Top Menu

Freepoint Commodities Resolves FCPA Enforcement Action

freepoint

In February 2023, the DOJ announced that Glenn Oztemel (previously employed by Freepoint Commodities LLC) and Eduardo Innecco (an agent for the company) were charged with FCPA and related offenses for an alleged Brazil bribery scheme. (See here for the prior post).

In summary fashion, the indictment alleged:

“Between in or about 2010 and continuing until in or about 2018, Glenn Oztemel and Eduardo Innecco, together and with others, agreed to pay, and did pay, bribes to foreign officials at Brazil’s state-owned and state-controlled oil and gas company, Petroleo Brasileiro S.A. – Petro bras (“Petrobras”), on behalf of Trading Company #1 and Trading Company #2. In exchange for the bribes, foreign officials at Petrobras, including Rodrigo Berkowitz (“Berkowitz”), who has been charged separately, provided Oztemel, Innecco and others with confidential information related to Petrobras’s business. The inside information and other improper assistance Berkowitz provided to Oztemel, Innecco and others gave Trading Company #1 and Trading Company #2 improper business advantages in trades with Petrobras.

To conceal the scheme, Innecco used coded language in his communications with Oztemel to refer to bribes and bribe amounts. In addition, Oztemel, Innecco and their co-conspirators used personal email accounts, fictitious names, and encrypted messaging applications to communicate in furtherance of the scheme, particularly regarding the confidential Petrobras information they received from Berkowitz.

In furtherance of and to promote the corrupt bribery scheme, Oztemel and Innecco, together and with others, agreed to and did cause employees of Trading Company #1 and Trading Company #2, located in the District of Connecticut, to transmit the corrupt payments from bank accounts in the United States to and through bank accounts in Switzerland and Uruguay. The payments were made pursuant to invoices sent from Innecco to Oztemel and others, which sought payment for purported consulting fees and commissions.

Inneco paid a portion of the money he received from Trading Company #1 and Trading Company #2 to Berkowitz and others as bribes. The bribes were paid into a bank account in Uruguay and in cash.”

As highlighted in this prior post, in August 2023 the DOJ announced that Glenn Oztemel’s brother – Gary Oztemel (the owner and president of Oil Trade & Transport S.A. (OTT) and the owner of Petro Trade Services Inc. (Petro Trade) – was also criminally charged in connection with the same bribery scheme.

Yesterday, the DOJ announced an FCPA enforcement action against Freepoint based on the same conduct.

The criminal information alleges in summary fashion:

“Beginning in or about 2012 and continuing until in or about 2018 … Freepoint, through its employees and agents, knowingly and willfully conspired and agreed with others to offer and pay approximately $3.9 million in corrupt commission payments to Innecco knowing that all or a portion of such money would be used to pay bribes to and for the benefit of Brazilian foreign officials, including [Rodrigo] Berkowitz and others, to secure improper advantages in order to obtain and retain business from Petrobras in connection with the purchase and sale of oil products.”

Berkowitz is described as a citizen of Brazil who resided in Rio de Janeiro, Brazil and Houston, Texas who worked as a trader at Petrobras America Inc., (a wholly owned subsidiary of Petrobras with its principal place of business in Houston, Texas) during a portion of the relevant time period and as a trader at Petrobras during other relevant time periods. According to the information, PAI was controlled by the government of Brazil and performed government functions.

According to the information, in 2010, prior to Glenn Oztemel’s employment with Freepoint, Glenn Oztemel, Gary Oztemel, and Innecco agreed to pay bribes to Berkowitz and other Petrobras officials to obtain and retain business for Glen Oztemel’s then employer. According to the information, in exchange for the bribes, Berkowitz and other Petrobras officials provided Glenn Oztemel, Gary Oztemel, Innecco, and others with confidential information related to Petrobras’s business.

According to the information, when Glenn Oztemel and others left that company to work for Freepoint, Glenn Oztemel caused Freepoint to enter into a “Service Provision Agreement” with a Liberian company controlled by Innecco, knowing that all or a portion of the money paid to Innecco under the agreement would be used to continue paying bribes to Berkowitz and other Petrobras officials in order to obtain and retain business for Freepoint.

