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Catch of the Week: Vitol to Pay $163 Million to Settle Criminal and Civil Charges Related to Oil Bidding in Brazil, Mexico, and Ecuador

Posted  December 11, 2020

This week’s Catch of the Week highlights the participation of the Commodity Futures Trading Commission (CFTC) in the settlement of an international bribery and kickback scandal involving Vitol Inc., a member of the Vitol Group, the world’s largest privately owned oil and gas trading firm.  As part of the settlement, Vitol will pay $90 million in fines to the DOJ, $45 million to Brazilian authorities, and at least $28 million to the CFTC.  On December 8th the CFTC issued a notice that any whistleblowers who may have had a role in the investigation may submit a claim under the CFTC Whistleblower Program to seek up to 30 percent of monetary sanctions collected.

Remarkably, this was the CFTC’s first enforcement action to address foreign corruption impacting the U.S. derivatives and related physical markets since it issued guidance relating to the reporting and disclosure of such schemes in March 2019.  As described in the CFTC Order, Vitol’s conduct was truly egregious.

According to the CFTC press release, at various times between 2005 and early 2020, Vitol paid bribes and kickbacks to employees and agents of certain state-owned entities in Brazil, Ecuador, and Mexico in exchange for improper preferential treatment, access to trades, and inside information.  Vitol attempted to hide the payments by making them through offshore bank accounts and to shell entities.

Specifically, in Brazil, Vitol allegedly paid more than $8 million in bribes to at least nine officials at Petrobras, the state-owned oil company, in order to obtain inside information such as weekly reports on the company’s production volume, anticipated imports, and confidential bids by competitors.

Similarly, in Mexico and Ecuador, as recently as July 2020, Vitol allegedly paid more than $2 million in bribes to officials at Pemex and Petroecuador, the state-owned oil companies, again, in exchange for preferential treatment and inside trading information.

The CFTC further charged that Vitol attempted to manipulate certain U.S. benchmark prices relating to physical fuel oil products in order to make its trades more profitable.  According to the CFTC, Vitol’s manipulative and deceptive conduct “undermined the legitimate market forces of supply and demand and the integrity of the global physical and derivative oil markets.”

Whistleblowers play a critical role in exposing wrongdoing of the type alleged in the CFTC’s Vitol settlement order.  Where investors and the markets are not receiving accurate and truthful information, the CFTC Whistleblower Program provides financial incentives to whistleblowers to come forward with that information.  While the decision to be a whistleblower is rarely an easy one, their voices bring important facts to light and can bring accountability for wrongdoing.

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Tagged in: Catch of the Week, CFTC Whistleblower Reward Program, FCPA, Financial and Investment Fraud,