Experienced Energy Trader at Vitol Convicted in Foreign Bribery and Money Laundering Scheme

A former trader at Vitol, Inc., an energy commodities company, was convicted by a federal jury of violating the Foreign Corrupt Practices Act (FCPA) by paying bribes to officials of Petroecuador, an Ecuadorian state-owned oil company. Additionally, the former trader was convicted of laundering money used to bribe Ecuadorian government officials and executive officers at Mexican oil company PEMEX’s affiliate company, Pemex Procurement International. The verdict was delivered after an eight-week trial, with testimony from ten witnesses–three of whom were former officials from Mexico and Ecuador that allegedly received the bribes. Seven other co-conspirators have pled guilty and await sentencing. The seven co-conspirators have agreed to forfeit over $63 million in penalties and recovered assets.[1]

What is the Foreign Corrupt Practices Act?

The bribery of foreign officials is wrong, not only because this kind of act goes against universally understood ethics, but because it erodes confidence and integrity in the free market. Companies that resort to bribes use shortcuts to conceal their less efficient and less competitive nature, which in turn threatens the domestic corporate climate as other businesses may similarly cut corners to compete for business.

The Foreign Corrupt Practices Act of 1977 (15 U.S.C. §§ 78dd-1), or FCPA, was founded to combat this practice, and aims to create a more level playing field for honest businesses and stop corporate corruption. The anti-bribery provisions of the FCPA prohibit “any offer, payment, promise to pay, or authorization of the payment of money or anything of value to any person…given or promised, directly or indirectly, to a foreign official to influence the foreign official in his or her official capacity, induce the foreign official to do or omit to do an act in violation of his or her lawful duty, or to secure any improper advantage in order to assist in obtaining or retaining business for or with, or directing business to, any person.”[2]

In other words, bribes to foreign officials for the sake of business are not allowed.

The FCPA also requires publicly listed companies to keep accurate books and records and utilize a system of internal accounting controls. These rules are meant to prevent businesses from falsifying books or circumventing internal controls.

Penalties for Violating the FCPA

There are several types of potential penalties for violating the FCPA that depend on if the violation was criminal or civil, and on which statute was violated.[3]

Criminal Penalties Under Anti-Bribery Provision

Corporations and other entities may face up to $2 million per violation. Individuals may face up to 5 years in prison and be fined up to $250,000 per violation.

Civil Penalties Under Anti-Bribery Provision

As of January 15, 2024, individuals or entities may face up to $25,597 per violation. The amount is adjusted for inflation every year. The DOJ and SEC may seek additional relief to prevent more violations.

Criminal Penalties Under Accounting Provision

Corporations and other entities may face up to $25 million per violation. Individuals may face up to 20 years in prison and be fined $5 million.

Civil Penalties Under Accounting Provision

As of January 15, 2024, companies or entities may face penalties as low as $115,231 or as high as $1,152,314 per violation. Individuals may face penalties as low as $11,524 or as high as $230,464 per violation. Again, the SEC may seek additional relief or bar the individual from serving as an officer or director at a public company.

Other international agencies may also have their own penalties that can stack on top of the penalties imposed by the United States government.

Other Statutes to Combat FCPA Violations

False Claims Act (FCA)

The False Claims Act is a powerful tool in the fight against fraud involving U.S. government contracts and programs, which can be directly related to the enforcement of the Foreign Corrupt Practices Act (FCPA). The FCA incentivizes whistleblowers to come forward with information about wrongdoing through its qui tam provisions. Certain FCPA violations like bribing foreign officials to secure government contracts can fall under the FCA. By sharing the recovery with private individuals, the FCA greatly increases the reach of law enforcement agencies in catching potential FCPA violations.

New Anti-Corruption Initiative from the DOJ

Recently, the Department of Justice (DOJ) launched a new anti-corruption initiative aimed at enhancing the enforcement of the FCPA. This initiative involves increasing the resources dedicated to investigating and prosecuting corruption cases that involve American businesses bribing foreign officials to gain a competitive advantage. This initiative not only reinforces the message that compliance with the FCPA is a priority for U.S. enforcement agencies but also ensures a level playing field for companies that adhere to the law. Furthermore, it helps catch cases that might not be addressed under the False Claims Act (FCA), ensuring that the DOJ can prosecute any FCPA violation.

Anti-Money Laundering Program

The anti-money laundering (AML) programs set up by financial institutions are crucial in detecting and preventing schemes that may involve FCPA violations, such as the concealment of bribes or diversion of funds through complex financial networks. These measures are vital in identifying unusual patterns that may indicate bribery or corruption, such as irregular wire transfers or the establishment of shell companies, which are often used to facilitate payments in violation of the FCPA. By strengthening AML regulations and enforcement, the financial sector can act as a frontline defense against corruption, limiting the ability of companies and individuals to engage in and conceal corrupt practices on an international scale.

Vitol, Bribery, and Oil

Vitol is an energy commodities company that deals primarily in the refining, trading, shipping, and storage of crude oil and other energy products. In 2020, the company admitted to bribing officials in Ecuador, Mexico, and Brazil–another previous violation of the FCPA.

According to the U.S. Attorney Office of the Eastern District of New York, the convicted ex-trader “bribed officials at state-owned oil and gas companies in Ecuador and Mexico using shell companies and sham invoices to obtain business for Vitol, Inc.”[4] During the trial, it was proven that the ex-trader paid over $1 million in bribes to officials at Petroecuador and PPI. The ex-trader and his co-conspirators used shell companies to bypass the government-owned corporations’ restrictions on working with private companies, and thus secured a $300 million contract for fuel oil for Vitol, Inc. The money was then laundered through “a series of fake contracts, sham invoices, and shell entities incorporated in Curacao, Panama, and Cayman Islands.”[5] The ex-trader used a similar system to launder bribes for officials at PEMEX Procurement International in Mexico.

As the co-conspirators await their sentencing after pleading guilty, the ex-trader faces up to 25 years in prison for his crimes. Together, the individuals have also agreed to forfeit over $63 million.[6]

[1] https://www.justice.gov/usao-edny/pr/ex-energy-trader-vitol-convicted-foreign-bribery-and-money-laundering-scheme

[2] chrome-extension://efaidnbmnnnibpcajpcglclefindmkaj/https://www.justice.gov/sites/default/files/criminal-fraud/legacy/2012/11/14/fcpa-english.pdf

[3] https://complianceconcourse.willkie.com/resources/anti-bribery-and-corruption-enforcement-fines-penalties-and-sanctions

[4] https://www.justice.gov/usao-edny/pr/ex-energy-trader-vitol-convicted-foreign-bribery-and-money-laundering-scheme

[5] Id.

[6] Id.