Unpublished documents Ecuador: How Gunvor initiated a decade of corruption
Adrià Budry Carbó & Agathe Duparc, 18. March 2024
The tone of the conversation is good-natured, with nothing off limits. “Hi there, brother! How’s it going?” Pablo Celi has known José Agusto Briones, whom he affectionately calls Pepin, for years. The two friends, both senior Ecuadorian civil servants, chat regularly on WhatsApp about sensitive subjects relating to Petroecuador, the state oil company whose interests they are supposed to safeguard, as well as those of their country. On 7th April 2021, however, their conversation concerns the distribution of illicit commission: “Who do you think from Petro[ecuador] was involved in this business of distributing Gunbor’s (sic) money when you were Minister?” This is followed by an offline conversation, the contents of which we’ll never know.
Pablo Celi misspells the name of the Geneva-based trader, as most Spanish speakers would do, as they tend not to notice the distinction in pronunciation between the letters “v” and “b”. But this isn’t the main problem for this former auditor of Petroecuador’s accounts. Along with José Agusto Briones, who held the country's highest offices, including that of Energy Minister, until March 2020, these two men were a major cog in Ecuador’s corruption scandal. They weren’t aware of it then, but the future would have some nasty surprises in store for them.
José Agusto Briones was remanded in custody one week after this conversation. On 23rd May, he was found dead in his cell, with the official theory being that he had committed suicide. Also arrested, Pablo Celi was sentenced in February 2023 to 13 years in prison for his role in the Las Torres scandal. While this huge money-laundering case did not involve Gunvor, it brought to light these exchanges of messages, a copy of which was obtained by Public Eye. It also provided a good overview of the corruption that plagues Ecuador’s institutions.
However, it would take three years for Gunvor’s illicit actions, apparently an open secret among the Ecuadorian elite, to be revealed. Backed into a corner by the US and Swiss justice systems, the Swiss trader was finally forced to come clean, admitting to having paid, between January 2013 and January 2020, approximately $91.8 million to intermediaries in order to obtain barrels of crude oil at below-market prices, while being fully aware that part of these funds would be used to line the pockets of officials in Petroecuador. Some of these bribes were handed out via the Swiss financial centre. The U.S. Department of Justice announced on 1st March that it had fined the Geneva-based oil trading giant $661 million.
The Office of the Attorney General of Switzerland (OAG) found Gunvor guilty of a “lack of organisation” (Art. 102 SCC),
the only article in the Swiss Criminal Code which allows a company rather than an individual to be convicted. It was able to trace $7.5 million paid in bribes. The Swiss Federal Prosecutor’s Office was seeking a fine of CHF 4.3 million and CHF 82.3 million in compensation claims, part of the $384 million in profits made by Gunvor from the corrupt contracts.
And this makes Gunvor a blatant repeat offender. While the Swiss judiciary was investigating the payment of bribes in the Republic of Congo and Ivory Coast linked to oil markets (actions that led to a conviction in October 2019), the trading house was engaging in very similar practices in Ecuador.
How to corrupt foreign civil servants in five easy steps.
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Johis Alarcón/Panos
Chapter 1: Target a country in dire straits
Established in 2000, Gunvor was initially considered to be under the influence of the Kremlin, buying mainly Russian oil, with oligarch Gennady Timchenko, a close ally of Vladimir Putin, as one its two co-founders. Seeking to diversify, the trader was gradually turning to other continents, including Latin America, where a new wind was blowing with the election of a number of hardline left-wing heads of state. In Ecuador, Rafael Correa took over as Ecuador’s president in January 2007. The young economist promised to break free from US imperialism and the stranglehold of its multinationals on natural resources.
Gunvor didn’t have a free rein to operate there. The trader was the type of middleman that Rafael Correa intended to break away from. Moreover, the process of winning oil contracts involved private companies having to go through tender procedures set up by Petroecuador. These competitive procedures were open to all trading houses and aimed to guarantee the best possible selling price for the oil extracted from the Ecuadorian Amazon rainforest, the Napo and Oriente varieties. However, it didn't take long for Gunvor to find a way round this, as Public Eye revealed in an investigation published in June 2021.
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Johis Alarcón/Panos
Research by Public Eye (2021): A predator called Gunvor in the Amazon
Stifled by a lack of capital and placed on the red list of major international creditors, Ecuador turned to China as a financial lifesaver. On 27th January 2009, the first pre-financing contract was signed with the state-owned oil company PetroChina. It agreed to pay Petroecuador $1 billion in exchange for barrels of crude oil to be delivered over the following 24 months. The interest rate was fixed at 7.25 percent, a rate well above what the International Monetary Fund or the World Bank was offering, but which had the advantage of not being tied to any requirements for possible structural reforms.
Established as part of a “strategic alliance” between friendly countries, this type of agreement was renewed 16 times under the governments of Rafael Correa and his successor Lenín Moreno, with the Chinese state-owned companies PetroChina and Unipec, or their Thai counterpart PTT International Trading (based in Singapore). Between 2009 and 2016, Ecuador received loans worth a whopping $18.47 billion, pledging to deliver 1325 million barrels of crude oil to these Asian companies until 2024. But in reality this special relationship between non-aligned states was a love triangle.
