When commodity traders get caught

Companies and/or individuals involved: Vitol Inc. (USA) and Cockett Marine Oil Ltd. (Dubai); Glencore International A.G. (Switzerland) and Glencore Ltd. (United Kingdom); Trafigura Beheer B.V. (Netherlands and Switzerland)

Charges:

• Vitol: Violation of the Foreign Corrupt Practices Act (USA); use of manipulative or deceptive device or contrivance on the stock exchange
• Glencore: Violation of the Foreign Corrupt Practices Act (USA); use of manipulative or deceptive device or contrivance on the stock exchange; fraud and corruption, exploitation of confidential information of state-owned enterprises, price manipulation
• Trafigura: Violation of the Foreign Corrupt Practices Act (USA)

Swiss lawyers used: None

Countries affected: Brazil, United States

Proceedings: Brazil (Ministério Público Federal, MPF); United States (Commodity Futures Trading Commission, CFTC; Department of Justice, DoJ)

Outcome:

• Vitol:
  • USA (Department of Justice): Deferred Prosecution Agreement: Criminal penalty: USD 90 million (relates to several matters and countries; other penalties partly taken into account)
  • USA (Commodity Futures Trading Commission): Settlement: Civil monetary penalty: USD 16 million and forfeiture of profits of USD 12.791 million (relates to several matters and countries; other penalties partly taken into account)
• Glencore:
  • USA (Department of Justice): Guilty Plea: Payment of USD 262,590,214 in fines and USD 181,457,195 in forfeiture of profits (relates to several matters and countries; other penalties partly taken into account)
  • USA (Commodity Futures Trading Commission): Settlement: USD 333,548,040 fine and forfeiture of profits (relates to several matters and countries; other penalties partly taken into account)
• Trafigura:
  • USA (Department of Justice): Guilty Plea: USD 53,658,694 in fines and USD 46,510,257 in forfeiture of profits
  • Brazil (Ministério Público Federal): Pending

Asset recovery:

• Vitol: USD 45 million paid to Petrobras
• Glencore: USD 39,598,367 paid to Petrobras
• Trafigura: none (yet)

The case

Since 2014 authorities worldwide have been investigating the corruption affair surrounding the semi-state-owned Brazilian oil company Petróleo Brasileiro S.A. (Petrobras). High-ranking politicians, members of the Latin American business elite and major international corporations have been targeted. By 2021 alone, 278 convictions were delivered and USD 803 million in ill-gotten gains were transferred back to Brazil.

Companies from the Swiss commodity groups Glencore, Vitol and Trafigura have also admitted to bribing public officials at Petrobras in order to land lucrative contracts.

On 3rd December 2020, Vitol Inc. (USA), a company in the Swiss Vitol Group, was the first to admit to having bribed public officials in Brazil, Ecuador and Mexico.

In particular, Vitol had paid over USD 8 million to Petrobras employees from 2005 to 2014 to obtain inside information, even including details from the confidential bids submitted by competitors (the “golden number”) and internal documents. The payments were made through intermediaries, shell companies and accounts abroad. They used alias email accounts and made-up names such as “Batman”, “Tiger”, “Phil Collins”, “Dehl Phin” or “Popeye”. Lastly, fake contract negotiations were held during which Vitol knew exactly what to offer in order to win the contract. Vitol made at least USD 33 million in profits this way.

In addition, Vitol used the inside information to manipulate certain benchmark prices for oil.

Vitol paid a fine of USD 90 million to the U.S. criminal authorities and a total of almost USD 29 million to the U.S. Commodity Futures Trading Commission (CFTC) for all offences committed. It also paid back USD 45 million to Petrobras. The company admitted its actions and vowed to make improvements, thereby enabling it to reach a Deferred Prosecution Agreement and finally completely avoid prosecution.

Further investigations carried out by the Brazilian authorities target Cockett Marine Oil Ltd., in which Vitol SA holds a 50% stake.

Glencore enjoyed less success. For Glencore, Petrobras was just one of many cases of bribery and market manipulation. On 22nd May 2022, Glencore International A.G. admitted that between 2007 and 2018 companies in the Switzerland-based group had systematically paid a total in excess of USD 100 million to government employees in Nigeria, Cameroon, Côte d’Ivoire, Equatorial Guinea, Brazil, Venezuela and the Democratic Republic of the Congo. Of this sum, USD 147,202 went at least partly to state employees at Petrobras in 2011. In this case too, the employee used a private email address and the payment was justified with a fake service contract.

Given the extent of the criminal offences committed, criminal and supervisory authorities in the United States, Brazil and Switzerland, among others, launched investigations. The U.S. authorities assessed the misconduct found as a complete package, offsetting fines and compensation payments from other proceedings. This makes it impossible to determine what proportion was attributable to the Petrobras affair. Glencore paid USD 777.6 million to the U.S. authorities and nearly USD 40 million to Petrobras for systematic bribery.

Beginning in October 2022, 197 investment funds sued Glencore for damages in a London civil court. They claimed that the company had not disclosed the criminal activities and the resulting financial risks in its sales prospectuses for deals in 2011 and 2013, thus deceiving investors. These proceedings are still pending, but they already show a facet that has received little attention so far: bribery and other crimes also damage the company and its shareholders.

Trafigura Beheer B.V., a company that operates mainly from Switzerland, did not get off scot-free either. On 28th March 2024, the company admitted to bribing Petrobras employees from 2003 to 2014, illegally raking in profits of USD 61 million. In this case too, intermediaries, shell companies, false invoices, cash and foreign accounts had been used. The U.S. Department of Justice ordered Trafigura to pay USD 127 million, but offset USD 27 million for a pending case in Brazil. When Brazil had accused Trafigura of bribery in December 2020, the company had still denied the allegation.

Documents related to this affair

• Vitol: Statement of Facts, agreed to by the company under the Deferred Prosecution Agreement with the U.S. Department of Justice (3rd December 2020)
• Glencore: Statement of Facts of 24th May 2022, submitted by the company as part of the guilty plea to the U.S. Department of Justice (24th May 2022)
• Trafigura: Statement of Facts, submitted by the company as part of the guilty plea to the US Department of Justice (29th March 2024)

Timeline

Legislative loopholes

• Concealment of responsibility by using intermediaries to pay bribes
• Systematic bribery as an organizational problem
• Lack of monitoring of group-wide compliance with minimum legal standards
• No detection of systematic bribery while auditing the financial report
• No disclosure of (bribe) payments to government employees in the sustainability report (at that time still voluntary)
• Bribery as a financial risk for companies and investors
• Follow-up offences such as falsification of balance sheets, document offences
• No specific supervisory authority in the commodities sector and no appropriate due diligence obligations for traders