UK Markets closed

Exclusive: Middleman implicates top executives at Vitol, Trafigura in alleged bribery ring

By Ricardo Brito and Gram Slattery

By Ricardo Brito and Gram Slattery

BRASILIA/RIO DE JANEIRO (Reuters) - A middleman in a graft scheme at Brazilian state oil company Petrobras has implicated the chairman of global energy trading firm Vitol in a bribery operation to obtain oil contracts, as well as two high-ranking executives at rival Trafigura and its former CEO, according to plea bargain testimony seen by Reuters.

The individuals named in the previously unreported documents are Ian Taylor, the chairman of Vitol, as well as Claude Dauphin, the former chief executive and chairman of Trafigura. Trafigura co-head of oil trading José Larocca and chief operating officer Mike Wainwright were also implicated in the alleged scheme.

According to the documents, which summarize a plea deal reached in August with federal prosecutors, businessman Carlos Henrique Nogueira Herz testified that the executives knew of millions of dollars in bribes paid to Petrobras employees.

An oil industry insider with decades of experience, Herz pleaded guilty in August to Brazilian prosecutors' charges that he formed a "criminal group" that used his contacts in the sector to funnel bribes from Vitol and Trafigura to Petrobras employees from 2011 to 2014 in return for sweetheart fuel trades benefiting the commodity trading firms.

If his accusations are proven, Herz's testimony would up the ante in an ongoing Brazilian investigation of the commodity trading industry - codenamed Operation Without Limits - as it brings accusations of wrongdoing to the top echelons of some of the sector's largest companies.

Herz provided prosecutors with dozens of pages of emails and bank statements, reviewed by Reuters, that offered extensive detail on the bribery scheme as a whole.

Herz provided no documentary evidence specifically linking Taylor to the allegedly illegal conduct. Herz said one of his business partners, a close personal associate of Taylor, informed him about the Vitol executive’s involvement in the bribery scheme.

He provided documents showing Trafigura’s Wainwright was copied on an email referencing what Herz alleges were bribe payments. In his August testimony, Herz said Wainwright was involved in facilitating the payments.

He did not provide any documentary evidence showing the involvement of Trafigura executives Dauphin and Larocca, whom he alleged were both aware of the bribery scheme but not directly involved.


BACK CHANNEL PAYMENTS In his testimony, Herz said he knew of the executives' knowledge and involvement in the alleged scheme in part because he personally set up a financial back channel in 2012 through which Trafigura bribes could be paid to Petrobras employees.

He provided to prosecutors dozens of pages of emails and bank statements detailing what he alleged were aspects of those negotiations. The documents did not mention or include correspondence from Dauphin or Larocca.

Reuters could not independently confirm Herz's allegations about any of the executives.

Reuters could not determine what advantage Herz gains by striking the plea bargain deal with prosecutors. However, defendants in Brazil are generally given reduced sanctions in return for their cooperation.

A lawyer for Herz did not respond to requests for comment on Facebook and LinkedIn. The lawyer's legal offices did not pick up multiple phone calls. Prosecutors did not respond to a request for comment.

In a statement, Vitol said it would not be appropriate to comment on Herz’s testimony "beyond reiterating our zero tolerance policy in respect of bribery and corruption and our policy of cooperating fully with the relevant authorities in all the jurisdictions in which we operate."

Vitol said Taylor had nothing to add. Taylor, who was also CEO at the time of the alleged incidents, did not respond to a LinkedIn message sent by Reuters.

Petrobras said it had immediately begun internal inquiries after learning about Herz's plea bargain testimony and had removed employees named in the testimony from their positions.

Trafigura said in a statement that it was aware of reports of Herz' testimony but had not been contacted by Brazilian authorities in relation to the allegations.

"Any suggestion that Trafigura's current management knew that its payments would be used to make improper payments to employees of Petrobras is not correct," the statement said. "Trafigura has a zero tolerance policy on bribery and corruption."

The firm did not make Wainwright and Larocca available for comment and the two men did not respond emails from Reuters. Dauphin, who stepped down as Trafigura CEO in 2014, died in 2015.


'PRIVILEGED INFORMATION'

The investigation is part of a larger probe in Brazil, known as Operation Car Wash, which started in 2014 and has taken down scores of elite businessmen and politicians throughout Latin America who until recently were thought untouchable.

The oil trading investigation became public knowledge in December when federal prosecutors alleged that Vitol, Trafigura, Glencore Plc and Mercuria Energy Group used intermediaries to pay at least $31 million in bribes to Petrobras employees to sell them oil at below-market rates and gain access to privileged information that gave them an edge over competitors when trading with the oil firm.

The companies, which together control about 10 percent of the world's daily oil consumption, have said they are cooperating with the Brazilian investigation.

In his testimony, Herz said that his business partner, Bo Ljungberg, negotiated a back channel through which Vitol paid bribes to Petrobras employees in exchange for confidential Petrobras information.

That information gave Vitol a significant advantage over competitors when trading fuel with the state-run firm, according to the documents.

Ljungberg, a Swedish national, was indicted by Brazilian authorities in December for facilitating the alleged payments. He did not respond to Reuters messages on Facebook and LinkedIn requesting comment.

An Interpol alert has been issued for Ljungberg. Brazilian prosecutors said in December he had returned to Sweden. Reuters has not been able to locate a lawyer for Ljungberg.

Herz alleged that Taylor was directly involved in the negotiation of the bribes, which came to around 10 cents to 20 cents per barrel of oil exchanged between the companies.

Herz said he was kept abreast of interactions between Taylor and Ljungberg via conversations with the Swede, with whom he was a co-owner of various firms active in the trading industry, according to the documents.


(Reporting by Ricardo Brito in Brasilia and Gram Slattery in Rio de Janeiro; Additional reporting by Julia Payne in London; Editing by Daniel Flynn and Bill Rigby)