Behind the scenes, it was Gunvor, and other traders such as Vitol and Trafigura, that were running operations,
thereby helping themselves to these barrels of crude, being sold at “buddy rates”, and sometimes themselves granting the pre-financing to Ecuador.
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Johis Alarcón/Panos
Chapter 2: Banking on the right people
To help it in penetrating the Ecuadorian market, Gunvor first enlisted the expertise of a man with hands-on experience and a bulging address book: Raymond K., a Canadian adventurer who seemed to have networks throughout Latin America. Having worked in Ecuador for years, he had been in charge of relations with local communities for the OCP consortium, which operated an oil pipeline on behalf of major oil producers, or for the US company Occidental Petroleum Corporation, whose licence had been withdrawn by Rafael Correa.
Raymond K. felt at home in Ecuador and officially joined Gunvor in 2009. He will remain there until April 2018, and will then work as a consultant for the trading giant until August 2020. Antonio and Enrique Peré, two Ecuadorean-Spanish brothers, were among his favourite collaborators. They had changed career to become oil “consultants” and were living the high life in Miami. Due to the involvement of these two intermediaries, who had contractual relationships with Gunvor since 2012, bribes would be paid to Ecuadorian officials on an industrial scale.
Chapter 3: Using state backchannels
But it was primarily in bypassing tender procedures where Gunvor demonstrated its creative genius. In order to obtain barrels at a better price, the trading house managed to form an alliance with the commercial subsidiaries of Asian state oil companies which, after signing contracts with Petroecuador, transferred the goods to it using a new contract based on similar terms (with the same volumes, at the same price) leaving it to Gunvor to organize the transport. These are known as “back-to-back” contracts in the business. Rather than being transported to Asia for refining, the crude oil was transported by Gunvor to ports in the United States or Peru.
Public Eye managed to obtain a copy of the Bills of Lading (a document issued by the shipping company to the sender, which specifies the type, quantity and destination of the goods) for deliveries of Ecuadorian oil to Peru between 2011 and 2020. During this period, Gunvor acquired at least 74 shipments from Unipec or, later on, from PTT International Trading. The Geneva branch of the ING Belgium bank financed the shipments in almost half of the cases. ING said it was unable to "comment on specific situations or potential customers".
PTT International Trading, registered in Singapore in the 2000s, was involved in this scheming. Officially, it was the subsidiary of Thailand's state-owned oil company PTT. But unofficially, it played the role of a simple intermediary. The US justice system was clear about the situation: as part of the guilty-plea agreement with Gunvor, PTT International Trading had been identified as a “front company” used by the trader to get around tender procedures and thereby facilitate corruption. “It's a fairly common practice,” says one industry insider. “It’s often the case that a private trader needs a company of this type to conclude a specific deal in certain countries that prefer to sign contracts with state organizations. Or to avoid tender procedures.”
According to our information, this small company had excellent connections with a senior Gunvor executive.
Public Eye has in its possession an official letter from Gunvor, sent on 2nd February 2015 to Petroecuador, and signed by Stéphane D., then head of crude for the Asia-Pacific region. The manager, who is now one of the most senior executives of Gunvor SA in Geneva, recommended the sound reputation and experience of PTT International Trading. The “Trade Reference” document stated:
“In its dealings with us, the company has shown itself to be reliable and, during this period, it has built up a good track record of entering into sale and purchase transactions of crude oil. The day-to-day management of the company has been known to Gunvor for six years.”
Stéphane D. was hired by Gunvor in 2007. A source added that, when he worked for the trading company Addax in Geneva, Gunvor’s future top executive, along with one of his colleaguesas, had already established good contacts with this company. This tandem is said to have brought this valuable contact with them.
Sponsored by Gunvor, PTT International Trading was finally included in Petroecuador’s pool of buyers. At the end of June 2015, it signed a first contract with the Ecuadorian oil company, then a second, a copy of which we have received, on 1st December 2016. The small Singaporean company was then granted the right to lift more than 122 million barrels of crude oil between 2017 and 2021, i.e. equivalent to 341 cargo ships. Ultimately, it was Gunvor that would receive all the oil and sell it, picking up the goods the very same day by signing a “back-to-back” contract.
Chapter 4: Paying their share
Contractually, these millions of barrels had to be delivered to repay, over five years, a $600 million loan granted to Petroecuador. Who was the generous backer? In the summary penalty order issued by the Office of the Attorney General of Switzerland, which we have consulted, we discovered that it was Gunvor that probably rallied its banks to advance such a large amount. The US investigation was able to establish that between 2009 and 2020, Gunvor worked behind the scenes to obtain for Petroecuador $5.4 billion in pre-financing in exchange for millions of barrels of oil.
The summary penalty order against Gunvor stated that Nilsen Arias, head of international trade at Petroecuador, who had recently testified at a high-profile trial in New York, had been directly involved in the negotiation and award of this Petroecuador-PTT trading contract, just as he was for three other contracts signed with Unipec, which also allowed Gunvor to fully recover the barrels of crude. According to Swiss justice, Nilsen Arias passed on confidential information to the Gunvor Group during the negotiation phase between Petroecuador and the two Asian companies. The Ecuadorian official was generously thanked for his services, pocketing a total of $7.4 million between February 2013 and February 2017.
