Last week the DOJ announced  that Vitol Inc., the U.S. affiliate of the Vitol group of companies, which together form one of the largest energy trading companies in the world, agreed to resolve a net $90 million FCPA enforcement action for conduct in Brazil, Ecuador and Mexico.
As noted in the DOJ release (and as will be explored in a future post) “Vitol has also agreed to disgorge more than $12.7 million to the Commodity Futures Trading Commission (CFTC) in a related matter and to pay the CFTC a penalty of $16 million related to trading activity not covered” by the DOJ enforcement action.
Under the heading “The Brazil Bribery Scheme” this criminal information  alleges:
“In or about and between 2005 and 2014, Vitol, through certain of its employees and agents, knowingly and willfully conspired and agreed with others to corruptly offer and pay more than $8 million in bribes to, and for the benefit of, Brazilian officials to secure an improper advantage in order to obtain and retain business from Petrobras in connection with the purchase and sale of oil products. Vitol and its affiliated companies earned at least $33 million in profits from its corruptly obtained contracts with Petrobras.
In furtherance of the scheme, Vitol and its co-conspirators entered into sham consulting agreements, established a fictitious company to divert funds to offshore shell companies and created fake invoices for purported consulting services and “market intelligence.” At times, Vitol and its co-conspirators used the U.S. financial system to transmit bribe payments, including through transactions in the Eastern District of New York, into offshore bank accounts, from which the bribes were paid in cash and/or via electronic wire payments to Brazilian officials.”
According to the information:
“Vitol and its co-conspirators caused corrupt payments of more than $3 million to be made to Brazilian Official 1 [described as a fuel oil trader for Petrobras] and at least three other officials at Petrobras in exchange for receiving confidential Petrobras information, including: (i) “market intelligence,” which included internal Petrobras import and export forecasts and other confidential information intended to benefit Vitol in trading with Petrobras; and (ii) “last look” information, including confidential bid information that Petrobras received from Vitol’s competitors, which Vitol used to determine the amount it would need to bid to win public tenders.”
To facilitate and conceal Vitol’s corrupt payments, the information alleges that Vitol Brazil Executive (described as a senior manager at Vitol Brazil), with the knowledge of Vitol Trader 1 (a dual citizen of the U.S. and another country and a senior trader at Vitol who had oversight responsibilities for certain aspects of Vitol’s operations in Latin America) and Vitol Trader 2 (a U.S. citizen who was a trader at Vitol) used the Brazil Sham Company to invoice Vitol for amounts that would included bribes to be paid to Brazilian Official 1. The information alleges:
“Vitol caused dozens of invoices from Brazil Sham Company to be paid from an account in Switzerland held by Vitol S.A. to other accounts in Switzerland and the United States, ultimately for the payment of cash bribes to Brazilian officials. In general, the funds were then transferred from the accounts in Switzerland and the United States to accounts in the Bahamas and Grand Cayman. These accounts were held by doleiros, who converted the funds into Brazilian currency so that Vitol Brazil Executive could deliver cash to Brazilian Official 1.”
The information further alleges:
“While the bribery scheme involving Brazilian Official 1 was ongoing, Vitol also made corrupt bribe payments of more than $5 million to five additional officials at Petrobras, including Brazilian Official 2 [a fuel oil trader for Petrobras who worked in Rio de Janeiro, Brazil and Houston], Brazilian Official 3 [a trading manager for Petrobras in Rio de Janeiro], Brazilian Official 4 [a fuel oil trader for Petrobras in Rio de Janeiro], Brazilian Official 5 [a trading manager for Petrobras in Rio de Janeiro] and Brazilian Official 6 [a trading manager for Petrobras in Rio de Janeiro]. Vitol paid the bribes to these Brazilian officials through intermediaries, Brazil Consultant 1 and Brazil Consultant 2, in exchange for receiving confidential pricing information that Vitol, at times, used to bid or offer on fuel oil contracts from Petrobras.
Acting on behalf of Vitol, Brazil Consultant 2 engaged in secret negotiations with Brazilian Official 2, through Brazil Consultant 1, to establish corruptly-agreed upon prices for Petrobras contracts that included bribes to the Brazilian officials and commissions to Brazil Consultant 1 and Brazil Consultant 2. After the prices were secretly agreed to pursuant to the corrupt scheme, the parties engaged in sham negotiations to make those negotiations appear legitimate.”
