In late 2019 Gunvor Group, one of the world’s biggest oil traders, said it would make a clean break from the past by settling a long-running bribery case in Africa.
“We need to take our experience in Congo very seriously and learn our lessons from that,” Torbjorn Tornqvist, Gunvor’s co-founder, chairman and chief executive, said in an interview at the time. “We must make sure we never find ourselves in that situation again.”
It turns out that even as the company was pledging to overhaul and strengthen its compliance department, a former employee was making corrupt payments to government officials in Ecuador to win oil deals.
The scandal adds yet another black eye to an industry that has tried and largely failed to shake off the perception it has a shady past, personified by the buccaneering template drawn by industry pioneer and former fugitive from US prosecutors Marc Rich.
It also underscores the new aggressive stance US authorities are taking with investigations against commodities traders amid a raft of legal probes, criminal charges and settlement deals.
Gunvor, which is based in Switzerland, said it is cooperating with a US Department of Justice investigation after Raymond Kohut admitted to paying more than $22 million in bribes to government officials in Ecuador to win business from the state-owned oil company. The former Gunvor employee told a U.S. judge that he conspired with others including intermediary business development “agents” in the scheme between 2012 and 2020.
A Canadian citizen, Kohut now faces more than two decades in prison under US sentencing guidelines.
Oil traders play a critical role as middlemen in the transportation of crude oil and fuels from producers and refineries to end users. They’ve thrived during the pandemic taking advantage of wild price swings to rack-up some of their best profits in history.
But despite long-running efforts to open up and be more transparent, trading houses’ legal woes have continued.
Gunvor paid $95 million to Swiss investigators in 2019 to settle the African bribery case. The guilty plea from its former employee this week shows there are plenty of lessons still to be learned.
“Gunvor takes compliance very seriously and maintains a zero-tolerance approach, which is why we’ve banned outright the use of agents,” a company spokesman said.
Kohut, now 68, served as a business development employee at Gunvor before retiring and being rehired as a business agent, the Gunvor spokesman said. The company terminated its relationship with the agent or agents involved in the Ecuador bribes due to compliance reasons, before it learned of the DoJ investigation, the spokesman said. He wouldn’t specify when that happened.
In 2020, Gunvor enjoyed one of its best ever annual trading results. Many of its peers have also thrived during the pandemic, but been tainted by new scandals.
Vitol Group, the world’s biggest independent oil trader, enjoyed its highest annual profit ever during 2020, earning about $3 billion, according to people familiar with the company’s results. It also settled a sprawling bribery case during the year, agreeing to pay $160 million as part of a deferred prosecution agreement with the DoJ in which it admitted to paying bribes in Brazil, Mexico and Ecuador for years and as recently as July, 2020.
Trafigura Group, the second-largest independent oil and metals trader, reported a record trading result in its fiscal 2020 year. It also faces charges in Brazil that it paid kickbacks to win business with the state oil company. Trafigura, which is based in Singapore but houses most of its top executives at its headquarters in Geneva, has denied the allegations.
The world’s biggest commodities trader, London-listed Glencore Plc posted its biggest trading profits in a decade. It has also grappled with a host of legal issues in the U.S. and other jurisdictions. Last month, a former Glencore trader was charged with conspiracy to manipulate a key oil benchmark. Glencore has said it is cooperating with the investigation.
The company is also part of a wide-ranging probe by the US DoJ on allegations of bribery and money laundering. Authorities in the UK, Switzerland and Brazil are also investigating the commodity trader.
The new Gunvor bribery case adds more fuel to traders’ legal fires while giving further credence to calls for regulation. As Tornqvist told the authors of the recent book The World For Sale, it’s possible that the industry will face further scandals.
“Unfortunately this is something that has plagued the commodity industry,” he said. “There’s a lot of skeletons and many of them, most of them, will never be surfaced.”