Glencore shares on Tuesday tumbled the most in two years as U.S. authorities demanded documents relating to possible corruption and money laundering.
The world's biggest commodity trader said Tuesday it's been subpoenaed by the U.S. Department of Justice to hand over documents related to the Foreign Corrupt Practices Act and U.S money laundering statutes. The documents relate to the company's business in Nigeria, the Democratic Republic of Congo and Venezuela from 2007 to the present.
The shares plunged as much as 13 percent before paring some of the losses, wiping up to $8.8 billion off Glencore's market value, more than half the $14.8 billion of profit the company made last year.
Glencore owns one-third of the stock in the proposed PolyMet copper-nickel mine near Hoyt Lakes and is in line to buy all of the copper produced by PolyMet.
It's been a tumultuous year for Glencore, mostly due to challenges linked to its business in the Congo, where it operates giant copper and cobalt mines. The Swiss trader and miner is already facing the possibility of a bribery investigation by U.K. prosecutors over its work with Dan Gertler, an Israeli billionaire and close friend of Congo President Joseph Kabila, people familiar with the situation said in May.
"It's a very worrying development for any multinational to be subpoenaed by the U.S. Justice Department given their reputation for prosecuting foreign corruption and money-laundering aggressively," said Daniel Leader, a lawyer for Leigh Day in London. "The DOJ takes a very aggressive stance on jurisdiction so it's sufficient for the transaction to be in U.S. dollars for them to say they have jurisdiction."
Glencore said it's reviewing the subpoena and will provide further information as appropriate. The shares dropped to the lowest in almost a year and were down 5.3 percent by 2:10 p.m. in London.
The DOJ usually issues subpoenas when it is investigating a company. In December, a Swiss court ordered companies controlled by Gertler to hand over bank documents to U.S. Federal prosecutors.
"Given the flow of negative news we've had through the course of this year, the knee-jerk reaction is worse than it otherwise might have been," Hunter Hillcoat, an analyst at Investec Securities Ltd., said by phone. "The DOJ fines can be big, but to wipe out 10 percent of the market cap would be bigger than any fine I can recall."
While Glencore didn't specify exactly what the DOJ is investigating, it has faced legal challenges in DRC, Venezuela and Nigeria that might suggest where authorities are focusing their probe.
The company's relationship with Gertler, who's under U.S. sanctions over allegedly corrupt deals in Congo, has long been a cause for concern. In Venezuela, Glencore is among oil traders accused of paying bribes to get the inside track on oil deals, according to a lawsuit filed by a trust for Petroleos de Venezuela SA earlier this year. In 2015 a former representative of Glencore alleged the company failed to pay a fee for helping to free 15 Russian sailors detained on suspicion of smuggling guns in Nigeria.
The company's problems had seemed to ease last month as it headed off two of its biggest challenges in Congo. Faced with the risk of losing control of its mines, Glencore bowed to the demands from two entities with close government ties - the state-run mining company Gecamines and Gertler.
A spokesman for Gertler declined to comment.
"After navigating the recent challenges in the Congo, albeit with a jurisdictional shift in risk from the Congo to the U.S., this investigation is likely to provide another reason for investors to proceed with caution around the Glencore investment case," RBC Capital Markets analyst Tyler Broda said in a note to investors.
The News Tribune contributed to this report.