Glencore cuts out intermediaries as scrutiny grows

Bloomberg

Glencore Plc is cutting out many of its intermediaries — the agents and dealmakers once essential to cracking the toughest markets — amid growing scrutiny of its operations around the world.
Under pressure from its compliance division, Glencore is dismantling much of its glo-bal network of trading agents, according to people familiar with the situation. To continue operating, the company is setting up teams in some countries, said the people, asking not to be named as the matter is private. In other places, Glencore is still using agents who pass strict compliance tests and have a clear role.
Glencore has long relied on intermediaries, who work on commission. The agents network with well-connected business and government officials in developing nations with the goal of securing commodity-trading deals. In a prospectus in 2003, for example, Glencore listed 64 field offices around the world, saying that included nine agents in eight countries “which act primarily for us.”
The change comes as the trading house founded by Marc Rich transitions from its swashbuckling roots towards a more conventional mining company and predates a
Department of Justice investigation into its business practices. Chief Executive Officer Ivan Glasenberg is also searching for a successor as the company goes through a generational shift and many of his top lieutenants retire.

CONGO TEAM
One country where Glencore has overhauled its operating strategy is Congo, the home of some of the richest copper and cobalt mines. In the past, now-sanctioned Israeli billionaire Dan Gertler was its key partner. Now the company has built its own
administrative team in the capital Kinshasa. Glencore directly employs more than 20 people, working on everything from arranging visas to government contacts, according to one of the people.
The pivot echoes that of rival oil and metals trading houses. Both Trafigura Group Ltd. and Gunvor Group Ltd. say they plan to use fewer intermediaries in foreign countries after a series of bribery scandals involving the controversial agents put the industry in the sights of US law enforcement.
Glencore is being investigated by the US Department of Justice, the Federal Bureau of Investigation and Brazilian authorities in the Car Wash scandal. The firm has also been subpoenaed by the Justice Department for documents relating to possible corruption and money laundering in Nigeria, the Democratic Republic of Congo and Venezuela. The US Commodity Futures Trading Commission is also investigating the company for possible corrupt practices.
Glencore, Trafigura and Gunvor have said they have a zero-tolerance policy on bribery and corruption. Glencore has said it’s cooperating with the Justice Department.
The investigations coincided with several management changes over the past six months, including the announcement of the departures of the billionaire heads of copper and oil. CEO Glasenberg said in December he would retire in three to five years and is actively searching for a successor.