Katanga pays $28.5M to settle disclosure allegations

TORONTO Katanga Mining Ltd., a subsidiary of Anglo-swiss commodities and mining conglomerate Glencore PLC, has paid $28.5 million to settle allegations that it issued materially misleading financial information and that it failed to adequately disclose the risks of doing business with associates of an Israeli businessman in the Democratic Republic of Congo.

Entities associated with Dan Gertler — an Israeli billionaire sanctioned by the U.S. government in December 2017 in a sweep targeting corruption and human rights abuses that focused on his “close friendship” with DRC President Joseph Kabila — held at least 11 per cent of Katanga’s shares until February 2017, according to a settlement approved by the Ontario Securities Commission.

The settlement agreement says Katanga, whose shares are traded on the Toronto Stock Exchange, “relied upon and paid the Gertler Associates to maintain relations with the DRC government and for a variety of other services which required interactions with DRC government officials to represent Katanga’s interests.”

Though Katanga bought out Gertler’s interest and took steps to terminate the business relationships in 2017, the firm “did not properly consider the disclosure it was required to provide in connection with its ongoing engagement of the Gertler Associates and the related risks,” the settlement states.

What the firm told shareholders in disclosure documents filed between 2012 and 2016 did not adequately describe the heightened risks linked with an environment where there was an “elevated risk of public sector corruption,” nor that “the risk that a cessation or deterioration in Katanga’s business relationship with the Gertler Associates could have an adverse impact on Katanga’s business,” Carlo Rossi, senior litigation counsel at the OSC, told the hearing Tuesday.

As part of the settlement, Katanga agreed to submit to and pay for a review of its practice and procedures by an independent consultant agreed to by staff of the commission.

The OSC deal, which also resolved separate claims against seven current and former executives and directors of Katanga, netted total payments of $34.4 million, and $1.85 million to cover the regulator’s costs.