A Justice Department investigation into a Glencore PLC business partner in the Democratic Republic of Congo could pose a another headache for the Swiss mining-and-trading company, which has been struggling with volatile commodity prices and concerns about its debt.
The Justice Department on Thursday announced a settlement with New York hedge-fund firm Och-Ziff Capital Management Group LLC in which the company agreed to pay $412 million in criminal and civil penalties and a unit pleaded guilty to criminal charges related to its activities in Africa.
A separate Securities and Exchange Commission civil sanction against Och-Ziff said the firm entered a series of deals from 2007 to 2011 in which it paid bribes through middlemen to government officials in several African countries.
In its investigation, the Justice Department found that Och-Ziff’s business partner in the Congo paid more than $100 million in bribes to Congolese officials, including President Joseph Kabila, in exchange for access to some of the nation’s best mineral assets.
The partner is Israeli mining tycoon Dan Gertler, according to the settlement and people familiar with the matter.
A representative of Mr. Gertler declined to comment about the Justice Department’s investigation. A Glencore spokesman declined to comment.
In a response to a 2014 report by corruption watchdog Global Witness about its ties to Mr. Gertler, Glencore said all transactions with Mr. Gertler’s companies “have been conducted on arm’s-length terms and all public disclosure requirements applicable to us have been complied with.” All transactions with Mr. Gertler and his companies “were entirely proper,” it said.
“These revelations about Gertler raise doubts about his other relationships” in Congo, said Leigh Baldwin, author of the Global Witness report on Glencore.
Glencore linked up with Mr. Gertler about a decade ago. In 2007, Glencore invested in Nikanor PLC, a Congo-focused mining company partly owned by Mr. Gertler. Nikanor had gone public in London the previous year and owned coveted copper assets in the impoverished country’s southeast.
Nikanor then sought to merge with Katanga Mining, a copper-mining outfit with assets nearby. Arthur Ditto, Katanga’s chief executive at the time, said in an interview this year that he resisted the deal, because he didn’t think Katanga’s assets had been fully developed.
Mr. Ditto said Congolese government officials pressured him to complete a deal with Nikanor and that the officials threatened to revoke his mining license if he didn’t comply. “I couldn’t take it as an idle threat,” he said.
Nikanor and Katanga merged in early 2008, creating Katanga Mining, one of Congo’s largest copper-mining operations. After a series of transactions, Glencore and Mr. Gertler emerged as its two largest shareholders.
Katanga Mining has struggled to turn a profit. Last September, amid a plan to sell assets and pare back debt, Glencore said it planned to shut down Katanga for 18 months and spend nearly $1 billion to upgrade its operations. A landslide at one of its mines this year killed seven workers.
Glencore and Mr. Gertler are also partners in another big copper-mining business near Katanga Mining in Congo, Mutanda Mining.
Allegations of impropriety have long dogged Glencore and its founder, Marc Rich, a brash commodities trader whose trading of oil with Iran while it held U.S. hostages in 1980 led U.S. authorities to charge him with tax evasion. He fled to Switzerland in 1983 and was later pardoned by President Bill Clinton in 2001. He died in 2013.
Mr. Gertler, the son of an Israeli diamond baron, has been a lightning rod for anticorruption groups, who say he has used his access to top government Congolese officials to gain control of mineral assets at steep discounts.
He got his start in Congo as a diamond merchant toward the end of the country’s long civil war in the 1990s. He befriended the country’s ruler, Laurent Kabila, and Mr. Kabila’s son Joseph, who took over the country after his father’s assassination in 2001.
He became one of the country’s most influential, and controversial, mining executives.
A due-diligence firm engaged by Och-Ziff to conduct a background check on Mr. Gertler found that he “is happy to use his political influence against those with whom he is in dispute…[and] keeps what can only be described as unsavory business associates,” according to the Justice Department’s settlement.