The information alleges:

“At Freepoint, Glenn Oztemel and Innecco, together with others, including Gary Oztemel, would and did take steps to conceal their receipt and use of the confidential Petrobras information by, among other ways: (i) sharing confidential information via personal, alias email accounts and encrypted messaging applications; (ii) using coded language to refer to other individuals involved in the scheme and using coded language to refer to bribes and bribe amounts; and (iii) engaging in sham negotiations to give the appearance of legitimacy to trades between Petrobras and Freepoint and between Petrobras and Freepoint.”

According to the information, between 2012 and 2018 Freepoint paid Innecco approximately $3.9 million in corrupt consultancy fees and commissions associated with approximately 124 transactions between Freepoint and Petrobras, knowing that a portion of such money would be used to pay bribes to Brazilian government officials in exchange for Freepoint obtaining and retaining business with Petrobras.

The information alleges that “Freepoint earned approximately $30.5 million in profits from its corruptly obtained business with Petrobras.

Based on the above, the information charges conspiracy to violate the FCPA’s anti-bribery provisions.

The criminal charge was resolved via a three year deferred prosecution agreement. The DPA sets forth the following “relevant considerations.”

a. the nature and seriousness of the offense conduct … including the payment of over $3.9 million in commissions to a third-party intermediary, knowing that a portion of those commissions would be used to pay bribes to Brazilian government officials, in exchange for the Company obtaining and retaining business with Petrobras … resulting in profits of approximately $30.5 million;

b. the Company did not receive voluntary disclosure credit … because it did not voluntarily and timely disclose to the DOJ;

c. the Company received credit for its cooperation … because it cooperated with [the DOJ’s] investigation and demonstrated recognition and affirmative acceptance of responsibility for its criminal conduct; the Company also received credit for its cooperation pursuant to the Criminal Division’s Corporate Enforcement and Voluntary Self-Disclosure Policy. Such cooperation included, among other things: (i) promptly and thoroughly responding to requests by the Fraud Section and the Office by producing and summarizing relevant documents and other information; (ii) engaging in significant efforts to aggregate and analyze complex financial information and trade data for more than 4,000 transactions; and (iii) making Company officers and employees available for interviews, and arranging separate counsel where appropriate. However, in the initial phases, the Company’s cooperation was limited in degree and impact, and largely reactive;

d. the Company provided to the DOJ all relevant facts known to it, including information about the individuals involved in the conduct …;

e. the Company also received credit pursuant to the Criminal Division Corporate Enforcement and Voluntary Self-Disclosure Policy because it engaged in remedial measures, including: (i) conducting an analysis of the causes of the underlying conduct and undertaking appropriate remediation to address those root causes and taking additional steps to improve its compliance program, including by retaining an advisory firm to evaluate its third-party compliance program; (ii) overhauling its third-party compliance and risk management program, including through the implementation of enhanced risk-based due diligence, screening, ongoing monitoring and oversight procedures, and the implementation of FCPA training for third-party agents; (iii) reducing the use of third-party intermediaries; (iv) implementing a global agent onboarding and tracking procedure; (v) strengthening its corporate governance and risk management structures, including through the utilization of data and metrics to evaluate risk, enhancing the independence and stature of its compliance function, and hiring additional, experienced compliance personnel; (vi) updating the Company’s global anti-bribery and corruption policy to include FCPA red flags; (vii) implementing a process for reporting and investigating allegations of misconduct; and (viii) conducting testing of its third-party compliance program.

f. the Company has enhanced and has committed to continuing to enhance its compliance program and internal controls …

g. the Company has no prior criminal history;

h. the Company’s agreement to resolve concurrently a separate investigation by the Commodity Futures Trading Commission (CFTC) related to the conduct … and its agreement to pay $7.6 million in disgorgement; and its anticipated resolution with authorities in Brazil related to the conduct … which resolutions the DOJ has agreed to credit in connection with the criminal penalty and forfeiture …

i. the Company has agreed to continue to cooperate with the DOJ; and

j. accordingly … the DOJ has determined that the appropriate resolution in this case is a deferred prosecution agreement and a criminal penalty of $68,000,000, which reflects a discount of 15 percent off the bottom of the otherwise-applicable U.S. Sentencing Guidelines fine range, and forfeiture of $30,551,150.

k. Based on the Company’s remediation and the state of its compliance program, and the Company’s agreement to report to the DOJ … the DOJ has determined that an independent compliance monitor was unnecessary.”

