The Secret Club That Runs the World: Inside the Fraternity of Commodity Traders (30 page)

Ivory Coast government
:
Trafi’s conflict with the Ivory Coast occurred in the summer of 2006 and involved the dumping of 400 metric tons of petrochemical waste from a tanker ship it had leased. For a cut-rate fee, Trafi hired a local sanitation company to handle the materials, and the company dumped the hazardous sludge in various locations near a major city, ultimately killing at least ten people and sickening thousands. In the initial aftermath of the event, the Ivory Coast’s prime minister fired his entire government and Trafi cofounder Claude Dauphin served five months in jail without ever being charged. But most of the administration was later reinstated, and Trafi eventually settled the matter without admitting wrongdoing. See Lydia Polgreen and Marlise Simons, “Global Sludge Ends in Tragedy for Ivory Coast,”
New York Times,
October 2, 2006, http://www.nytimes.com/2006/10/02/world/africa/02ivory.html?pagewanted=all. And “Trafigura Found Guilty of Exporting Toxic Waste,”
BBC News Africa,
July 23, 2010, http://www.bbc.co.uk/news/world-africa-10735255. For Trafigura’s version of events, see http://www.trafig ura.com/media-centre/probo-koala/.

7.
THE WILDERNESS YEAR

$1 million for private performances
:
Sean Michaels, “Elton John Performs at Rush Limbaugh’s Wedding for $1m,”
Guardian
, June 8, 2010, http://www.theguardian.com/music/2010/jun/08/elton-john-rush-limbaugh.

Citadel, the large Chicago fund group, had recently done it
:
Azam Ahmed, “Citadel Clears Its High Water Mark,”
New York Times,
DealBook blog, January 20, 2012, http://dealbook.nytimes.com/2012/01/20/citadel-clears-its-high-water-mark/?_php=true&_type=blogs&_r=0.

8.
GOLDMAN SACHS

got an unexpected complaint
:
Tatyana Shumsky and Andrea Hotter, “Wall Street Gets Eyed in Metal Squeeze,”
Wall Street Journal
, June 17, 2011, http://on line.wsj.com/news/articles/SB10001424052702304186404576389680225394642.

“The situation has been organized
”
: Ibid.

increased 13 percent
:
Ibid.

when Goldman had paid half a billion dollars
:
Jonathan Leff and David Shepard, “Goldman to Resume Talks on Sale of Metals Warehouse Unit: Source,” Reuters, November 18, 2013, http://www.reuters.com/article/2013/11/18/us-goldman-metro-sale-idUSBRE9AH0U120131118.

coal-mining assets in Colombia
:
Juan Pablo Spinetto, “Vale Sells Colombian Coal Assets to Goldman for $407 Million,”
Bloomberg Businessweek
, May 28, 2012, http://www.businessweek.com/news/2012-05-28/vale-sells-colombian-coal-assets-to-goldman-for-407-million.

nearly all the world’s private warehouses
:
Tom Vulcan, “Metals Warehousing: The Perfect Hedge and the Perfect Storm?,”
Hard Assets Investor
, March 23, 2012, http://www.hardassetsinvestor.com/features/3567-metals-warehousing-the-perfect-hedge-a-the-perfect-storm.html, along with author’s reporting.

Their survey
:
“Warehouse Study by Europe Economics,” May 27, 2011. The study can be accessed at http://www.lme.com/news-and-events/notices/2011/05/11-141-warehouse-study-by-europe-economics/.

1.5 million tons and a sixteen-month queue for removal
:
David Kocieniewski, “A Shuffle of Aluminum, But to Banks, Pure Gold,”
New York Times
, July 20, 2013, http://www.nytimes.com/2013/07/21/business/a-shuffle-of-aluminum-but-to-banks-pure-gold.html?_r=0.

eighteen different raw materials
:
Based on data provided by Standard & Poor’s, the current owner of the index.

The aluminum markets were at a crossroads then
:
Ed Meir, senior commodity consultant for INTL FC Stone, in phone conversation, March 6, 2013, as well as author’s reporting.

the firm’s $4 billion in capital
:
Phillip L. Zweig, “Goldman Sachs’ Spectacular Road Trip,”
Bloomberg Businessweek
, October 31, 1993, http://www.businessweek.com/stories/1993-10-31/goldman-sachs-spectacular-road-trip.

9,600-employee firm
:
Phillip L. Zweig et al., “Where Does Goldman Sachs Go from Here?,”
Businessweek
, March 19, 1995, http://www.businessweek.com/stories/1995-03-19/where-does-goldman-sachs-go-from-here.

