JPMorgan faces investigation into bribery in Brazil’s oil sector

RIO DE JANEIRO, BRAZIL – Brazilian authorities are investigating whether JPMorgan Chase & Co had a hand in an alleged kickback and money laundering scheme dating back to 2011 involving state oil company Petrobras, according to documents reviewed by Reuters and two sources with knowledge of the matter.

So far, police have focused their attention on JPMorgan’s purchases of about 300,000 barrels of fuel oil from Petrobras in 2011, according to court documents and sources, who requested anonymity to discuss an ongoing investigation.

The documents, which were seen by Reuters, include email messages between alleged coconspirators, witness statements, and bank records. Authorities are working to determine whether the alleged kickbacks continued in subsequent years, the sources added.

The court documents seen by Reuters include testimony from a Petrobras fuel trader named Rodrigo Berkowitz. In his plea deal with Brazilian authorities, he refers to two cargoes of fuel that were sold to a JPMorgan unit.

The investigation, which is in the preliminary stages, is part of a broader investigation by Brazilian authorities that has been examining irregularities in the commodities trading sector for years. As one of the largest banks in the world, JPMorgan would represent the most significant target so far in the investigation.

The Federal Police are working to determine whether JPMorgan bought Petrobras’ fuel shipments at artificially low prices by routing the kickback payments to officials at the company’s trading desk through a network of intermediaries, according to people and documents related to the investigation.

The Federal Police and JPMorgan declined to comment on the investigation. Rodrigo Berkowitz’s lawyer did not respond to requests for comment. He previously confirmed that his client is cooperating with U.S. and Brazilian authorities investigating the commodities trading industry.

Petrobras said in an email that it has “zero tolerance for fraud and corruption.” The company added that it has extensively assisted Brazilian authorities in various corruption-related investigations.

The world’s largest commodities trading companies, including Swiss oil major Vitol, face global scrutiny after years of investigations into whether they offered kickbacks to win contracts in several Latin American countries. Vitol admitted wrongdoing as part of a 2020 settlement with U.S. and Brazilian authorities and said it is satisfied with the resolution of the matter.

No charges have been filed in the JPMorgan investigation, and it is not yet clear whether there will be any.

Elements of the JPMorgan investigation were outlined in previously unreported documents that Brazilian police presented this year to a federal judge overseeing the study, including bank records, emails, and WhatsApp messages exchanged between alleged coconspirators, which were reviewed by Reuters. The documents also included internal Petrobras files and testimony from a former Petrobras fuel trader.

EXPANDED INVESTIGATION

Petrobras, the world’s seventh-largest oil producer, typically buys and sells oil derivatives in deals that seek the best possible price for the company.

However, U.S. and Brazilian authorities allege that some Petrobras operators accepted bribes from counterparties for more than a decade through 2018.

In December, Vitol agreed to pay $164 million and admitted its guilt to resolve allegations by Brazilian and U.S. authorities that it paid kickbacks in Brazil and other Latin American countries between 2005 and 2020.

In November, Brazilian prosecutors filed a civil suit against Trafigura, alleging that the Geneva-based company and at least two subsidiaries paid Petrobras officials more than $1.5 million in kickbacks in 2012 and 2013.

Trafigura has consistently denied the allegations raised by Brazilian authorities and said that an external audit it hired “found no basis to conclude that Trafigura’s current management was involved in, or had knowledge of, alleged improper payments to Petrobras.”

Reuters reported in recent months, citing Brazilian sources and court documents, that U.S. and Brazilian authorities are also investigating Connecticut-based trading company Freepoint Commodities for its dealings in Brazil from approximately 2012 to 2018.

A spokesperson for Freepoint wrote in an email at the time that the company was firmly committed to following the laws everywhere we do business. The company declined to comment further.

Brazilian investigators have not yet shared their findings of JPMorgan with U.S. authorities, the sources added, though they likely will if the investigation moves forward.

Among other questions, Brazilian authorities are trying to determine the timeline of JPMorgan’s alleged kickback operation.

JPMorgan largely exited the physical commodities market in 2014, selling its operations to Swiss Mercuria for US$3.5 billion in an all-cash deal.

It is unclear whether the alleged kickback occurred until that date or whether the alleged wrongdoing was limited to deals made in 2011.