Perhaps it is fitting to end this unusual FCPA enforcement year with another in a series of compliance reminders — the quickest way to experience a bribery scandal is to ignore third-party risks. This has been a continuing theme this year and Freepoint is yet another example of why managing third-party risks is so important to any anti-bribery compliance program.
The relevant facts underlying the Freepoint enforcement action bear this out. In another interesting trend and twist, the Freepoint case is another example of a corporate enforcement action developing with close links to related individual case prosecutions. From FDOJ’s perspective, once individuals have been charged, there is often little more work that may be involved to extend an enforcement action to a corporate resolution. This new trend may indicate that individual and corporate enforcement actions may increase hand-in-hand.
The case was built with the assistance of Rodrigo Berkowitz, a former Petrobras trader, who plead guilty in 2019 to a single count of money laundering conspiracy in the Eastern District of New York. It is clear that Berkowitz provided important information to assist the grand jury in its investigation and indictment.
Prior to Glenn Oztemel joining Freepoint in 2012, Glenn, his brother Gary and Innecco agreed to pay bribes to Berkowitz and other Petrobras officials to secure business for two trading companies. The bribes would range from 25 cents to $1 per barrel of fuel oil for any back-to-back transactions that were intermediated between Petrobras and the trading company. In exchange, Berkowitz provided confidential information related to Petrobras’ business. The participants engaged in coded and encrypted messages to facilitate the bribery scheme.
In 2012, Glenn Oztemel and other employees joined Freepoint. They reorganized the bribery scheme, relying on Innecco’s new company, Albatross, a Liberian company, as a means to funnel bribery payment’s to Berkowitz and other Petrobras officials. Innecco was paid a $10k per month consultancy fee and per-barrel commissions of between 5 and 25 cents . Glenn, his brother Gary, and Innecco continued to pay bribes to secure confidential information via personal, alias email accounts and encrypted messaging applications, use of coded language; and engaging in sham negotiations to give the appearance of legitimacy to trades. The co-conspirators tracked the bribery transactions in a spreadsheet, which they shared with each other.
Berkowitz shared information regarding Petrobras’s pricing and negotiation strategy, as well as information regarding bids submitted by Freepoint’s competitors. Innecco shared the information with Glenn Oztemel and a co-conspirator who used it in their negotiations on Freepoint’s behalf. Innecco also instructed Freepoint traders to conceal the scheme by bidding fopr cargoes that they knew they would not win.
Freepoint paid the bribes using two methods — usually, Freepoint paid bribes to Berkowitz and other Petrobras officials through false consultancy fees and commissions paid to Innecco companies that were requested in invoices sent to Freepoint. On other occasions, bribes were funded through profits from back-to-back transactions. After receiving the payments, Innecco paid a portion to Berkowitz and others through a Uruguay bank account for the benefit of Berkowitz.
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