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Gunvor's secret oil in Ecuador

Companies and/or individuals involved: Gunvor SA (Switzerland) / Raymond K., Antonio and Enrique Peré Ycaza, Nilsen Arias Sandoval, Javier Aguilar

Charges: Bribery of foreign public officials (Article 322septies of the Swiss Criminal Code (SCC)), linked to a lack of organization (Article 102 SCC) / Violation of the Foreign Corrupt Practices Act (USA)

Swiss lawyers used: Benjamin Borsodi and Charles Goumaz (Schellenberg Wittmer, Geneva)

Countries affected: Ecuador, Switzerland

Proceedings: United States (Department of Justice, DoJ), Switzerland (Ministère public de la Confédération, MPC), Ecuador (Fiscalía General del Estado)

Outcome: 

  • DoJ: Guilty plea USD 661 million (including USD 287 million in fines). The amounts paid in Switzerland and Ecuador are partly deductible.
  • MPC: CHF 86.7 million (including a fine of CHF 4.3 million)
  • Fiscalía General del Estado: USD 93.6 million

Asset recovery: N/A

The case

If Ecuador’s oil history were not so tragic, this affair might have been called “The Art of Making Yourself Indispensable”. While a wind of change was blowing across almost the whole of Latin America, President Rafael Correa announced in 2009 that Ecuador, sidelined by international markets, would forge “strategic alliances” with friendly countries with a view to offloading its barrels of crude oil. On the basis of extensive pre-financing agreements – signed with the Asian state-owned companies Unipec, Oman Trading International, PetroThailand PTT and Ancap (Uruguay) – the young economist’s government obtained loans to be repaid against future deliveries of Napo and Oriente crude, valued at billions of dollars. 

In actual fact, this relationship between consenting states was a love triangle. In order to obtain oil barrels at a more favourable price, Gunvor formed an alliance with  Unipec and PetroThailand PTT to which it advanced the pre-financing sums granted to Petroecuador in exchange for crude. These same subsidiaries then sold the goods to Gunvor on the basis of a new contract concluded under similar terms (same volumes and same price). Rather than being shipped to Asia for refining, the crude oil was transported to ports in the United States or Peru by the Geneva-based trader, which nicely pocketed a juicy capital gain. All this was done, without ever having won a tender procedure.

To “facilitate” these agreements, Gunvor paid local consultants, the Peré brothers, USD 91.8 million in commission fees. Some of this money would be used to grease the palms of Ecuadorian officials. Alerted to this situation by former Petroecuador trade unionist Fernando Villavicencio, prosecutors from the U.S. Department of Justice have been investigating Gunvor since 2012, a company reputedly close to Putin, which was then making a spectacular entry into the Latin American market. But it was not until years later that Raymond K., an intermediary from Gunvor (between 2009 and 2019), indulged in some indiscretions (recorded by the FBI) about the bribes paid on behalf of the company. 

These agreements secretly controlled by Gunvor and implemented on the fringes of the law, which involved paying a handful of individuals handsome rewards in the process, were and are a complete disaster for Ecuador. The country’s debt has constantly increased since Rafael Correa came to power, while drilling for crude is extending ever deeper into the Amazon rainforest. In one of his last investigations carried out in 2022, Fernando Villavicencio estimated the loss of revenue from these pre-financing contracts, concluded well below market prices, at USD 4.8 billion. Fernando Villavicencio was assassinated on 9th August 2023, while he was in the midst of his presidential campaign and had made many enemies by denouncing the corruption that plagued his country’s institutions.

In Brooklyn, as part of the trial against a former Vitol executive, a series of revelations about the networks and companies mobilized in Ecuador came to light in early 2024. Gunvor bas well as its competitors Vitol and Trafigura were said to have used public entities as shell companies, through the same Ecuadorian intermediaries – the Peré brothers – to grease the palms of the key players in the Ecuadorian oil industry. Nilsen Arias Sandoval, who was in charge of international trade at Petroecuador until 2017, was investigated by the U.S. judicial authorities. José Agusto Briones, Minister of Energy to Rafael Correa’s successor, was found dead in his cell on 23rd May 2021, five weeks after his arrest. Gunvor’s conviction by the Swiss Office of the Attorney General, secured in cooperation with the U.S. judicial authorities, for lack of organization in connection with corruption was delivered at the end of the trial on 1st March 2024. 3,768 characters

