also reveal internal concerns about demands that Glencore, a reliable source of revenue, made on the Bermuda law firm over the years.
Once in 2006, an Appleby lawyer said he would refuse to sign a document that stated that $2 billion in loans from Glencore to its subsidiaries would “benefit the company.” His reason was that he had not read the document’s contents.
“This does raise the issue of our responsibility as directors and how we can discharge that to the satisfaction of the client and ourselves, in an acceptable time frame and for a reasonable remuneration,” he said. “That risk/reward debate is very much the topic.” The lawyer ultimately signed the document as requested.
Requests from Glencore that Appleby employees backdate documents sparked repeated flare-ups, Appleby’s client files reveal. In 2009, Glencore asked Appleby to sign a board approval motion on May 6 that was dated April 28. Glencore was being “sneaky in my view,” an Appleby administrator in Bermuda said.
In late 2013, an Appleby lawyer wrote a colleague to complain that Glencore was asking her to sign a document stating in effect that a Glencore company had approved a decision before it had, in reality, been made. “Glencore are up to their old tricks,” the lawyer wrote.
Glencore declined to comment on the practice of backdating documents. The company complies with its tax obligations, it told ICIJ. Appleby did not reply to detailed questions but issued a press release that stated: “We are an offshore law firm who advises clients on legitimate and lawful ways to conduct their business. We do not tolerate illegal behaviour.”
The two sides agreed to end retroactive dating of documents in 2014, according to notes from meeting held in Zurich.
Misery and survival
Far from Switzerland and far from the special room in Bermuda, Congolese people who live and work near the mines have their own concerns about Glencore’s operations.
Maj. Leonie Kamanda, a national park supervisor from Kisenda, a town close to another Glencore mine in the copper-rich Katanga region, has watched for years as the park’s vegetation turns yellow – a result, she believes, of mineral runoff from copper and cobalt diggings inside and around the park. Kamanda works within a protected hunting reserve where hippos, apes and buffalo coexist with mining operations run by various corporate parents.
Mining companies don’t respect the environment, Kamanda said, and deforestation is rife. Glencore says its environmental policies and practices meet and exceed international and industry standards.
Despite living in the DRC’s richest mineral region, 60 to 70 percent of the inhabitants of the region that is home to Glencore’s operations are reported to live in poverty. It had been at least 10 years since some towns close to the mine have had running water, said Christian Sapu Kankonde of the Institute for Good Governance and Human Rights. “The population finds itself left to its own devices to survive.”
“We are the ones on the ground,” said Daudet Kitwa Kalume, a human rights attorney in Kolwezi, the largest town close to Katanga Mining’s joint venture. “When you go around town, you can practically read the misery on people’s faces.”
Additional reporters: Katrin Langhans
Developing nations are facing a rising wave of illicit financial flows and money laundering. In South Africa the country’s Reserve Bank is at the forefront of managing the problem. Mills Soko asked South African Reserve Bank deputy governor and registrar of banks, Kuben Naidoo, to explain the scale of the challenge and what’s been done about it.
What are the key highlights of how to fight money laundering?
First let me just say that we don’t know how big the losses are, but South Africa must be losing billions, if not tens of billions, of rand in revenue through illicit financial flows.
The South African Reserve Bank plays two particular roles in dealing with money laundering and illicit financial flows.
Firstly, we assess the compliance of banks with the provisions of the Financial Intelligence Centre Act (FICA) and the relevant regulations. This is purely a compliance job to ensure that banks have the requisite systems, processes and procedures to be able to implement the act.
We do this through an auditing methodology. We ask a bank for a sample of customer accounts, let’s say 70 accounts. We then go through the sample to determine whether the bank has complied with FICA’s Know Your Customer requirements. Did they check the names of their customers against the United Nations database on criminal sanctions? Did they check them against the database of politically exposed persons? If anyone was on a list, did they do an enhanced diligence?
Then, we ask for all the transactions involving the 70 people and pick out suspicious transactions or those that fall within the cash threshold reporting requirements. And we check whether the bank’s systems flagged these suspicious transactions.
