Jack Farchy, Maria Clara Cobo and Patricia Hurtado, Bloomberg News

HONG KONG/NEW YORK
EnergiesNet.com 01 19 2024

Three of the world’s top commodity trading houses used state oil companies from China, Thailand, Oman and Uruguay as fronts in their corrupt deals with Ecuador, a federal jury in Brooklyn, New York has heard.

Gunvor Group, Vitol Group and Trafigura Group all used the government-owned oil companies of other countries to corruptly engineer favorable deals for themselves, according to testimony over the past week in the first major trial of a commodity trader in more than a decade.

The case — in which a former Vitol trader is accused of bribing government officials to win business — has shone a new light on a frenzied period of corruption, as Ecuador struck billions of dollars of oil deals in the 2010s under the government of ex-President Rafael Correa. The culmination of a years-long US investigation, the details heard in court stand out even by the standards of the oil-trading industry, with its history of backhanders and brown envelopes.

The testimony has shown how deals that were supposedly between two government entities, including some that involved multibillion-dollar loans, in fact were often being orchestrated behind the scenes by the traders and middlemen who stood to benefit from them, a process lubricated by millions of dollars in bribes.

‘The Front’

Nilsen Arias, who until mid-2017 was international trade manager at Petroecuador, testified that he had received bribes from numerous companies, including Vitol, Trafigura, Gunvor, Noble, Petredec and Sargeant Marine. 

He told the court that dealing directly with another state-owned company allowed him greater leeway than dealing with private companies, which required a public tender process.

Arias described hearing that Vitol trader Javier Aguilar, the man on trial for engaging in a foreign bribery and money-laundering scheme, had found a “trustworthy state-owned company that could be the front in the negotiations.”

The company would “act on behalf of Vitol, get the deal, and later hand it over to Vitol.”

This company was Oman Trading International, owned by the government of Oman, that would go on to sign a deal to buy fuel oil from Ecuador in December 2016, including a $300 million advance payment. 

The negotiations between Oman and Ecuador were carefully managed by traders and middlemen, the court heard. For example, Antonio Pere, a consultant who admitted handling bribe payments for several trading companies, described how he drafted a letter from the chief executive of Oman Trading International to the general manager of Petroecuador.

But the traders were careful to stay out of the limelight. On the day the contract was signed in Dubai in December 2016, Arias bumped into Aguilar in the lobby of his hotel and told him to stay away from the signing ceremony. 

Aguilar and Vitol paid bribes to Arias via Pere in connection with the Oman deal, both witnesses testified. 

Aguilar denies that, claiming he has been framed by a superior at Vitol. Vitol in 2020 admitted to having paid bribes in Ecuador and two other countries. 

There was no suggestion in the testimony in court that the state oil companies that were counterparties to deals with Petroecuador knew about or participated in the alleged corruption.

OQ Trading, as Oman Trading International is now known, said it “has at all times acted in accordance with applicable law (including the US Foreign Corrupt Practices Act) with regards to the Petroecuador contract and was not aware of, or involved in, any illegal activity purported to be undertaken by third parties. OQT remains committed to upholding the highest ethical standards in all aspects of our business.”

Trafigura, Gunvor

Arias and Pere testified that other major trading houses also used state oil companies as fronts in their dealings with Petroecuador. They said the first to do so was Trafigura, which used Uruguayan state energy company Ancap as a front for deals starting in 2010 in which it swapped crude oil for diesel and gasoline. Trafigura also paid bribes to Arias via Pere, the two men testified.

“Those bribes were paid by Trafigura through a company in Uruguay, and then to one of my companies, and then to Nilsen Arias’s companies,” Pere said. Arias received approximately $200,000 in bribes in connection with the Trafigura deal, he said.

Gunvor used Unipec, a unit of Chinese state giant Sinopec, and Thailand’s PTT as fronts, both Arias and Pere testified. A former trader for Gunvor, Raymond Kohut, earlier pleaded guilty to paying more than $22 million in bribes to Ecuadorian government officials. Gunvor has disclosed it faced a US investigation over bribery in Ecuador and booked a $650 million provision.

A spokesperson for Gunvor declined to comment. A spokesperson for Trafigura said: “Trafigura is not a party to the case and will not comment on ongoing legal proceedings relating to other parties.”

Spokespeople for Ancap, Sinopec, PTT, Noble and Petredec either declined to comment or did not respond to requests for comment.

Petroecuador’s oil deals with foreign state-owned companies have long been controversial in Ecuador.

Fernando Villavicencio, a crusading journalist turned lawmaker, estimated after an investigation in 2022 that Petroecuador had lost $4.8 billion from selling its oil at below-market prices under contracts with state oil companies from China and Thailand. Petroecuador received more than $10 billion in loans in the loans-for-oil deals, he said in March 2022. Villavicencio was assassinated last year.

The case is US v. Aguilar, 20-cr-390, US District Court, Eastern District of New York (Brooklyn). 

–With assistance from Ken Parks, Sarah Chen, Patpicha Tanakasempipat and Ben Bartenstein.

bloomberg.com 01 18 2024