40 cents per metric ton per day
:
“Goldman to Buy LME Warehouse Firm Metro,” Reuters, February 18, 2010, http://www.reuters.com/article/2010/02/19/us-goldman-metro-idUSTRE61I0ZH20100219 and author reporting.

hired Goldman to advise it on a $12 billion
:
FactSet.

45 cents per ton
 . . . $200 million per year:
Dustin Walsh, “Aluminum Stores Grow at Warehouses,”
Crain’s Detroit Business,
July 30, 2012, http://www.crainsdetroit.com/article/20120729/SUB01/307299986/aluminum-stores-grow-at-warehouses.

Premiums had gone from
:
Based on proprietary data from CRU Group, provided by Michael Southwood, senior metals consultant at CRU.

Goldman was the subject of a tough story
:
David Kocieniewski, “A Shuffle of Aluminum.”

Goldman received subpoenas
:
Jack Farchy and Thomas Braithwaite, “Subpoenas Issued over Metals Warehouse Probe,”
Financial Times,
August 12,
2013, http://www.ft.com/intl/cms/s/0/b8917ace-037f-11e3-b871-00144feab7de.html?siteedition=intl#axzz2rGnkpzbz.

if aluminum prices had fallen
:
The 28 percent figure was confirmed independently with LME after first reading about it in commentary on MetalMiner. Lisa Reisman, “MetalMiner, Goldman Sachs Battle It Out over LME Aluminum,”
MetalMiner
, July 31, 2013, http://agmetalminer.com/2013/07/31/goldman-sachs-metalminer-battle-it-out-over-lme-aluminum/.

Cohn hurriedly booked a television interview and went on CNBC
:
Gary Cohn, interview by Kate Kelly,
Halftime Report
, CNBC, July 31, 2013,
http://video.cnbc.com/gallery/?video=3000187032.

Justice Department inquiry
:
Jamila Trindle and Tatyana Shumsky, “U.S. Probes Metals Warehouse Firms,”
Wall Street Journal
, July 25, 2013, http://online.wsj.com/news/articles/SB10001424127887323971204578628232626155990.

9.
THE DEAL

“man of steel”
:
Martin Baker, “Ex-Goalie Scores in Metals,”
Telegraph
, October 8, 2006, http://www.telegraph.co.uk/finance/2948607/Ex-goalie-scores-in-metals.html.

before its $28 billion merger
:
Anita Raghavan, S. Karene Witcher, and Andrew Trounson, “BHP, Billiton to Merge Operations to Create a Global Mining Giant,”
Wall Street Journal
, March 19, 2001, http://online.wsj.com/article/SB984931118144036379.html.

Vale about a purchase
:
Rebecca Bream, “Vale Blames Delays in Xstrata Bid on Glencore,”
Financial Times,
March 1, 2008, http://www.ft.com/intl/cms/s/0/fe1571ea-e701-11dc-b5c3-0000779fd2ac.html?siteedition=intl#axzz2rGnkpzbz
.

private-equity firms and the sovereign-wealth fund
:
Mara Der Hovanesian, “A Dark Horse at Citi,”
Businessweek,
November 28, 2007, http://www.businessweek.com/stories/2007-11-28/a-dark-horse-at-citi.

advised the UK
:
Michael J. de la Merced, “Former Citi Banker Earns Spot on Glencore-Xstrata Merger by Himself,”
New York Times,
DealBook blog, February 7, 2012, http://dealbook.nytimes.com/2012/02/07/former-citi-banker-earns-spot-on-glencore-xstrata-merger-by-himself/?_r=0.

helped keep its corporate culture smooth
:
Mara Der Hovanesian, “A Dark Horse.”

Mack had left Morgan Stanley
:
Landon Thomas Jr., “John Mack Is Back at Morgan Stanley,”
New York Times,
July 1, 2005, http://www.nytimes.com/2005/06/30/business/worldbusiness/30iht-morgan.html
.

wouldn’t catch him lying on a beach
:
John W. Miller, “Glasenberg: We Don’t Do Work-Life Balance,”
Wall Street Journal,
MoneyBeat blog, May 3, 2013, http://blogs.wsj.com/moneybeat/2013/05/03/glasenberg-we-dont-do-work-life-balance/.

February 7, 2012, Glencore and Xstrata
:
Glencore & Xstrata, “Recommended All-Share Merger of Equals of Glencore International PLC and Xstrata PLC to Create Unique $90 Billion Natural Resources Group,” news release, February 7, 2012.

“fabulous deal for Glencore”
:
Sarah Young and Eric Onstad, “Glencore-Xstrata $90B Deal Meets Shareholder Opposition,”
Financial Post
, February 7, 2012, http://business.financialpost.com/2012/02/07/glencore-xstrata-90b-deal-meets-shareholder-opposition/.

