Tags: Glencore | Fraud | Criminal | Case | IPO | Risks

Glencore Lists Fraud, Criminal Case Among IPO Risks

Wednesday, 04 May 2011 11:44 AM

Commodity trader Glencore, set to list this month in one of London's largest-ever offerings, has detailed its involvement in a Belgian criminal probe as it outlines risks to investors, including fraud and corruption.

Glencore said in a prospectus on Wednesday, ahead of its planned $11 billion listing, that its subsidiary Glencore Grain Rotterdam, a former employee and a current employee had been charged in a criminal case in Belgium.

Glencore said the criminal investigation was probing a public official, the European Commission's Directorate General for Agriculture and others for "violation of professional secrecy, corruption of an international civil servant and criminal conspiracy".

Glencore's unit and its current and former employees have been charged with having committed corruption in exchange for information on European export subsidies, it added.

The case was initiated in 2003, with co-operation from Dutch and French police, and covers facts dating from 1999 to 2003.

Glencore declined to comment on the case beyond details included in the prospectus. It says it is not involved in legal proceedings which could have a material impact on its profits.

Belgium's federal prosecutor confirmed on Wednesday that there is a criminal case against Glencore but declined to comment further. The case will be heard in Brussels on May 12.

The Commission, the European Union's executive arm, has become a civil party to the case, Glencore said. Glencore also listed in its prospectus over 30 other risks to the broader company, its marketing and trading operations.

The formerly publicity-averse trader and miner operates around the world and says its willingness to move into riskier countries in Eastern Europe, Central Africa and South America before rivals gives it a "first-mover advantage".

Companies typically outline a vast number of risks to future performance in the run-up to a listing, in order to satisfy requirements to provide a full picture for future investors.

Glencore, however, detailed more than many, with risks including declines in demand for commodities, geopolitical risk and the risk it may not be able to retain key employees.

It also raised the risk of fraud and corruption, "both internally and externally".

"Glencore's marketing operations are large in scale, which may make fraudulent or accidental transactions difficult to detect. In addition, some of Glencore's industrial activities are located in countries where corruption is generally understood to exist," the company said.

Glencore said it has internal controls, external due diligence and compliance policies.

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