Brazilian Prosecutors’ “Operation Car Wash” Investigations of Leading Oil Trading Firms Intensify With Criminal Charges

Since December 5, a series of actions related to Brazil’s long-running “Operation Car Wash” shows that Brazilian prosecutors are aggressively pursuing three of the world’s leading oil trading firms – Trafigura Group Pte, Vitol Group, and Glencore – for alleged bribery connected with the Brazilian state-owned oil company Petrobras.  These actions occurred shortly after a November 2018 report by non-governmental organizations Global Witness and Public Eye that the three firms had “links to men accused or convicted of involvement in the [Petrobras] bribery scandal.”

First, on December 5 the Financial Times reported that all three firms were under investigation on suspicion of paying bribes to Petrobras employees in exchange for contracts. Brazilian prosecutors said that “there are suspicions” that between 2011 and 2014, all three companies paid more than $15.3 million related to more than 160 operations “of purchase and sale of oil products and rental of storage tanks.”  Still other, unnamed companies were reportedly also being investigated for paying a similar bribe amount to Petrobras employees.

The Brazilian prosecutors stated that evidence of the alleged corruption activities, which involved Petrobras offices in Houston and Petrobras headquarters in Rio de Janeiro. “shows that there was a scheme in which the investigated companies paid bribes to Petrobras’ employees in exchange for favours, more advantageous prices, and gaining contracts more frequently.”   Although they did not provide precise information about the total amount of the bribes by the three named firms, they noted that between 2004 and 2015, Trafigura conducted approximately 966 commercial operations with Petrobras that totaled approximately $8.7 billion.   At the time of the December 5 statement, Brazilian federal police reportedly had arrested 11 individuals and were seeking another 26 individuals for questioning.

In addition, according to the Wall Street Journal, the prosecutors said that “they have ample documentary evidence, implicating top executives at the targets of the probe, that the companies bribed Petrobras employees to win more contacts to trade oil and derivatives and to win better prices on those contracts, among other things.”  One prosecutor stated in a press conference that “[t]he early stages of the investigation are revealing only the tip of the iceberg,” and that “[t]he main executives of the trading companies had total and unmistakable knowledge” of the deals.

Second, on December 14 the Wall Street Journal reported that Brazilian prosecutors had charged two former Trafigura executives with paying bribes totaling approximately $1.5 million to Petrobras employees in return for contracts.  Brazilian prosecutors said that the charges against those two defendants, a former senior executive and a country representative, “were the first of many to come” against the three firms.

Third, on December 20 Brazilian prosecutors reportedly charged 12 individuals, including former Petrobras employees and middlemen who allegedly “worked directly with top executives at Vitol,” with participation in a Petrobras-related scheme involving at least $2.85 million in bribe payments.  The charging document that prosecutors filed said that two Vitol senior executives for the United States and Latin America and the Caribbean “had full knowledge of the scheme.”

Note: These actions by Brazilian prosecutors, though certainly significant in their own right, appear to be part of a larger international initiative by anti-corruption prosecutors to probe alleged corruption involving Trafigura, Vitol, and Glencore.  In their December 5 statement, the prosecutors said that the three firms would “face legal repercussions in other jurisdictions,” but did not specify which jurisdictions.  In July 2018, however, Glencore disclosed that it had received a subpoena from the U.S. Department of Justice “with respect to compliance with the Foreign Corrupt Practices Act and United States money laundering statutes,” seeking documents relating to Glencore’s business in Nigeria, the Democratic Republic of Congo [(DRC)], and Venezuela from 2007 to the present.  In addition, there were unverified reports in May 2018 that the United Kingdom Serious Fraud Office is investigating Glencore for alleged corruption in the DRC, though the SFO stated at the time that it would not comment on the reports and to date has made no further public statements regarding Glencore.

While the Brazilian prosecutors’ statements indicate that they are far from done, the three firms are already feeling the repercussions of the Brazilian investigations.  On December 20, the Financial Times reported that shortly after the announcement regarding the Vitol charges, Petrobras, which has been cooperating with law enforcement authorities, announced that it had “temporarily suspended the commercialisation of oil with the three companies, either to buy or sell.”  Petrobras’s statement said that based on the latest news related to the investigations, it needed to “analyse and verify the information contained in the investigation.”  It also stated that Petrobras had asked the three firms what measures they had taken regarding the bribery allegations that pertained to investigating “irregularities” and the “accountability of individuals.”  Given the pace of the Brazilian prosecutors’ actions in these investigations so far, it is reasonable to expect that still more repercussions will be felt very soon.