Anticorruption Group Accuses Top Commodities Firms of Engaging Risky Middlemen
November 08 2018 - 6:33PM
Dow Jones News
By Samuel Rubenfeld
The top three global commodity trading firms used or engaged
middlemen with links to a massive Brazilian corruption
investigation that led to the imprisonment of that country's former
president, according to an anticorruption group.
Vitol Group, Glencore PLC and Trafigura Group Pte. Ltd. were
accused by Global Witness of dealing with men accused or convicted
of involvement in Brazil's "Operation Car Wash" investigation, also
known as Lava Jato. The probe involves a cartel of construction
companies accused of overbilling state oil company Petróleo
Brasileiro SA, or Petrobras, for projects and for paying bribes to
high-level politicians and Petrobras executives.
Global Witness, a London-based anticorruption activist and
investigative group, said it dug through hundreds of Brazilian
court documents and spoke with sources across Brazil to compile its
report.
The investigation raises questions about the due diligence the
commodities firms conducted when selecting the intermediaries,
Global Witness said.
All three commodities firms denied wrongdoing and said the
Global Witness report didn't provide any evidence of improper
payments.
"Contrary to the suggestion by Global Witness that there are
'new' allegations, this is a recycling of ambiguous commentary and
conjecture, and beyond that, it provides no substantiated evidence
of any wrongdoing by Trafigura," a spokeswoman for the company
said.
A Glencore spokesman said: "The allegations do not provide any
evidence that Glencore or any of its affiliates made an improper
payment, and are based on speculation and inferences from a very
limited and ambiguous record [of] information."
Vitol said it was contacted by Global Witness in September and
has worked extensively with the group, and that the report
"contains no evidence of wrongdoing" by the firm.
The Brazilian Car Wash probe has led to dozens of people
imprisoned, including former president Luiz Inácio Lula da Silva,
and billions in fines and penalties for the companies and
individuals involved. Petrobras, for example, agreed in September
to an $853.2 million settlement with Brazilian and U.S.
authorities, and several of its executives have been convicted and
jailed.
Mr. da Silva has challenged his conviction and his 12-year
prison sentence, saying the judge involved was biased.
Vitol and Glencore struck deals with middlemen who were part of
a network shown in Brazilian court documents to have drawn up
bribery schemes, Global Witness alleges. Trafigura proposed a deal
involving a middleman known in Brazil as the "Deacon of Bribes,"
but it didn't end up working with him, and the man was later
sentenced to 13 years in prison for bribery, Global Witness
said.
The allegations raised in the Global Witness report highlight
the risk of using third parties when striking business deals. Most
organizations don't hold third parties to the same risk standards
they set for themselves, according to a survey released last month
by Deloitte LLP.
The survey, which questioned 200 chief executives and 200 board
members, found that while almost two thirds of CEOs believe the
risk-management policies of their extended enterprise is weaker
than that of their own organization, more than half don't have a
monitoring program.
"Many CEOs and board members are risk-aware but not adequately
risk-prepared," Chuck Saia, chief executive of Deloitte Risk and
Financial Advisory, said in a statement.
Compliance-software provider Navex Global Inc. said that about
35% of the 500 ethics and compliance professions it surveyed last
month regarding third-party risk still use paper-based records or
disparate software to administer third-party risk assessments.
Companies need to apply a risk-based approach to their third
parties, said Bob Conlin, president and chief of Navex.
"For multinationals in high-risk industries, such as commodities
and trading, this means investing in additional deep-dive due
diligence that leverages local knowledge and investigations," said
Mr. Conlin. "Where inadequate due diligence occurs, it can result
in some of the largest regulatory fines assessed."
Write to Samuel Rubenfeld at samuel.rubenfeld@wsj.com
(END) Dow Jones Newswires
November 08, 2018 18:18 ET (23:18 GMT)
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