An energy trading firm (the "Firm") entered into a deferred prosecution agreement with the DOJ and settled a parallel administrative action with the CFTC for violating the Foreign Corrupt Practices Act ("FCPA"). The Firm was accused of paying more than $8 million in bribes to officials in Brazil, Ecuador and Mexico to obtain competitive advantages which resulted in significant illicit profits.
According to the criminal charging documents and the CFTC settled order, the bribes were paid over a 15-year period from 2005 to early 2020 in exchange for confidential information used to win lucrative business contracts. The DOJ alleged, and the Firm admitted, that it entered into sham consulting agreements, set up shell companies, created fake invoices for purported consulting services and used alias email accounts to transfer funds to offshore companies, knowing that the funds would partly be used to pay the bribes. Additionally, the Firm attempted to manipulate two fuel-oil benchmarks, which would have distorted pricing for numerous futures, swaps, and other derivatives and physical trades.
To settle the DOJ charges and to resolve a parallel investigation in Brazil, the Firm agreed to pay a criminal penalty of $135 million. The Firm neither admitted nor denied the CFTC claims related to market manipulation but agreed to pay disgorgement of more than $12.7 million and a penalty of $16 million, which will be offset by the amount that the Firm pays to the DOJ in criminal penalties.
Commentary Jodi Avergun
This is another matter in the now years-long saga of massive bribes paid to Petrobras, the Brazilian state-owned petroleum company, which ensnared companies in massive enforcement actions across the globe. A new player entered the arena, though: the CFTC. This case represents the first foray by the CFTC into foreign bribery enforcement following its announcement last year that its enforcement policy on cooperation and self-reporting for violations of the Commodities Enforcement Act ("CEA") would extend to foreign corrupt practices as well as other violations of the CEA. While relatively run-of-the-mill for the DOJ, this action adds to the enforcement chops of the CFTC and spells increased scrutiny and risk for registrants in the commodities or derivatives markets. Nevertheless, the Firm scored a significant reduction in potential penalties, and was not required to admit to any misconduct, highlighting, as the DOJ and the SEC have done before it, the tangible value of self-disclosure and cooperation.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.