According to the information:
“To facilitate and conceal the corrupt bribe payments to Brazilian Official 2, Brazilian Official 3, Brazilian Official 4, Brazilian Official 5 and Brazilian Official 6, Vitol entered into sham consulting agreements with companies controlled by Brazil Consultant 2. Once the trades between Vitol and Petrobras were finalized and the cargoes delivered, Brazil Consultant 2 sent Vitol an invoice for the commissions from Brazil Consultant 2’s consulting companies.
In general, upon receiving a payment from Vitol, Brazil Consultant 1 and Brazil Consultant 2 kept a portion of that payment and used the balance to pay bribes to Brazilian Official 2, Brazilian Official 3, Brazilian Official 4, Brazilian Official 5 and Brazilian Official 6 by wire transfer into bank accounts controlled by the Brazilian officials in Uruguay, Brazil and elsewhere. Some of the bribes were also paid in cash.”
Under the heading “The Ecuador and Mexico Bribery Scheme,” the information alleges:
“In or about and between 2015 and 2020, Vitol, through certain of its employees and agents, knowingly and willfully conspired and agreed with others to corruptly offer and pay more than $2 million in bribes to, and for the benefit of, officials in Ecuador and Mexico to secure an improper advantage in order to obtain and retain business in connection with the purchase and sale of oil products.
In furtherance of the scheme, Vitol and its co-conspirators entered into several sham consulting agreements, set up shell companies for the purpose of laundering the corrupt payments, created fake invoices for purported consulting services and used email accounts with pseudonyms to transfer funds to offshore shell companies involved in the conspiracy. The illegal payments were made through multiple bank accounts in the United States, including in the Eastern District of New York, and abroad in an effort to conceal the bribes.”
According to the information “beginning in or about 2015, Vitol, through its employees and agents, including Javier Aguilar [an individual previously criminally charged – see here  for the prior post] and Ecuador Consultant 1, agreed to pay bribes to Ecuadorian Official 1 [a senior manager at Petroecuador] and Ecuadorian Official 2 [an individual who held various positions in the Ecuadorian Ministry of Hydrocarbons] in exchange for identifying business opportunities for Vitol and others with Petroecuador and, in some cases, using their influence to ensure Vitol received the benefits of those opportunities.”
As to Mexico, the information alleges:
“[F]rom at least in or about and between 2015 and 2020, Vitol, through its employees and agents, used Intermediary 1 to make bribe payments to Mexican officials to receive inside information and obtain business.
For example, in or about 2018, Vitol paid bribes to a Mexican official at a wholly-owned PEMEX subsidiary in order to receive confidential, inside information to help obtain a contract with the PEMEX subsidiary. To effectuate the bribe payments, Vitol caused two Mexican entities to execute sham consulting agreements with shell companies controlled by Intermediary 1.
Pursuant to the sham consulting agreements, the Vitol trader subsequently caused the Mexican entities to create fake invoices that the Vitol trader sent to Intermediary 1. Using the fake invoices to justify the payments, Intermediary 1 wired bribe payments to bank accounts controlled by the Mexican entities for the ultimate benefit of the Mexican official.”
The information alleges the following overt acts with a U.S. nexus: a consultant traveling to Houston to meet with executives at Vitol to discuss a potential engagement by Vitol to develop business with Petrobras; wiring money through a correspondent bank or account in the U.S.; and a Vitol Brazil Executive sending an e-mail to Vitol Group employees in Houston.
Based on the above, the DOJ charged Vitol with two counts of conspiracy to violate the FCPA’s anti-bribery provisions.
The criminal charges were resolved through this three year deferred prosecution agreement . The DPA sets forth the following “relevant considerations.”
