The Commodity Futures Trading Commission (“CFTC”) recently announced the settlement of its first enforcement action involving foreign corruption. In December 2020, the CFTC issued a Consent Order, finding that Houston-based energy and commodities trading firm Vitol, Inc. defrauded counterparties, harmed other market participants, and undermined the integrity of U.S. and global physical and derivatives oil markets by engaging in fraudulent and manipulative conduct. Notably, Vitol’s fraudulent conduct involved foreign corruption, including bribes and kickbacks to employees and agents of state-owned entities in Brazil, Ecuador, and Mexico, to obtain preferential treatment and unauthorized access to nonpublic trading information.
Vitol must pay more than $95 million in civil penalties and disgorgement as a result of the CFTC order. This hefty fine comes in addition to the criminal charges filed by the Department of Justice (“DOJ”) against Vitol for conspiracy to violate the FCPA arising from the same conduct at issue in the CFTC enforcement action. The DOJ charges resulted in a Deferred Prosecution Agreement that included a criminal fine, a portion of which the CFTC agreed to offset against the civil fine it ordered.
Though this historic enforcement action is the first of its kind for the CFTC, it is probably not the last. In March 2019, the CFTC launched its foreign corrupt practices program, announcing its intent to investigate and prosecute violations of the Commodity Exchange Act involving foreign corrupt practices and issuing an Enforcement Advisory on self-reporting and cooperation for such violations. According to Chairman Heath P. Tarbert, the Vitol enforcement action “demonstrates that the CFTC will actively pursue fraud tied to foreign corruption and manipulation that impacts the U.S. derivatives and related physical markets.”
This action by the CFTC cements the addition of a new regulator in the foreign corrupt practices space. In addition to punishment from the DOJ and Securities and Exchange Commission, commodity market participants now also face consequences from the CFTC for engaging in foreign corruption. With increasingly high stakes, it is critical for companies to reexamine their risk profiles and ensure that they have effectively implemented robust compliance programs to mitigate the risk of corruption.