Glencore: the new global business model

IN A SONG ABOUT OUTLAWS, Woody Guthrie noted: “Some’ll rob you with a six-gun, some with a fountain pen.” But that doesn’t mean fountain pen robberies are easy. Au contraire, amigo, as pulled off by today’s corporate thieves, they require convoluted schemes, a web of secret arrangements … and hearts throbbing with greed. For a textbook example of mass robbery by modern-day packers of high-powered fountain pens, let’s track the maneuvers of the Glencore Gang.

Since at least 2009, Glencore plotted against their recently acquired Texas subsidiary, Sherwin Alumina. They rigged the subsidiary’s corporate rules and compelled it to accept bad deals from Glencore and affiliated financial groups, thus weakening Sherwin to the point of insolvency. Then the gang shoved Sherwin into bankruptcy.

QUESTION: But why would Glencore buy an aluminum maker and then spend more than six years conspiring to bankrupt it?

ANSWER: The move would make business sense if Glencore intended to use bankruptcy laws to plunder Sherwin’s facilities and other assets, restart the plant as union-free, and jettison the debts owed to Sherwin’s unsecured creditors (including USW families who are owed millions of dollars in pensions, suppliers who’ve gone unpaid, and local people burdened with environmental damage caused by Sherwin/Glencore). According to the formal complaint that their creditors filed on March 21 in Sherwin’s bankruptcy case, Glencore’s machinations in this corporate mugging ranged from merely unethical to unconscionable:

• Glencore’s 2007 purchase of Sherwin was screwy, executed through at least five opaque layers of corporate fronts, leaving the expert legal diggers who’re representing the harmed parties baffled: “It’s unclear from whom the Facility was acquired.”
• Glencore totally controlled Sherwin. Glencore became the sole supplier of the plant’s raw product (bauxite) and essentially was the sole buyer of its finished product (alumina). The terms of all contracts were approved by Sherwin’s board of managers, made up of–guess who?–three Glencore executives. They rubberstamped whatever bad deals the parent wanted to impose, including an agreement that the sole fiduciary duty of Sherwin’s executives was to Glencore.
• The conglomerate directed that all capital borrowed for Sherwin’s operations was to come from a bank wholly owned by Glencore. Sherwin had no independent legal advisors in this arrangement and instead was compelled to rely on Glencore’s own law firm, which, as representative of both the lender and borrower, had a hopeless conflict of interest.
• In 2015, Sherwin’s local managers publicly exclaimed that the company’s financial situation was “disastrous” (June), “terrible” (July), and “dire” (August). Yet that summer Glencore demanded that Sherwin take on $20 million in additional debt by purchasing a distressed promissory note from another Glencore affiliate. Already basically insolvent, Sherwin had to borrow the $20 million from Glencore’s bank, adding to its already unsupportable debt.
• Last November, Glencore’s lawyers obtained the ruling the conglomerate wanted from Obama’s National Labor Board, declaring the lockout of its USW workforce legal, giving the giant a green light to plunge Sherwin into bankruptcy.

As the Lowdown goes to press, a trial in bankruptcy court is scheduled for late April, and settlement discussions are heating up. Stay tuned!