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The eight-year-old corruption case that still matters

One, a dive into the Department of Justice (DOJ) and FBI investigation on metals trading at US bank JP Morgan by Bloomberg, showed how precious metals traders could fiddle markets to their own advantage. This was done by placing spoof orders for a commodity to encourage buyers or sellers to bite or even move the price. 

When trader John Desmond pled guilty in 2018, William Sweeney from the FBI said he was attempting “to profit off of an unfair market that he helped create”.  Bloomberg says the bank could pay a $1bn fine for its traders’ actions. 

The second showed how tough it is to get to the bottom of mining deals done across several countries with multiple parties involved. Eurasian Natural Resources Corporation (ENRC), a miner that was listed in London for six years until 2013, is a good demonstration of when company regulation does not work. 

ENRC, which was taken private by its major shareholders via the Eurasian Resources Group (ERG) vehicle, is the subject of a now-eight-year-long Serious Fraud Office (SFO) investigation into “allegations of fraud, bribery and corruption” relating to asset purchases. 

An investigation by our sister publication the Financial Times raised even more questions over ENRC at the start of October, going beyond allegations of dodgy dealing, which the company denies. 

FT journalist Tom Burgis has dug through the details around two ENRC employees dying in the US in 2015. This is now under investigation by the FBI, according the local police who initially handled the inquiry. 

The company denies any involvement with their deaths, which were initially put down to malaria. The two men were part of ENRC’s African operation, which is at the heart of the SFO investigation. The other death was the murder of a geologist who had questioned the value of a South African project ENRC bought for $295m in December 2011. We don’t need to go into the sticky details of his death, but the FT report raised the possibility he was an SFO witness when he was killed in 2016. 

ENRC told the FT it had no involvement in the man's death.

Of course for investors, ENRC is done and dusted. But the combination of the long-term SFO investigation - which began with the company investigating itself at the enforcement body's request - and its second life as ERG means it is still a key test of corporate governance rules in London. Fellow miner Ferrexpo (FXPO) offers an example of a current London-listed company with a major shareholder in legal trouble allowed to trade as normal. 

ERG is now part of the Global Battery Alliance alongside Volkswagen, BMW and Microsoft, among many other corporate giants. There is no reason it shouldn't be part of this organisation: as a major miner in the Democratic Republic of Congo, it sells child labour-free cobalt, and the SFO has yet to properly put its case before a court. At an online event hosted by the Bureau of Investigative Journalism this week, former attorney general Dominic Grieve said the SFO was under-resourced and not able to do its job properly. But these buyers and their end consumers should have a clearer picture on who they are dealing with, and the SFO should provide that as soon as possible. The ramifications of this go beyond the lack of ENRC's conduct being tested in court. Buyers of its products and their end consumers should have a clearer picture on who they are dealing with, and the SFO should provide that as soon as possible. 

 

This article was updated at 15.15 on 8 October 2020