The DPA sets forth an advisory guidelines fine range of $80 – $160 million and states;

“The Fraud Section and the Office and the Company agree, based on the application of the Sentencing Guidelines, that the appropriate criminal penalty is $68,000,000 (the “Criminal Penalty”). This reflects a 15 percent discount off the bottom of the Sentencing Guidelines fine range.

The Company and the Fraud Section and the Office agrees that the Company will pay a monetary penalty in the amount of $45,560,000, equal to two-thirds of the Criminal Penalty, to the United States Treasury no later than ten business days after the Agreement is fully executed. The Fraud Section and the Office agree to credit toward the Criminal Penalty the amount paid by the Company to authorities in Brazil for violations of Brazilian law related to the same conduct … up to a maximum of $22,440,000 (the “Penalty Credit Amount”), within one year of the execution of this Agreement. Should any amount of the Penalty Credit Amount not be paid within twelve months of the execution of this Agreement, or be returned to the Company or any affiliated entity for any reason, the remaining balance of the Penalty Credit Amount will be paid to the United States Treasury within twelve months of the execution of this Agreement.”

The DPA further states:

“The Company hereby admits that the facts … establish that at least $30,551,150, representing the proceeds traceable to the commission of the offense, is forfeitable to the United States.

The Fraud Section and the Office agree that anticipated payments by the Company in connection with any concurrent resolution with the CFTC shall be credited against the Forfeiture Amount in the amount of $7,637,788 (the “Forfeiture Credit Amount”). Should any amount of the Forfeiture Credit Amount not be paid to the CFTC in connection with the Company’s resolution with the CFTC, the Company agrees that it shall make a payment of any remaining unpaid portion of the Forfeiture Credit Amount by wire transfer pursuant to instructions provided by the Fraud Section and the Office no later than 10 days after one year from the date of the Agreement.”

In the DOJ release, Acting Assistant Attorney General Nicole Argentieri stated:

“As [this] resolution demonstrates, the Criminal Division remains resolute in our fight against bribery and corruption. Our dedicated prosecutors are working tirelessly to hold both corporations and culpable individuals to account. Let this case also send a reminder that our policies offer the greatest benefits to companies that are proactive and act with urgency.”

U.S. Attorney Vanessa Roberts Avery for the District of Connecticut stated:

“This office and our federal law enforcement partners are keeping a watchful eye on those not only involved in the financial industry, but all U.S. businesses that operate overseas, to ensure that they are complying with our nation’s laws. This hefty financial sanction and deferred prosecution agreement should both serve as a deterrent to illegal conduct in the U.S. and abroad, and as a reminder that the Justice Department incentivizes those who report illegal conduct and work with us to correct wrongdoing.”

Assistant Director Michael Nordwall of the FBI’s Criminal Investigative Division stated:

“This case exemplifies the FBI’s relentless fight against corruption and our commitment to holding companies accountable for criminal business practices. The FBI, along with our domestic and international partners, will continue to aggressively combat these crimes and work to level the playing field of the global marketplace.”

Assistant Director in Charge Donald Alway of the FBI Los Angeles Field Office stated:

“This resolution and the indictment of three individuals demonstrate the commitment by the FBI and the Justice Department to holding accountable both corrupt companies and actors — wherever they are — for their illicit business activity. Our tireless work with partners around the globe ensures that businesses earn their contracts and that consumers are protected from inflated prices.”

In this release, Freepoint stated:

“Freepoint is fully committed to adhering to the letter and spirit of the laws and regulations in every jurisdiction where we operate. [These] resolutions with the US Department of Justice and the Commodity Futures Trading Commission, though serious and unfortunate, stem from activity by individuals that commenced prior to their joining Freepoint and was inconsistent with Freepoint’s values and a breach of our zero-tolerance for corruption. The individuals involved are no longer associated with the company. As noted in the resolutions, Freepoint cooperated with the authorities, providing information to aid their inquiries and engaging in significant efforts to aggregate and analyze complex financial information. In addition, we have reviewed and strengthened our internal processes and training to prevent, and improve detection of, violations of our policies and will continue to evaluate the effectiveness of our procedures and controls on an ongoing basis. In all our work with customers, we are committed to zealously guarding the confidentiality of their information.”

Francis Healy (Hogan Lovells) represented Freepoint.

Powered by WordPress. Designed by WooThemes