“a. the Company did not receive voluntary disclosure credit pursuant to the FCPA Corporate Enforcement Policy …, or pursuant to the Sentencing Guidelines, because it did not disclose to the Fraud Section and the Office the conduct described in the Statement of Facts;
b. the Company received full credit for its cooperation and Vitol S.A.’s cooperation with the Fraud Section’s and the Office’s investigation, including: (i) making factual presentations to the Fraud Section and the Office; (ii) voluntarily facilitating the interview in the United States of a former foreign-based employee; (iii) producing to the Fraud Section and the Office, on a prompt basis, relevant documents, including documents located outside the United States, accompanied by translations of documents; and (iv) timely accepting responsibility and reaching a prompt resolution;
c. the Company and Vitol S.A. provided to the Fraud Section and the Office all relevant facts known to them, including information about the individuals involved in the conduct described in the Statement of Facts and conduct disclosed to the Fraud Section and the Office prior to the Agreement;
d. the Company, Vitol S.A. and their affiliates engaged in remedial measures, including personnel changes; implementation of enhanced policies, procedures and internal controls relating to, among other things, anti-corruption, retention and management of commercial agents and other third parties, and gifts, travel and entertainment; internal investigations and risk assessments; and enhancements to training and internal reporting programs;
e. the Company and Vitol S.A. have enhanced and have committed to continuing to enhance their compliance programs and internal controls, including ensuring that their compliance programs satisfy the minimum elements set forth in Attachment C to [the DPA] (Corporate Compliance Program);
f. based on the Company’s and Vitol S.A.’s remediation and the state of their compliance programs, and the Company’s and Vitol S.A.’s agreement to report to the Fraud Section and the Office as set forth in Attachment D to [the DPA], the Fraud Section and the Office determined that an independent compliance monitor was unnecessary;
g. the nature and seriousness of the offense conduct, as described in the Statement of Facts, including the Company’s involvement in schemes to pay millions of dollars to officials of Brazil, Ecuador and Mexico, as well as the duration of the misconduct;
h. the Company has no prior criminal history;
i. the Company has resolved with the U.S. Commodity Futures Trading Commission (“CFTC”) through a cease-and-desist proceeding relating to the conduct described in the Statement of Facts and other conduct, and has agreed to pay $12,791,000 in disgorgement relating to the conduct described in the Statement of Facts and a $16,000,000 penalty relating to trading activity not covered by the Statement of Facts;
j. the Company is entering into a resolution with authorities in Brazil relating to the same conduct described in the Statement of Facts related to Brazil, which the Fraud Section and the Office are crediting in connection with the penalty in this Agreement;
k. the Company has agreed to continue to cooperate with the Fraud Section and the Office in any ongoing investigation …;
l. accordingly, after considering (a) through (k) above, the Fraud Section and the Office believe that the appropriate resolution in this case is a Deferred Prosecution Agreement with the Company; a criminal monetary penalty in the amount of $135,000,000, which reflects a discount of 25 percent off the bottom of the otherwise-applicable Sentencing Guidelines fine range; and the Company’s and Vitol S.A.’s agreement to report to the Fraud Section and the Office as set forth in Attachment D to [the DPA].”
Pursuant to the advisory guidelines range, the fine range was $180 – $360 million and the DPA states that the Vitol agreed to pay a total monetary penalty of $135 million. Pursuant to the DPA, Vitol will pay the DOJ $90 million with the remaining amount being credited based on a separate resolution with Brazilian authorities that addresses the same underlying conduct related to Brazil.
In the DOJ release, Acting Assistant Attorney General Brian Rabbitt stated:
“Over a period of 15 years, Vitol paid millions of dollars in bribes to numerous public officials – in three separate countries – to obtain improper competitive advantages that resulted in significant illicit profits for the company. [This] coordinated resolution with Brazil, along with our first coordinated FCPA resolution with the CFTC, underscores the department’s resolve to hold companies accountable for their crimes while, at the same time, avoiding unnecessarily duplicative penalties.”
Acting U.S. Attorney Seth DuCharme of the Eastern District of New York stated:
“Vitol paid bribes to government officials in Brazil, Ecuador and Mexico to win lucrative business contracts and obtain competitive advantages to which they were not fairly entitled. The United States Attorney’s Office for the Eastern District of New York will continue to hold accountable companies and individuals that attempt to defy U.S. law to the detriment of honest competitors.”
Assistant Director in Charge Kristi Johnson of the FBI’s Los Angeles Field Office stated:
“This resolution demonstrates the FBI’s commitment to investigate foreign corruption and hold accountable those who circumvent laws for financial gain at the expense of American consumers. We’ll continue to work with our partners to root out corruption, whether it occurs domestically or abroad, to ensure trust on the international playing field.”
In this statement, Russell Hardy (CEO of Vitol) stated:
“Vitol is committed to upholding the law and does not tolerate corruption or illegal business practices. As recognised by the authorities, Vitol has cooperated extensively throughout this process. We understand the seriousness of this matter and are pleased it has been resolved. We will continue to enhance our procedures and controls in line with best practice.”
Simpson Thacher attorneys Jeffrey Knox and Joshua Levine represented Vitol.
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