Louisiana Record

Monday, October 21, 2019

Glencore-owned firms accused of manipulating zinc market by falsifying documents in NOLA

By Michelle de Leon | Jun 28, 2016

NEW YORK – Executives of two firms owned by Glencore Plc. face a private antitrust lawsuit over allegations that they ordered workers to falsify documents in New Orleans, which resulted in monopoly and price manipulation of the zinc market.

Zinc purchasers accuse the executives of Pacorini Metals USA and Glencore Ltd. of violations of the antitrust laws. They allege the executives used fraud and falsified documents to monopolize the zinc market and manipulate prices for special high-grade (SHG) zinc. The lawsuits specifically cite Sections 1 and 2 of the Sherman Act as legal bases for their allegations.

“This is very bad for Glencore,” Peter Russell, of McBride & Russell Law Firm LLC in Gretna, told the Louisiana Record. “These sort of allegations are serious; and when it comes to a corporation alleged to have forced employees to falsify documents to alter the zinc market, the damage done to Glencore will be mostly completed before the lawsuit is completed. Even if the company is found innocent of charges, it will likely be difficult to resume business as usual.”

Russell further noted that while the allegations remain to be proven in court, a number of clients might opt out of their relationship with the company. According to the lawyer, the involvement of Glencore in a potential federal investigation may cause its customers, shareholders, corporate officers and employees to simply jump ship to avoid the scandal.

The suit, which is presided over by U.S. District Judge Katherine Forrest for the Southern District of New York, alleges that the firms manipulated the bills of lading issued for the zinc purchased by its clients. In the complaint, the plaintiffs presented a witness who claimed to have been ordered by company executives to falsify documents. 

The plaintiffs said executives at the two companies worked together to deceive their customers. To serve their common goal, the defendants allegedly schemed to misrepresent the supply of physical zinc available for delivery from the warehouses. In doing so, the company was able to command the prices of special high-grade zinc.

The defendants also allegedly conspired to manipulate the London Metal Exchange (LME) warehousing system, which involved shadow warehousing and delisting of warehouses, to maximize their profits via rental income and trading.

In addition, the plaintiffs noted the anticompetitive behavior of the firms, which later on proved to have massive consequences in the zinc market. The defendants also allegedly tried to wield their influence to acquire monopoly power and control the market for the LME-licensed zinc warehousing system and services. These acts affected a number of factors including the future contracts for the trading volume of zinc, the inventories for the zinc levels, the number of warrants canceled and the load-out queues at the warehouses of the LME.

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McBride & Russell Law Firm