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Johis Alarcón/Panos
The Peré brothers were in charge of handing out the bribes, operating like a conveyor-belt between Raymond K. and all the officials who stood in the way of Ecuadorian oil. Their two offshore companies, Energy Intelligence & Consulting Corp. and Oil Intelligence Corp. signed several Services Agreements with Gunvor Singapore, the traders' branch in Singapore. Between January 2013 and January 2020, these two offshore entities, registered in the British Virgin Islands, received the astronomical sum of $91.8 million mentioned above. Their services involved facilitating the conclusion of oil contracts, using part of this money to bribe Ecuadorian officials. Among other assets, they had an account in Switzerland at UBS Bank in Zurich, opened in the name of Energy Intelligence & Consulting Corp. From January 2013 to August 2014, nearly $11 million was paid into the account by Gunvor Singapore in twenty-three transfers. Of this sum, $1.7 million was transferred, in ten instalments, to the Curacao account of a company linked to Nilsen Arias. The senior Petroecuador official received $562,000 in 7 instalments from UBS Zurich, via a Panamanian company owned by the Peré brothers. His wife also received almost $230,000 in Panama, sent directly from Switzerland. These corrupt payments took place between February 2013 and October 2014.
When contacted by Public Eye, UBS declined to comment
Antonio Peré meticulously wrote down in his notebook details of all the bribes paid. From bank transfers via Panama to cash deliveries to major hotels in the area, including a Patek Philippe watch worth $70,000 given on behalf of a Gunvor employee to Nilsen Arias. Seized by the courts, this notebook gives a detailed breakdown of the extent of corruption in Ecuador. During his hearing in the US court, he was asked if he had ever helped a client obtain a contract with the government without paying a bribe: “I’m not sure,” he replied. “I cannot recall one.” Nilsen Arias alone – whom Antonio affectionately called "Mi gordo" (my fat man) – claims to have received $13.5 million from Gunvor and its competitors Vitol or Trafigura.
Gunvor’s competitors would indeed use the same bribery networks and schemes in Ecuador. Using Oman Trading International as a front, Vitol secured oil contracts after paying $2 million in bribes between 2015 and July 2020 to officials from Petroecuador, but also to those of its Mexican counterpart Pemex, according to the plea bargain reached with the US justice system. The Geneva-based trader agreed to pay a $160 million fine. Trafigura allegedly used Uruguayan state-owned Ancap for its crude-for-diesel and petrol swap contracts, according to the hearing involving Nilsen Arias in the United States. He also admitted to having received bribes from the Geneva-based trader through the Peré brothers. Trafigura has not yet been prosecuted in this case.
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Johis Alarcón/Panos
Chapter 5: Beware of journalists
Alerted by Fernando Villavicencio, a former trade unionist from Petroecuador who became an investigative journalist, prosecutors from the U.S. Department of Justice had been investigating Gunvor and its networks since 2012. But it was only years later, in February 2018, that they managed to trap Raymond K. through the Peré brothers, who were already collaborating with the US justice department. Caught on tape by the FBI in a fancy Miami restaurant, Gunvor's intermediary indulged in a few indiscretions about the bribes handed out in Ecuador. He confessed to the crimes two years later.
When contacted by Public Eye, Gunvor did not respond to a detailed list of 33 questions, citing short deadlines and referring to its press releases. The trader refers to its full cooperation with the prosecuting authorities and the progress made by its compliance department. It points out that it has ceased collaborating with external agents since 2020 and asserts that none of the individuals mentioned by the US judicial authorities currently works for Gunvor. With regard to the letter of recommendation sent by its senior executive, the trader has sent us the following statement: "the Department of Justice never declared that Mr. {Stéphane D.} is or ever was a target of their investigation. To state or insinuate otherwise would be false and, again, will be pursued legally".
The Gunvor contracts have been a disaster for Ecuador.
The country’s debt has only increased since Rafael Correa came to power, while drilling for crude is extending ever deeper into the Amazon rainforest. Between 2009 and 2016, Ecuador had to make sacrifices to repay its $18.47 billion in loans.
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Wikimedia
“The volume agreed shows that five times more oil has been committed than was needed to cover the debt,” states a report compiled by the Ecuadorian Congress Audit Commission led by Fernando Villavicencio. Lost earnings compared with the market price are estimated at nearly five billion dollars.
Fernando Villavicencio, the journalist, ended up entering politics, becoming a senator between 2021 and 2023, and then a candidate in the Ecuadorian presidential election. During a political rally on 9 August 2023, Fernando Villavicencio was murdered in the street by contract killers, leaving an entire country in a state of shock. Access to his mobile phone was at the centre of an intense power struggle in Ecuador, where he had unsettled many people. People with fairly good intentions fought to get their hands on his secrets. In any case, a copy of the data was eventually transferred to the FBI in the United States. There is therefore the chance that we’ll see other cases such as “Gunbor’s” crop up again.