Here’s a story South Africans should be latching onto. At the absolutely worst period of the Zuma era, SA’s strategic oil reserves were sold at a $10 a barrel discount to three international firms – London-listed Glencore, Nigeria’s Talaveros and the Swiss oil trader Vitol. A recent high court judgment exposed Glencore and Talaveros for bribery and corruption in a deal that cost SA taxpayers R1.5bn. But the judge went easy on Vitol for lack of hard evidence. After reading this report from our partners at The Wall Street Journal, while they’re putting together the criminal case against the corruptors, SA’s legal enforcers should definitely have another look at Vitol. Even better, call in help from the US Department of Justice. SA sorely needs a few hundred million settlement dollars. What Vitol and Glencore did in SA seems to have been standard business practice rather than anything unique to this country. – Alec Hogg
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Energy trader Vitol paying $163m to settle corruption, manipulation chargesÂ
Company accused of using bribes to gain advantage when bidding for oil in Brazil, Mexico, EcuadorÂ
Vitol’s deal with the Justice Department, announced Thursday in Brooklyn federal court, is the first in what is expected to be a series of similar settlements involving global commodity trading companies. Some of the claims grew out of a sweeping corruption scandal in Brazil that focused on bribery of officials at state-controlled Petróleo Brasileiro SA, also known as Petrobras.
A private company that is one of the largest traders of crude oil in the world, Vitol said it cooperated extensively with authorities, yielding a settlement that is more lenient. “We understand the seriousness of this matter and are pleased it has been resolved,” chief executive officer Russell Hardy said in a statement.
The deal includes a deferred-prosecution agreement with the Justice Department, allowing Vitol to escape charges if it stays out of trouble for three years. The company will pay a $90 million fine to the DOJ and an additional $45 million in a coordinated settlement with Brazilian authorities, according to U.S. prosecutors.
Vitol, accused of paying millions in bribes over a decade, also settled a probe by the Commodity Futures Trading Commission. It will pay at least $28 million to the CFTC, a civil regulatory agency.
Vitol trades 8 million barrels a day of crude oil and manages upstream assets and refineries, according to its website. Other trading companies that have faced similar corruption investigations include Glencore PLC and Singapore-based Trafigura Group Pte. Ltd.
Vitol admitted paying more than $8 million in bribes to at least nine Petrobras officials to get inside information that included weekly reports containing the oil company’s production volume and anticipated imports, as well as “last look” information that revealed confidential bids by competing companies, according to the settlements.
Traders used the information to determine the exact price they would need to bid to buy from Petrobras, a figure they sometimes called the “golden number.” They used aliases such as “Batman,” “Popeye” and “Beb.”
In Mexico and Ecuador, Vitol traders paid more than $2 million in bribes to officials at the state-owned oil PetrĂłleos Mexicanos, known as Pemex, and Petroecuador, prosecutors said. The scheme in those countries was ongoing as recently as July 2020, they said.
Brazilian prosecutors announced in 2018 that they were probing Vitol, Glencore and Trafigura for paying bribes that won them better terms on trading contracts. The authorities said bribes were paid to executives of Petrobras’s marketing and trading department and involved employees in the state-controlled oil producer’s Houston and Rio de Janeiro offices.
Following that announcement, Petrobras in 2018 temporarily suspended trading with the three companies.
A Glencore spokesman declined to comment. Glencore disclosed in August that it has spent $56 million in the first half of 2020 defending itself from various government investigations, including those undertaken by the DOJ, CFTC, U.K.’s Serious Fraud Office and Brazilian authorities.
A spokesperson for Trafigura said the company had responded to information requests from authorities and hired lawyers at Quinn Emanuel Urquhart & Sullivan to investigate allegations of improper payments concerning Petrobras.
“Based on its review to date, which is ongoing, Quinn Emanuel believes any allegations that current management were involved in, or had knowledge of, alleged improper payments to Petrobras are unsupported by the evidence and untrue,” the spokesperson said.
In September, federal prosecutors in Brooklyn unsealed an indictment charging Javier Aguilar, a former Vitol manager and oil trader, with participating in a scheme to bribe Ecuadorean officials to secure a $300 million contract from the country’s state-owned oil company.
A lawyer for Mr. Aguilar said he denies the allegations.
Prosecutors have also recently unsealed years-old guilty pleas by a former Houston-based Petrobras official and a middleman who were involved in the Brazilian bribery schemes.
The CFTC’s involvement in a foreign-corruption case is novel. The CFTC typically regulates derivatives but announced in early 2019 that overseas corruption could violate laws it enforces.
The CFTC doesn’t directly enforce the U.S. antibribery law, known as the Foreign Corrupt Practices Act. In March 2019, the agency’s enforcement director at the time, James McDonald, said the CFTC would be selective about opening investigations, but couldn’t tolerate venal practices in the markets it oversees.
In addition to bribing employees of state-controlled energy firms in South America and Mexico, Vitol employees also tried to rig two fuel-oil benchmarks in July and August 2015, the CFTC said in a settlement order. Manipulating those prices, which were compiled by S&P Global Platts, would have made Vitol’s trades in physical oil and oil futures more profitable, the CFTC said.
Vitol neither admitted nor denied the CFTC claims related to market manipulation.
A spokesman for S&P Global Platts, which wasn’t accused of wrongdoing, noted the manipulation attempt didn’t appear to succeed. “We maintain that our robust, rigorous and transparent methodology continues to allow S&P Global Platts to publish assessments reflective of market value,” the spokesman said.
“This historic enforcement action demonstrates that the CFTC will actively pursue fraud tied to foreign corruption and manipulation that impacts the U.S. derivatives and related physical markets,” CFTC Chairman Heath Tarbert said.
Write to Dave Michaels at [email protected] and Dylan Tokar at [email protected]
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Appeared in the December 4, 2020, print edition as ‘Energy Firm to Settle U.S. Charges.’
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