Former Glencore trader charged in global oil price manipulation scam

By Thomas Biesheuvel and Javier Blas on 3/23/2021
The scam has drawn the attention of prosecutors in multiple countries.
The scam has drawn the attention of prosecutors in multiple countries.

(Bloomberg) --A former Glencore Plc trader was charged by U.S. authorities with conspiracy to manipulate a key oil price benchmark, the latest sign that prosecutors around the world are stepping up their scrutiny of the notoriously opaque commodity trading industry.

U.S. prosecutors alleged that Emilio Heredia, a former Glencore employee, directed buy and sell orders that would push fuel oil prices up and down. That allowed the companies he worked for to profit from the price swings, between 2012 and 2016, according to a filing at a U.S. District Court in San Francisco on March 15.

The investigation is the latest legal setback for Glencore, already embroiled in a wide-ranging probe by the U.S. Department of Justice on allegations of bribery and money laundering. The UK, Swiss and Brazilian authorities are also investigating the commodity trader.

“The purpose of the conspiracy was for Heredia and his co-conspirators to unlawfully enrich themselves,” prosecutors said in the filing.

Glencore said Heredia was a former employee and that it’s co-operating with authorities. A lawyer representing Heredia didn’t immediately respond to a phone call and email requesting comment. The story was first reported by the Wall Street Journal.

“We note that one of Chemoil’s -- and later Glencore Ltd.’s -- former employees in the US has been charged with conspiracy to manipulate the price of fuel oil in the LA market between 2012 and 2016,” Glencore said in a statement Tuesday, referring to the Los Angeles fuel-oil market.

Clampdown

Authorities around the world are increasingly policing the world of commodity trading and the companies that dominate it, while also showing a fresh push against market manipulation.

The U.S. unit of the world’s biggest independent oil trader, Vitol Inc., agreed to pay more than $160 million to settle allegations it conspired to pay bribes in Latin America and attempted to manipulate energy markets. Meanwhile trading firms including Gunvor Group Ltd. have also been investigated.

The charge laid out how the manipulation worked. Heredia directed co-conspirators to submit bids and offers through S&P Global Platts, a benchmark price publisher, to artificially change the price assessment, allowing his firm to buy cheaper fuel oil from another company.

In one 2016 example a co-conspirator, on Heredia’s orders, lowered the benchmark price 41 times, moving down the price of bunker fuel from $245 a metric ton to $204.50 a metric ton, resulting in hundreds of thousands of dollars in unlawful gains for his company, the document said.

“We note charges of attempted manipulation of certain S&P Global Platts assessments but do not believe that any such attempts were successful and no court has ruled to the contrary,” a company spokesperson said in an email.

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