Trader Trafigura Targeted by US and Swiss Over Corruption

(Bloomberg) — Trafigura Group and one of its longstanding top executives have been charged over allegations of bribing public officials in Angola, in a major blow to one of the world’s largest commodity traders.

Trafigura acknowledged the Swiss charges in a statement, and also revealed for the first time a US Department of Justice investigation into “improper payments” made in Brazil.

The charges are the latest in a series of actions from global prosecutors targeting corruption in the commodity trading industry, and the most serious so far against Trafigura, a leading oil and metals trader.

The charges against Mike Wainwright, who as Trafigura’s chief operating officer has for a decade formed part of the top trio running the company, make him the one of the most senior commodity traders ever to be charged for corruption.

Trafigura’s top competitors Glencore Plc and Vitol Group have in recent years both agreed to pay fines to settle wide-ranging US investigations into corruption, but until now only a few, largely mid-level individuals have been charged in those cases.

The energy crisis over the past two years has raised the profile of companies like Trafigura, Glencore and Vitol in global capitals, as politicians realize they are reliant on commodity traders to secure supplies of essential resources. But it has also heightened scrutiny of an industry that has since the days of Marc Rich had a reputation for corruption and wrongdoing. 

For Trafigura, the charges follow a series of setbacks that have pressured its leadership and fueled tensions among the senior ranks — including having fallen victim to a massive alleged nickel fraud. The group, which is preparing to report results for its latest financial year, recently reorganized its top management and has been wrestling with the future of its metals business. Still, the company continues to reap huge profits from its energy divisions.

Cash Payments

In a statement Wednesday, the Swiss federal prosecutor’s office said that Trafigura, through its unit Trafigura Beheer BV, failed to take necessary organizational measures to prevent the payment of bribes in Angola between 2009 and 2011.

The trading house paid €4.3 million euros ($4.6 million) to a bank account in Geneva and made cash payments of $604,000 to an Angolan official between April 2009 and October 2011 in relation to its activities in the country’s petroleum industry, the prosecutor said in the statement. It also paid hotel and meal expenses of 797 Swiss francs ($911) for a stay in Geneva.

In return, the Angolan official, the former chief executive officer of a subsidiary of the state oil company Sonangol, favored Trafigura in shipping contracts, the Swiss prosecutor alleges. Trafigura’s alleged profits from those contracts amount to $143.7 million.

Under Swiss law, Trafigura faces penalties equivalent to the total illicit profit plus a fine of up to 5 million francs — or around $150 million in total. That compares to net profits of $5.5 billion reported by Trafigura in its latest half year accounts.

Trafigura said it expects to resolve the DOJ case “shortly” and has made a $127 million provision in its 2023 financial year accounts. 

It said that the investigations related in part to statements made by former Trafigura executive Mariano Ferraz as part of a plea agreement following his conviction in a separate case in Brazil. Ferraz was charged with corruption and money laundering as part of the Petrobras Carwash probe, while Trafigura and several of its senior executives have been accused of corruption by Brazilian prosecutors in a civil lawsuit.

Court Defense

Trafigura said it had been willing to settle the Swiss investigation out of court, but that now it would defend itself in court. It said Wainwright rejects the Swiss charges and will be mounting a court defense.

“We sincerely regret these incidents which breached our code of conduct and are contrary to our values,” Trafigura CEO Jeremy Weir said in the statement. “Our compliance policies and procedures have been externally reviewed and found to meet relevant legal requirements and international good practice standards. These historical incidents in no way represent the company we are today.”

If Wainwright is found guilty, he faces a potential fine or a maximum of five years in prison. Trafigura earlier this year announced his planned retirement in March 2024, but he has now handed over his responsibilities and is on a leave of absence to focus on his defense, according to a person familiar with the matter.

The Swiss attorney general’s office stressed in today’s statement that this is the first time that a case against a company for alleged bribery of public officials has ever been sent to the country’s top criminal court.

Swiss indictments of companies are rare and convictions even rarer. The last major Swiss company to be convicted of a crime was Credit Suisse Group AG for failing to prevent money laundering. It was one of a series of scandals that befell the bank, which collapsed, and was bought by UBS Group AG less than a year later.

–With assistance from Hugo Miller.

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