EXCLUSIVE JPMorgan faces investigation into oil corruption in Brazil

RIO DE JANEIRO, September 22 (Reuters) – Brazilian authorities are investigating whether JPMorgan Chase & Co (JPM.N) was involved in an alleged corruption and money laundering program dating back to 2011 and involving the oil company public Petrobras, according to documents reviewed by Reuters and two law enforcement sources.

Police have so far focused their attention on purchases of around 300,000 barrels of Petrobras fuel oil by JPMorgan in 2011, according to court documents and sources, who have requested anonymity to discuss an ongoing investigation. .

The documents, which were seen by Reuters, include email messages between alleged co-conspirators, testimonies and bank statements. Authorities are working to determine whether the alleged corruption continued in the following years, the sources added.

Court documents viewed by Reuters include testimony from a former Petrobras fuel trader named Rodrigo Berkowitz. In his plea agreement with the Brazilian authorities, he refers to two shipments of fuel that were sold to a JPMorgan unit.

The investigation, which is in its early stages, is part of a larger investigation by Brazilian authorities who have been examining wrongdoing in the commodities trading industry for years. As one of the largest banks in the world, JPMorgan would represent the biggest target to date in the survey.

The country’s federal police are working to determine whether JPMorgan has secured shipments of Petrobras fuel at artificially low prices by channeling bribes to employees at the Petrobras trading desk through a network of middlemen, people say. and documents related to the investigation.

Brazilian 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 US and Brazilian authorities investigating the commodity trading industry.

Petrobras, formerly known as Petroleo Brasileiro SA (PETR4.SA), said in an email that it has “zero tolerance for fraud and corruption”. The company added that it had largely assisted Brazilian authorities in various corruption-related investigations.

The world’s largest commodities traders, including Switzerland’s Vitol, the world’s largest independent oil trader, are also under scrutiny globally after years of investigations into whether they have offered bribes to win contracts in several Latin American countries. Vitol admitted wrongdoing in a 2020 settlement with US and Brazilian authorities and said he was happy the case was resolved.

No charges have been laid in the JPMorgan investigation, and it is still unclear whether they will be.

Elements of JPMorgan’s investigation were described in previously unreported documents that Brazilian police submitted this year to a federal judge overseeing the investigation, including bank statements, emails and WhatsApp messages exchanged between alleged co-conspirators, which have been examined by Reuters. The documents also included internal Petrobras files and testimony from a former Petrobras fuel trader.

INCREASED CONTROL

Petrobras, the world’s seventh-largest oil producer, regularly buys and sells petroleum products under agreements to seek the best possible price for the company. However, US and Brazilian authorities have alleged that some Petrobras traders accepted matching bribes for more than a decade until 2018.

In return, these traders allegedly bought fuel at inflated prices or sold it at a discount.

In December, Vitol agreed to pay $ 164 million and admit guilt to resolve claims by U.S. and Brazilian authorities that he paid bribes in Brazil and other Latin American countries. between 2005 and 2020.

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

Trafigura has always denied the allegations made by Brazilian authorities and said that the external lawyer he hired “had found no basis to conclude that the current management of Trafigura was involved or had knowledge of alleged improper payments. in Petrobras ”.

Reuters has reported in recent months, citing Brazilian law enforcement sources and court documents, that U.S. and Brazilian authorities are also investigating Connecticut-based trading house Freepoint Commodities for its transactions in Brazil between 2012 and 2018.

A spokesperson for Freepoint wrote in an email at the time that the company “is firmly committed to obeying the laws wherever we do business.” The company declined to comment further.

Brazilian investigators have yet to share their findings regarding JPMorgan with U.S. officials, the sources added, although they are likely to do so if the investigation goes ahead.

Among the questions that the Brazilian authorities are trying to determine is the timeline of the alleged corruption operation of JPMorgan.

JPMorgan largely withdrew from trading in physical commodities in 2014, selling its operations to Swiss trader Mercuria for $ 3.5 billion in an all-cash deal.

It is not clear whether the alleged bribery has taken place up to this date or whether the alleged wrongdoing was limited to transactions executed in 2011.

Last year, the bank agreed to pay more than $ 920 million and admit wrongdoing to settle U.S. market manipulation investigations into its operations in metals futures and Treasury securities.

In 2013, shortly before the sale of its physical commodities unit, the bank agreed to pay $ 410 million to settle allegations of electricity market manipulation in California and the Midwest.

Editing by Brad Haynes and Edward Tobin