16 percent no-vote
:
Lianna Brinded, “Timeline and FactBox: Glencore and Xstrata Merger,”
International Business Times
, May 3, 2013, http://www.ibtimes.co.uk/glencore-xstrata-merger-shares-trading-qatar-sovereign-464122. Further details on the terms of the merger can be found at “Recommended All-Share Merger of Equals of Glencore International PLC and Xstrata PLC,” Deal Circular, p. 48, http://www.glencorexstrata.com/assets/Uploads/Everest-Scheme-Circular.pdf.

(the 34 percent Glencore owned)
:
Ibid.

3.6 percent stake
:
Jan Willem van Gelder and Barbara Kuepper, “The Financing of Glencore and Xstrata,” Profundo Economic Research, Amsterdam, December 4, 2012.

talking to executives at Morgan Stanley
:
Kate Kelly, “Morgan Stanley, Qatari Fund May Do Commodities Deal,”
CNBC
, July 20, 2012, http://www.cnbc.com/id/48241872.

5 percent
:
Dinesh Nair, “Qatar Builds Up Xstrata Stake Ahead of Glencore Deal,” Reuters, April 9, 2012, http://www.reuters.com/article/2012/04/09/us-qatar-xstrata-idUSBRE83805320120409.

oversupply in Europe and general negativity
:
Vattenfall, “Commodity Markets at a Glance: April 2012,” http://www.vattenfall.com/en/file/Commodity_Markets_at_a_Glance_April_2012_20780475.pdf.

retention packages
:
“Recommended All-Share Merger of Equals of Glencore International PLC and Xstrata PLC,” Deal Circular, pp. 31–34. http://www.glencorexstrata.com/assets/Uploads/Everest-Scheme-Circular.pdf.

The British bank Barclays
:
Howard Mustoe, “Barclays Says 27% of Investors Voted Against Pay Package,” Bloomberg, April 27, 2012, http://www.bloomberg.com/news/2012-04-27/barclays-says-27-of-investors-voted-against-executive-pay-plan.html.

advertiser WPP
:
Robert Budden and David Oakley, “WPP Suffers Shareholder Revolt over Executive Pay,”
Financial Times
, June 12, 2013, http://www.ft.com/intl/cms/s/0/933c8ac2-d380-11e2-b3ff-00144feab7de.html#axzz2rGnkpzbz.

chief of the insurer Aviva
:
Marietta Cauchi and Vladimir Guevarra, “U.K. Pay Protests Oust Aviva Chief,”
Wall Street Journal
, May 8, 2012, http://online.wsj.com/news/articles/SB10001424052702304363104577391282844502266.

“in jeopardy”
:
David Cumming interview, “
Today
,” BBC, quoted in Jill Treanor, “Xstrata-Glencore Tie-Up ‘in Jeopardy’ over retention packages,”
Guardian
, June 25, 2012, http://www.theguardian.com/business/2012/jun/25/xstrata-glencore-tie-up-in-jeopardy.

“Xstrata should be under no delusions”
:
Helia Ebrahimi and James Quinn, “Chiefs at Risk in Xstrata Merger,”
Telegraph
, February 4, 2012, http://www.telegraph.co.uk/finance/newsbysector/industry/mining/9061755/Chiefs-at-risk-in-Xstrata-merger-talks.html.

A press release was soon to be issued
:
Qatar Holding, “Qatar Holding Seeks Improved Terms in Proposed Merger of Glencore with Xstrata,” news release, June 26, 2012.

10 percent at last check
:
Chris Wright, “Sovereign Wealth Funds: Qatar Seals Its Kingmaker Role in Xstrata Deal,”
Euromoney,
December 2012, http://www.euromoney.com/Article/3123638/Sovereign-wealth-funds-Qatar-seals-its-kingmaker-role-in-Xstrata-deal.html.

had fallen 42 percent
:
Half-Yearly Report 2012, Xstrata, http://www.glencorexstrata.com/assets/Uploads/xta-ir2012-en.pdf.

“end of the world”
:
Josephine Moulds, “Glencore’s Merger with Xstrata Close to Collapse,”
Guardian
,
August 21, 2012, http://www.theguardian.com/business/2012/aug/21/glencore-merger-xstrata-close-collapse.

north of 12 percent
:
Mirna Sleiman and Dinesh Nair, “Qatar Demands Respect with Muscular Xstrata Strategy,” Reuters, September 6, 2012, http://www.reuters.com/article/2012/09/06/us-qatar-glencore-strategy-idUSBRE8850PD20120906.