Last week the Department of Justice (DOJ) settled a multi-part enforcement action, partly involving the Foreign Corrupt Practices Act (FCPA), with Vitol Inc. (Vitol), the US subsidiary of Vitol Holding II SA. Vitol agreed to pay a combined $135 million to resolve matters. Interestingly, also included in the overall settlement was a disgorgement of more than $12.7 million to the Commodity Futures Trading Commission (CFTC) in a related matter and a penalty payment to the CFTC of $16 million related to trading activity. The FCPA component was settled via a Deferred Prosecution Agreement (DPA) and Criminal Information (Information).
According to the Information, “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.”
Ecuador Corruption
Here the corruption started in 2015, when Vitol agreed to pay bribes “for identifying business opportunities for Vitol and others with Petroecuador and, in some cases, using their influence to ensure Vitol received the benefit of those opportunities.” This was expanded in 2016 when Ecuadorian officials began working on a prospective project related to the purchase of fuel oil from Petroecuador. In this scheme the Ecuadorian national oil company would contract with Vitol “on back-to-back terms, thereby bypassing a competitive tendering process.”
The scheme played out as follows. Vitol would pay bribes to Ecuadorian officials in exchange for the award of the Fuel Oil Contract to Petroecuador for the benefit of Vitol. The bribe was baked into a “per-barrel commission for fuel oil provided to Vitol” and corrupt Consultants retained by Vitol would use a portion of those funds to pay bribes to Ecuadorian officials on Vitol’s behalf.
The bribes were funded in March through May 2018 by payments totaling approximately $2,638,000 by Vitol to its corrupt Consultant based upon fraudulent invoices. After the money was funded, Vitol instructed its corrupt Consultant in tranches of $150,000 every 15 days to the corrupt Petroecuador officials. For these bribe payments, Vitol secured a $330 million contract for its corrupt acts.
Mexico Corruption
In Mexico, between 2015 and 2020, Vitol, used a corrupt Intermediary to make bribe payments to Mexican officials to receive inside information and obtain business. The Information provided the following 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 the corrupt Intermediary.
Fine and Penalty
Vitol was assessed and agreed to pay a total monetary penalty in the amount of $135,000,000. The company and DOJ agreed that of that total amount, Vitol would pay the United States $90,000,000. The DOJ credited the remaining amount of the Total Criminal Fine against the amount the Vitol agreed to Brazilian authorities, up to a maximum of $45,000,000, so long as the Company pays the remaining amount to Brazil pursuant to the Company’s separate resolution with Brazilian authorities that addresses the same underlying conduct related to Brazil as described in the DPA. Vitol also resolved an enforcement action with the CFTC via a Cease-and-Desist proceeding for conduct described in the DPA and other conduct. The total fine and penalty is $12,791,000 in disgorgement relating to the conduct described in the DPA and a $16,000,000 penalty relating to trading activity not covered in the DPA.
Vitol was able to obtain a discount under the FCPA Corporate Enforcement Policy in the full amount available to it, 25%, although the company did not self-disclose its conduct. However they 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”.
Apparently, there was adequate disclosure of the facts by Vitol as the DPA noted, the Company provided to the DOJ all relevant facts known to them, including information about the individuals involved in the illegal conduct. Most importantly, Vitol 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.” The company agreed to continue to enhance its compliance program and report to the DOJ on its progress. It is not clear what obligations Vitol agreed to in a Brazilian enforcement action.
Interestingly, under the Sentencing Guideline calculations, it appears that the failure to self-disclose cost it $45 million in additional penalties. That amount is quite an incentive for companies to come forward and self-disclose.
Please join me tomorrow where I conclude my series with some critical lessons learned from this case for the compliance professional.
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