Freepoint Commodities agreed to pay nearly $99 million to settle allegations by the Department of Justice (DOJ) that it paid bribes to Brazilian government officials in return for business from state-owned oil company Petrobras.
Freepoint was assessed a criminal penalty of $68 million and agreed to forfeit more than $30.5 million, the DOJ announced Thursday. The Connecticut-based commodities trading company agreed to disgorge more than $7.6 million as part of a related resolution with the Commodity Futures Trading Commission (CFTC) charging it with misappropriation-based fraud.
Freepoint entered into a three-year deferred prosecution agreement with the DOJ, based on a criminal information filed in U.S. District Court for the District of Connecticut.
The details: Freepoint and its co-conspirators, three of which were recently charged with conspiracy to violate the Foreign Corrupt Practices Act (FCPA), paid bribes to Petrobras officials between 2012 and 2018, according to the DOJ. In exchange, the company received insider information regarding bids made by its competitors to Petrobras, the agency alleged.
Freepoint and the individuals allegedly involved communicated in code and encrypted messages to hide the bribery scheme. They directed the bribes to offshore bank accounts and shell companies.
The company earned $30 million in profits from the scheme, according to the DOJ.
The charges against the three co-conspirators remain pending.
Compliance considerations: Freepoint agreed to cooperate with ongoing or future criminal investigations related to the alleged scheme.
The company received a 15 percent reduction on its criminal penalty for its cooperative and remedial efforts, including making information and employees available to the DOJ; retaining an advisory firm to evaluate its third-party compliance program; implementing enhanced risk-based due diligence, screening, ongoing monitoring, and oversight procedures; implementing FCPA training for third-party agents; and increasing use of data and metrics to evaluate risk.
However, the DOJ noted Freepoint’s cooperation was “limited in degree and impact and largely reactive.”
The agency offered credit to Freepoint equal to one-third of the criminal penalty against amounts the company will pay to resolve a related investigation by Brazilian authorities. The DOJ also credited up to 25 percent of the forfeiture against disgorgement the company agreed to pay to the CFTC.
Company response: “Today’s resolutions … stem from activity by individuals that commenced prior to their joining Freepoint and was inconsistent with Freepoint’s values and a breach of our zero tolerance for corruption,” the company said in a statement. “The individuals involved are no longer associated with the company.
“… We have reviewed and strengthened our internal processes and training to prevent, and improve detection of, violations of our policies and will continue to evaluate the effectiveness of our procedures and controls on an ongoing basis.”