Documents related to this affair

Timeline

Date

Event

Source

2009-2017Boycotted by international creditors, Rafael Correa’s government signs extensive pre-financing agreements (receiving loans in exchange for future deliveries of crude) with Asian and Latin American state-owned companies. But some of this cheap oil ends up in the hands of the trading houses Gunvor and Vitol, which have been pulling the strings behind the scenes. Public Eye
2012-2020Gunvor is suspected by the US judicial authorities of having paid, during this period, at least USD 70 million (an amount that would eventually reach USD 91.8 million) to two intermediaries in order to obtain shipments from the state-owned oil company Petroecuador. At least USD 22 million of this sum ended up in the pockets of senior Ecuadorian officials. US Department of Justice
18th February 2018While working for Gunvor, Raymond K. is recorded without his knowledge by the FBI, while discussing corruption in a trendy Miami restaurant with two Ecuadorian intermediaries. The Canadian citizen freely divulges secrets about the crucial matter of the chain of responsibility within the Geneva trading house. US Department of Justice
14th October 2019Gunvor is convicted in Switzerland for “lack of organization” in connection with corruption in the Republic of Congo (Brazzaville) and Côte d’Ivoire. To avoid going to trial, the trading house admits its guilt and agrees to pay nearly CHF 94 million, including a fine of CHF 4 million. In its summary penalty order, the Swiss court concludes that the trader had “neither a compliance programme” nor “an internal audit and that no employee was in charge of identifying, analysing or reducing the risk of corruption”.Office of the Attorney General
3rd December 2020As part of a non-prosecution agreement with the U.S. Department of Justice (DoJ), Vitol admits to paying bribes in Brazil, Mexico and Ecuador and agrees to pay USD 164 million in compensation. Vitol and Gunvor used the same corrupt networks in Ecuador.US Department of Justice
6th April 2021Raymond K. pleads guilty to having participated in what U.S. prosecutors call “bribery and money laundering schemes” in order to obtain crude oil shipments from the state-owned oil company Petroecuador.Reuters
30th June 2021The Office of the Attorney General of Switzerland launches an investigation against an unknown person based on the suspicion of bribery of foreign public officials in connection with the Ecuadorian oil market. Office of the Attorney General
25th August 2023Gunvor announces that it has set aside up to USD 650 million to cover the payment of a possible fine imposed by the U.S. court in the Ecuadorian case. Reuters
January -February 2024The trial of Javier Aguilar opens in Brooklyn (United States). The former Vitol executive pleads not guilty, but other defendants come clean, giving details of the scheme set up to pay bribes to Mexican and Ecuadorian officials. Vitol, Trafigura and Gunvor seem to have used the same intermediaries and processes to obtain cheap shipments of crude oil.US Department of Justice
1st March 2024The U.S. Department of Justice announces that it will impose a fine of $661 million on Gunvor. The trader admits its guilt in relation to a scheme that lasted nearly a decade and allowed it to earn $384 million in illicit profits. 
At the same time, the Office of the Attorney General of Switzerland orders Gunvor to pay a fine of CHF 4.3 million and an equivalent claim of CHF 82.3 million. It focused on the movements of funds via Swiss-based banking institutions, tracing $7.5 million in corrupt payments between 2013 and 2020.

The U.S. sentence includes credits of up to $93 million each for amounts Gunvor pays to resolve the Swiss and the Ecuadorian investigations.		Office of the Attorney General
11th June 2024Gunvor reaches an out-of-court settlement with the Ecuadorian justice system. The trading house pays $93.6 million to the Ecuadorian National Treasury to settle all accounts.El Universo

Legislative loopholes

  • Oil-backed pre-financing: a practice that entails many risks of corruption and embezzlement of funds
  • Concealment of liability by using intermediaries to pay bribes
  • Systematic corruption seen as a lack of organization
  • Operation in a country with failing institutions, plagued by drug trafficking, undermined by violence and unable to protect witnesses and whistleblowers
  • No specific supervisory authority in the commodities sector and no appropriate due diligence obligations for traders