LDN - Business

Exclusive: Brazil probes U.S. oil trader Freepoint in alleged bribery scheme

[June 02, 2021] By Gram Slattery and Sabrina Valle

RIO DE JANEIRO (Reuters) - Authorities in Brazil are investigating senior employees at Connecticut-based trading house Freepoint Commodities for their alleged role in a bribery scheme involving state-run oil company Petrobras, Reuters has learned.

Federal police here suspect Freepoint, through an intermediary, routed bribes to Petrobras employees for a roughly seven-year period ending in 2018. Reuters pieced together the purported kickback operation from three people close to the investigation, who spoke on the condition of anonymity, and hundreds of pages of previously unreported court documents filed by Brazilian investigators.

At least two high-ranking Freepoint employees, including Robert Peck, head of the company's global oil business, are suspected to have participated in the purported scam, according to the sources and court documents reviewed by Reuters, which Brazilian police submitted last year to a federal judge overseeing the probe. Those documents include bank records, invoices, e-mails and WhatsApp messages exchanged between alleged co-conspirators, including Peck. In Brazil, judges routinely are involved in criminal cases from the early stages of an investigation to the sentencing phase.

The Brazilian investigation hasn’t been previously reported. No charges have been filed, and it remains unclear whether any will be. As part of the probe, authorities are investigating Freepoint itself, which could lead to potential fines or other civil penalties if the company is found to have engaged in wrongdoing.

In response to questions about the Brazil probe from Reuters, a Freepoint spokesperson said in an email the company "is strongly committed to following the laws everywhere we do business." It declined further comment.

Freepoint declined requests to make Peck available for an interview. Peck did not respond to questions sent to him by Reuters via LinkedIn. A woman who answered the telephone at his home declined to comment.

Petrobras said in an e-mail it has "zero tolerance in relation to fraud and corruption" and that employees involved in wrongdoing in its trading unit “were immediately fired for just cause in 2018.” It added that it has aided Brazilian authorities extensively with various corruption-related probes.

Brazil's federal police force did not respond to requests for comment. The U.S. Department of Justice declined to comment on whether it is investigating the Freepoint matter.

The Freepoint investigation comes amid a broader law enforcement crackdown on commodity trading firms engaged in alleged corruption, particularly in resource-rich Latin America.

In December, a U.S. subsidiary of Switzerland's Vitol SA, the world's top independent oil trader, agreed to pay $164 million to resolve allegations by U.S. and Brazilian authorities that it paid bribes in Brazil and other Latin American countries between 2005 and 2020 to boost its trading business. In November, Brazilian prosecutors filed a civil lawsuit against Trafigura AG, alleging the Geneva-based trader and at least two subsidiaries paid Petrobras employees more than $1.5 million in bribes in 2012 and 2013.

A spokeswoman for Vitol wrote in an e-mail that the company is "pleased the matter has been resolved."

Trafigura, in an emailed statement, said it "strongly denies" the allegations leveled by Brazilian authorities and that it has a zero-tolerance policy on bribery and corruption. The company said outside counsel it hired to investigate "found no basis to conclude that Trafigura's current management were involved in, or had knowledge of, alleged improper payments to Petrobras."

Freepoint is the first major U.S. energy trader to come under recent scrutiny in Brazil. The Stamford-headquartered firm buys and sells all types of fuel through operations on three continents and employs more than 500 people worldwide.

THE ALLEGED SCHEME

The Freepoint probe is part of a larger investigation by Brazilian authorities known as Operation Car Wash. Begun in 2014, Car Wash centered on contracting graft at Petrobras, formally known as Petroleo Brasileiro SA.

Car Wash officially ended in February, but some remaining investigations in advanced stages - including that of Freepoint - have continued, according to two people with knowledge of the probes.

At the center of the Freepoint investigation is an ex-Petrobras employee named Rodrigo Berkowitz, who formerly worked as a fuel trader for the Brazilian oil giant in Houston.

In February 2019, Berkowitz agreed to plead guilty to U.S. charges of conspiracy to commit money laundering for accepting kickbacks from fuel trading firms doing business with Petrobras. The identities of those companies were not revealed as part of the plea. Berkowitz, who still lives in Houston, is awaiting sentencing.

He is now collaborating with U.S. and Brazilian authorities in ongoing investigations into the commodities trading industry, according to his lawyer Jorge Camara, who declined further comment.

