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Katanga Mining Ltd. and several insiders, including its current and former CEOs, broke securities laws by making misleading financial statements and failing to disclose a potentially damaging relationship with an Israeli businessman, the Ontario Securities Commission alleges.

The regulator will hold a hearing on Tuesday to consider whether it’s in the public interest to approve a settlement agreement that would include penalties for Katanga, a TSX-listed subsidiary of Anglo-Swiss metals and mining conglomerate Glencore PLC.

Katanga “misstated its financial position and the results of its operations” and “failed to maintain adequate disclosure controls and procedures,” according to the Ontario Security Commission’s statement of allegations.

Among the seven individuals that the regulator brought allegations against are Katanga’s CEO Johnny Blizzard, former CEO Jeffrey Best, former chief financial officer Jacques Lubbe and Aristotelis Mistakidis, the outgoing head of Glencore’s copper unit. Mr. Mistakidis was a director with Katanga until last year and intends to retire from Glencore at the end of this year.

Based in Switzerland, Katanga trades on the Toronto Stock Exchange and owns copper and cobalt operations in the Democratic Republic of the Congo (DRC). The allegations centre around the company’s dealings between 2012 and the end of 2017.

Among the OSC allegations are that Katanga overstated its copper cathode production in 2014 and misled investors about its total copper production from 2012 to 2014. The various alleged infractions amount to hundreds of millions of dollars.

Katanga has already admitted its financial reporting fell short in certain instances. Last year, after it disclosed the OSC was investigating the firm, Katanga said its own review found that the company either overstated or overvalued its copper cathode production, inventories of concentrates and ore stockpiles on a number of occasions. Katanga also said it was restating a number of financial documents, including its consolidated financial statements for the 2015 and 2016 fiscal years. In the aftermath, CFO Mr. Lubbe stepped down from Katanga as well as board members Liam Gallagher and Tim Henderson. All three were listed Monday as respondents in the OSC’s statement of allegations.

Canada’s top securities watchdog is also alleging that Katanga violated securities laws by failing to disclose it had worked closely with individuals and companies tied to Dan Gertler, and that doing so put the company at risk. In 2017, Mr. Gertler was placed on the U.S. government sanctions list after being accused of corruption in the DRC. The OSC says that Katanga “relied upon and paid the Gertler associates to maintain relations with the DRC government.” Services provided by Gertler associates to Katanga in the DRC included legal, tax and customs clearings.

The regulator also says that over a number of years Katanga paid US$146-million to Africa Horizons Investment Ltd., a company affiliated with Mr. Gertler, but did not provide adequate disclosure to investors around the matter at the time.

According to the OSC, Katanga took steps to end its dealings with Mr. Gertler in 2017.

In a brief statement after the OSC release on Monday, Katanga said terms of the settlement will remain confidential until after it is approved by the OSC. The company declined any further comment. The Globe and Mail reached out to all of the lawyers representing the seven respondents, but none provided any comment by deadline.

Shares in Katanga fell by 9.5 per cent on Monday on the Toronto Stock Exchange to close at 57 cents apiece.

Follow Niall McGee on Twitter: @niallcmcgeeOpens in a new window

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