There is then a manual process that takes up to two weeks to see if these are indeed suspicious transactions. If they are, did the bank submit a suspicious transaction report to the Financial Intelligence Centre.
The second role we play involves enforcing the remaining foreign exchange controls and regulations in terms of the Currency and Exchanges Act of 1933 , a function delegated to us by the Minister of Finance. We monitor and enforce the foreign exchange aspects of cross border transactions. If a South African company or individual wants to take money out of the country above a certain threshold, they need foreign exchange control approval.
If, in the course of monitoring these transactions, we pick up violations of exchange controls, we have an administrative process to find out:
Why the person violated exchange controls?
If they want to declare what they’ve taken – what we call regularise?
Is there a sanction we can apply?
But we don’t have the ability to prosecute. We refer cases that are ready for criminal prosecution to the police who, after their own investigation, refer these to the National Prosecuting Authority for a decision whether to prosecute or not.
What are the big challenges that developing countries face in terms of tracking and curbing money laundering?
One of the challenges facing countries like South Africa is that it has relatively open capital markets. You can bring money in, and take money out within limits. At the same time, it also has significant amounts of corruption and crime, both of which are sources of illicit financial flows. While compliance has improved dramatically since 1994, there are still people who take a chance by avoiding taxes. The challenges therefore are: the corruption; proceeds of crime; and the legitimate South African businessmen who wants to avoid taxes.
What are countries like South Africa getting right?
The Financial Intelligence Centre – which is housed in the National Treasury – is a significant tool for monitoring the financial sector. But it’s limited to monitoring the formal financial sector. It also has a strong bias towards electronic transactions.
In general, the financial sector has a high level of compliance with the Financial Intelligence Centre Act. The act, and recent amendments, give the Reserve Bank significant powers to monitor transactions and require banks to report suspicious transactions. The legislative framework also creates room for greater cooperation among the three institutions - South African Revenue Service, the South African Reserve Bank and the Financial Intelligence Centre – to connect the dots and pick up patterns regarding money laundering, tax evasion, or fraud.
Where are the big gaps?
The financial reporting system that the South African Reserve Bank monitors is almost unique in the world. The bank has records of every ATM, debit card, credit card, or electronic funds transfer (EFT) transaction, whether done in South Africa or abroad. If a South African uses their card to buy coffee at Starbucks in New York the bank knows.
The system provides the bank with an opportunity for further investigation if it picks out what it believes are patterns of money laundering. But there are gaps. For example, South Africa’s remittance system allows transactions worth R3 000 per transaction, or R10 000 per month. There are almost no questions asked, only proof of identity. And there’s evidence that the remittances system is being abused.
Then there are gaps relating to South Africa’s trade with the rest of the world. For example, we have a 40% duty on imported clothing. You bring in a container load of shirts and tell the South African Revenue Service these shirts cost R10 each, and you pay R4 in import duties per shirt, but actually the shirts cost R100 each.
You now have to get R90 out of the country illegally to pay for the shirts. What you do is you send lots of gifts to somebody abroad. Alternatively, you set up a company and you apply for an advance purchase authority to pay for the imports. Once the payment goes through, but before the goods are delivered, the company collapses.
Or you say you are importing software for R50 million and you transfer R50 million and the exporter sends to South Africa a box of compact disks (CDs). Our customs officials have no way of knowing whether these CDs are worth R5 or R50 million. For all you know, they could be copies of Lionel Richie’s CDs.
Even though the legislative framework provides for cooperation, there is often not good cooperation between South African Revenue Service, the South African Reserve Bank and the Financial Intelligence Centre.
The last gap relates to law enforcement. We have given 151 cases to the police and/or the National Prosecuting Authority over the last 5 years, out of which there have been only two prosecutions . This might be because they don’t have the time, resources, expertise, skills, or the will to prosecute.
How can the gaps be closed?
This can be achieved through tighter cooperation between relevant institutions. And by creating better capacity to prosecute money laundering and illicit financial flows.
This is part of a series called Face-to-face interviews The Conversation Africa is running in which leading academics put questions to prominent individuals in the public, private and not for profit sectors.