The Swiss trading firm trading firm G Trafigura Beheer B.V. (Trafigura), an international commodity trading company with its primary operations in Switzerland, pled guilty and will pay over $126 million to resolve an investigation stemming from the company’s corrupt scheme to pay bribes to Brazilian government officials to secure business with Brazil’s state-owned and state-controlled oil company, Petróleo Brasileiro S.A. – Petrobras (Petrobras). The matter was resolved via a Plea Agreement. An Information detailing the company’s conduct was also issued.
In spite of substantial violations of the FCPA and its extension up into the corporate offices, Trafigura did receive the 10% discount from the 50th percentile of the US Sentencing Guidelines. The message from this enforcement action is the cost of failing to self-disclose, creating liability under the FCPA and creating jurisdiction for the DOJ to bring an enforcement action, denial that you have done anything wrong, failure to cooperate (at least initially) and not sanctioned any of the culpable company actors. In other words, a bit of reverse logic and analysis on this case. But as we have noted several times, the DOJ did reward Trafigura with some credit and give them a discount.
A. Remediation
While most of the remediation reported was standard, the one item which stands out and every compliance professional should consider is that the company proactively discontinued the use of third-party agents for business origination. The point is perhaps the most significant as we have now seen the DOJ call out Albemarle and SAP for discontinuing their use of third-party agents.
In the Albemarle and SAP enforcement actions, SAP eliminated its third-party sales commission model globally, and prohibiting all sales commissions for public sector contracts in high-risk markets and enhanced compliance monitoring and audit programs, including the creation of a well-resourced team devoted to audits of third-party partners and suppliers. Albemarle changed its approach to sales and their sales teams. Guvnor also moved away from third-party agents to a direct sales force.
Moving to a direct sales force does have its own risks which must be managed but those risks can certainly be managed with an appropriate risk management strategy, monitoring of the strategy and improvement; those risks can be managed. Yet there is another reason, and more importantly a significant business reason to move towards a direct sales business model. Every time you have third-party agent or anyone else between you and your customer, you risk losing that customer because your organization does not have a direct relationship with the customer. By having a direct sales business model, your organization will more direct access to your customers.
Another interesting aspect of this approach used by Albemarle, SAP, Guvnor and now Trafigura is that it is not an approach laid out in either the 2020 FCPA Resource Guide, 2nd edition or the 2023 Evaluation of Corporate Compliance Programs. These are all approaches developed by the companies based upon their own analysis and risk models. It may have been from a realization that the risk involved with 3rd party sales models were simply too great, the companies wanted more control over their own sales or another reason. Whatever the reason for the change, clearly the DOJ took note in each organization and viewed it affirmatively.
B. Bribery Schemes
This is an area that is important for all compliance professionals to take heed of and demonstrates the power of data analytics in a compliance program. The bribes were initially funded with a $ 0.20 surcharge or uplift for every barrel of oil traded. With the price of oil fluctuating wildly in the time period in question, literally between $60 to $100 per barrel, I am not sure such a small around would even seem anomalous. It would not even rise to a rounding error but it generated in some $19 million plus in bribes. While I am not sure that the bribery scheme was designed to be so hard to detect, the reality there is no compliance professional who could look at the trades and determine a bribe was baked into the pricing.
Yet there was even a deeper part of the bribery scheme. The prices for the oil trading were not set by market conditions but were pre-arranged by executive at Trafigura together with corruption traders at Petrobras. The Information noted, “The Trafigura Executive 2 and Brazilian Official 1 agreed to prices for trades of oil products and bribe amounts for each trade. After the price had been determined, Trafigura Executive 2 instructed Trafigura traders to engage in negotiations with Petrobras, which Trafigura Executive 2 knew to be a sham, in order to arrive at the pre-agreed price.” [emphasis supplied]
Finally was the funding of the another set of bribes through an unrelated business unit. This came about when one of the two corrupt Trafigura executives involved in the bribery scheme was transferred to run the company’s Singapore business unit. From there this corrupt executive had a corrupt third-party in Hong Kong bill the Singapore business unit for non-existent consulting services related to the China market to the tune of $500,000. This money funded additional bribes to corrupt Petrobras employees. This additional step would require someone in compliance to literally connect the dots between a corruption third-party and bribery scheme in Singapore and China with the corruption at Petrobras in Brazil.
It was the difficulty in determining these bribery schemes that is significant and where data analytics can play an important role the detection of illegal conduct. By using data analytics, a compliance professional can determine any anomalies in huge amounts of data and literally on an ongoing basis, even down to the amount used by Trafigura to fund the bribes to Petrobras employees. Additionally, data analytics can alert a compliance professional to payments to third parties half a world away which can then be further investigated. Through the efficient use of data analytics, a compliance function can have better and more visibility into risk areas which could lead to the stopping of such conduct on a more expeditious basis.