Glencore to pay $341 million fine over US fuel oil price manipulation
May 26, 2022
The United States Department of Justice announced that Glencore International A.G. (Glencore) and Glencore Ltd., both part of a multinational commodity trading and mining firm headquartered in Switzerland, pleaded guilty on Tuesday (24 May) and obliged to pay over USD 1.1 billion to resolve the government's investigations into infringements of the Foreign Corrupt Practices Act (FCPA) and an oil price manipulation scheme.
These guilty pleas are part of a coordinated resolution by US, UK, and Brazilian criminal and civil authorities. Glencore Ltd. confessed to a multi-year plan to rig fuel oil prices at two of the country's major commercial shipping ports.
Glencore Ltd. agreed to pay a criminal penalty of over $341 million, forfeiture of over $144 million, and employ an independent compliance monitor for three years as part of the plea agreement. The government has agreed to credit up to half of Glencore Ltd.'s criminal fine and forfeiture against penalties paid to the Commodity Futures Trading Commission (CFTC) in a related, concurrent civil prosecution. The market manipulation case will be sentenced on June 24, and the FCPA case will be sentenced on October 3rd.
Glencore’s Commodity Price Manipulation Case
Glencore Ltd., according to confessions and court documents filed in the District of Connecticut, had a worldwide commodities trading company that included trading in fuel oil. Glencore Ltd. employees plotted to manipulate two benchmark price evaluations published by S&P Global Platts (Platts) for fuel oil products, namely intermediate fuel oil 380 CST at the Port of Los Angeles and RMG 380 fuel oil at the Port of Houston, between approximately January 2011 and August 2019.
By container tonnage, the Port of Los Angeles is the busiest shipping port in the United States. Houston is the largest port on the Gulf Coast and the busiest port in the United States in terms of foreign waterborne tonnage.
Employees of Glencore Ltd. conspired to illegally benefit themselves and Glencore Ltd. by boosting earnings and lowering expenses on contracts to acquire and sell physical fuel oil, as well as certain derivative positions owned by Glencore Ltd.
The pricing parameters of the physical contracts and derivative positions were determined by referencing daily Platts benchmark price assessments — either Los Angeles 380 CST Bunker Fuel or U.S. Gulf Coast High-Sulfur Fuel Oil — on a certain day or days plus or minus a preset premium.
During the daily trading "window" for the Platts price assessments on certain pricing days, Glencore Ltd. personnel sent orders to purchase and sell (bids and offers) to Platts with the goal of artificially pushing the price assessment up or down. If Glencore Ltd. had a contract to buy fuel oil, for example, Glencore Ltd. workers would submit proposals within the Platts "window" with the sole intent of lowering the price assessment and hence the price of the fuel oil Glencore Ltd. purchased.
The bids and offers were not submitted to Platts for any legitimate economic reason, but rather to artificially influence the relevant Platts price assessment so that the benchmark price, and thus the price of fuel oil that Glencore Ltd. bought from and sold to another party, did not reflect legitimate supply and demand forces.
Emilio Jose Heredia Collado of Lafayette, California, a former Glencore Ltd. senior fuel oil trader, pleaded guilty to one count of conspiracy to engage in commodities price manipulation in March 2021 in connection with his trading activity related to the Platts Los Angeles 380 CST Bunker Fuel price assessment. The date of Heredia's sentence has been set on June 17, 2022.
The complete press release from the U.S. Department of Justice is available here.