Trader Gunvor Pays $95 Million to Swiss in Corruption Probe

(Bloomberg) -- Gunvor Group Ltd. will pay $95 million to end a long-running investigation by Switzerland’s Attorney General after the energy trader admitted a former employee bribed officials in the Republic of Congo to secure oil contracts.

Gunvor failed to take all the reasonable organizational measures required to prevent the bribery, the Attorney General’s Office said Thursday. The company, one of the world’s biggest independent oil traders, will pay a fine of 4 million Swiss francs ($4.03 million) and give up related profits of about 90 million Swiss francs it made from the deals.

The penalty is among the largest ever paid by a company to Swiss prosecutors and spotlights the commodity trading sectors’ controversial use of agents or middlemen in foreign countries to win lucrative deals. Long criticized as largely unregulated, opaque and publicity shy, commodity traders have become more transparent in recent years, disclosing some government payments and vowing to cut back on the use of agents.

“Warning signs had been ignored and other irregularities had occurred, including authorization being given for a substantial number of payments to third party offshore companies unrelated to oil activities and the backdating of supporting letters to banks,” the Swiss prosecutor said in a statement.

Trader Gunvor Pays $95 Million to Swiss in Corruption Probe

The sanction marks one of the first times a trading house has admitted guilt and been financially penalized for corruption. The penalty represents about 3% of the company’s total trading profits between 2009 and 2011 when the offenses took place. The Swiss prosecutor said that Gunvor had made efforts since 2012 to improve its compliance and governance practices “to prevent corruption.”

The probe widened in April when the Swiss disclosed they were also examining two companies controlled by the oil trader. The probe centered on how consultants hired by Gunvor transferred a significant portion of their fees to foreign government officials to secure favorable treatment for the trading house, the prosecutors said at the time. Similar offenses were committed in the Ivory Coast, the Swiss prosecutor added.

The probe had been previously focused on “organizational shortcomings,” the company said in 2017, that were “exploited” by a former employee to bribe foreign officials. That worker, a former trader, was convicted of bribery last year, and was given an 18-month suspended sentence and ordered to pay 33,000 Swiss francs.

“Gunvor maintains that there was absolutely no conscious or desired involvement of employees or members of management in these activities,” the company said in a statement. “No current employees or businesses of Gunvor Group are involved in any related ongoing litigation or investigations.

Legal provisions to cover the penalties have already been taken, Gunvor said.

CEO Torbjorn Tornqvist said in an interview earlier this month that he expected to settle the Swiss case by the end of this year. Geneva-based Gunvor has learned from the experience and now has a 16-strong compliance staff to monitor payments and trading partners, he said.

“We need to take our experience in Congo very seriously and learn our lessons from that,” he said. “We must make sure we never find ourselves in that situation again.”

Gunvor has cut the use of agents in foreign countries by a about a third in one year, Tornqvist, a Swedish billionaire, said.

Rival trading houses, including oil and metals traders Glencore Plc and Trafigura Group Ltd., have also pledged to cut back on the use of intermediaries following a spate of scandals involving so-called middlemen.

Gunvor said Thursday that about 4% of its trading business is done in African countries and that company no longer conducts business in the Republic of Congo.

Switzerland said earlier Thursday that the Economy Minister Guy Parmelin “will sign a program in Washington that will help to improve transparency and governance in the commodities sector.”

Many of the world biggest commodities traders, including Gunvor, Glencore, Mercuria Energy Group Ltd. and units of Vitol Group Ltd. and Trafigura are based in Switzerland.

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