On December 3, 2020, the Commodity Futures Trading Commission (CFTC), in parallel with the Department of Justice (DOJ), settled charges against Vitol, Inc., ordering the Houston-based energy and commodities trading firm to pay $95.7 million for corruption-related fraud and attempted manipulation in the US and global oil markets. The resolution concludes the CFTC’s first foreign corruption-related enforcement action since it announced its intent to pursue such cases in March 2019, underscoring the CFTC’s commitment to bringing foreign corruption cases that affect the markets the CFTC regulates.
The CFTC’s first foreign corruption action
The CFTC’s order found that Vitol had made corrupt payments—including bribes and kickbacks—to employees and agents of state-owned entities in Brazil, Ecuador, and Mexico to gain preferential treatment over competitors. In so doing, the CFTC claimed that Vitol defrauded counterparties, harmed market participants, and undermined the integrity of the U.S. and global physical and derivative oil markets.
The Vitol resolution is the CFTC’s first foreign corruption-focused action since it released an Enforcement Advisory (the Advisory) in March 2019 to announce that it would take action against companies that engaged in foreign corruption in connection with violations of the Commodities Exchange Act (CEA). As Freshfields has previously discussed, the Advisory encouraged companies to self-report, cooperate, and remediate any misconduct in order to obtain favorable consideration by the CFTC’s Enforcement Division. The Advisory noted that the CFTC would “seek all available remedies—including, where appropriate, substantial civil monetary penalties—with respect to companies or individuals implicated in the misconduct that were not involved in submitting the voluntary disclosure.”
When the Advisory was announced, the then-Director of the CFTC’s Division of Enforcement announced that the agency had “open investigations” regarding foreign corruption—it seems as though Vitol may have been one of those matters.
The Vitol action demonstrates the CFTC’s commitment to (1) expand the its investigative interests into a (largely) new area for the agency, and (2) further align the CFTC’s enforcement approach with the policies and practices of the DOJ. Daniel Kahn, Acting Chief of the DOJ’s Fraud Section, noted that the Vitol matter is the DOJ’s “first ever coordinated resolution with CFTC in a foreign bribery case.” As we noted when the Advisory was first issued, companies involved in the US commodities markets would be advised to ensure that they have up-to-date and effective anti-corruption compliance programs. Companies should also consider their potential exposure to the CEA and factor the CFTC into their decisions over self-reporting conduct involving foreign corruption to US authorities