Berkowitz described the alleged Freepoint kickback scheme in the presence of both U.S. and Brazilian investigators in December 2019, according to court filings summarizing his testimony that were submitted by Brazilian police in March 2020 and October 2020 to the judge overseeing the probe.

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A sign with the logo of Freepoint Commodities LLC is pictured outside the company's headquarters in Stamford, Connecticut, U.S., May 28, 2021. Picture taken May 28, 2021. REUTERS/Mike Segar

Petrobras, the world's seventh-largest oil producer, routinely auctions large shipments of various fuels to ensure it gets the best price possible for its products. According to Berkowitz's testimony, the former fuel trader tipped off Freepoint about the amounts competitors bid in those auctions. That knowledge allowed Freepoint to edge out competitors, while still allowing Freepoint to pay less than it otherwise might have bid, Berkowitz said.

In exchange for that information, according to Berkowitz’s plea bargain testimony and invoices obtained by Brazilian police and seen by Reuters, the fuel trader received bribes from Freepoint through a middleman - a businessman named Eduardo Innecco. Innecco performed consulting work for Freepoint from roughly 2012 until late 2018, when he abruptly left South America over concerns that investigators were closing in, Brazilian police allege in the court filings reviewed by Reuters.

Innecco, through a representative, declined to comment. He has not been charged with a crime. Innecco currently resides in southern Europe, the representative said.

Freepoint allegedly compensated Innecco with commissions that were inflated to cover the cost of the bribes, according to Berkowitz’s testimony, bank records obtained by police and seen by Reuters, and the people familiar with the investigation. Innecco, in turn, passed those kickbacks to Petrobras employees, including Berkowitz, according to the people and documents. Freepoint funneled nearly $500,000 in bribes through Innecco between August 2017 and November 2018 alone, Berkowitz said in his testimony.

Innecco's principal contact at Freepoint was Glenn Oztemel, according to hundreds of WhatsApp messages exchanged between the men obtained by police and seen by Reuters. According to publicly listed business intelligence platform ZoomInfo, Oztemel held the title of Fuel Oil Book Head for Freepoint's U.S. operations.

Oztemel didn't respond to multiple requests for comment. Freepoint said Oztemel retired in late 2020. He has not been charged with a crime.

He and Peck, head of Freepoint's global oil business, knew of the illicit nature of Innecco's dealings with Petrobras, Brazilian police allege in the court filings.

In WhatsApp messages exchanged between the three men obtained by law enforcement and viewed by Reuters, Innecco frequently told Oztemel and Peck precise details of competitors' bids on Petrobras fuel and said the information came from Berkowitz.

According to Berkowitz's testimony, he met with Peck and Innecco in London in February 2015 to pass sensitive commercial information about Petrobras' fuel business to Peck.

THE DOWNFALL

Those involved in the suspected Freepoint scam were aware of the risks they were taking as the Car Wash dragnet widened, police allege.

On Sept. 1, 2018, Innecco sent a WhatsApp message to Berkowitz, suggesting the fuel trader transfer his wealth offshore to shield it from authorities in the event their scheme was discovered, according to Berkowitz's testimony and a copy of the message reviewed by Reuters.

Innecco later expressed contrition for stoking panic.

"I want to apologize for perhaps for going too far with my suggestions about how to proceed in case things get complicated," Innecco wrote to Berkowitz via WhatsApp on Sept. 11, 2018. "It's just that I got very worried."

Three months later, on Dec. 5, 2018, Brazilian authorities issued an arrest warrant for Berkowitz for accepting bribes from commodity trading firms. He would plead guilty to parallel charges in the United States in February 2019. Freepoint was not mentioned by Brazilian authorities in that warrant or by U.S. authorities in Berkowitz's plea agreement.

On Dec. 6, 2018 Innecco flew from his home in Uruguay to Madrid, according to travel records obtained by Brazilian police and seen by Reuters.

No arrest warrant was issued for Innecco. Still, Brazilian investigators believe he fled out of fear that his arrest was imminent, according to filings they submitted in October 2020 to the federal judge overseeing the Freepoint investigation.

Police allege Innecco dispatched an associate to purchase him a burner phone, made hurried arrangements to sell his real estate holdings in Uruguay, and applied for Italian passports for himself and his family. Brazilian authorities now consider him a fugitive, the filings show.

(Reporting by Gram Slattery and Sabrina Valle in Rio de Janeiro; Additional reporting by Daniela Desantis in Punta del Este, Uruguay, Dmitry Zhdannikov in London, Gary McWilliams in Houston and Chris Prentice in Washington; editing by Marla Dickerson)

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