U.S. Justice Department probes suspected manipulation of Platts benchmarks
The U.S. Department of Justice is investigating suspected
manipulation of energy pricing benchmarks published by S&P Global Platts,
expanding the agency's crackdown on misconduct in the global commodities
market, according to four people familiar with the matter.
London-based Platts is a data and news provider which
focuses on energy, metal and agricultural commodities. The company collects
data from traders on their deal prices to determine a daily market price for a
number of physical commodities.
U.S. prosecutors are probing suspected manipulative behavior
by individual traders when submitting those deal prices to Platts' price
assessments for oil and other energy benchmarks, the four people said, without
specifying which ones.
The people declined to be named as the probes are not
public.
Over the past year, U.S. authorities have brought two cases
of alleged manipulation of Platts' oil benchmarks by traders at two different
companies, but prosecutors are now probing similar behavior across the market,
the sources said.
The previously unreported, industrywide probe opens up a new
front in the Justice Department's crackdown on fraud, bribery and manipulation
in the commodities market, raising the stakes for traders and companies
globally which daily use Platts' benchmarks to price billions of dollars' worth
of contracts.
The sources said prosecutors are focused on traders'
behavior and gave no indication of suspected wrongdoing by Platts.
In response to a request for comment by Reuters, Platts said
it conducts reviews to ensure the integrity of its price assessments. Platts
publishes data and correspondence used to determine a price assessment and
provides this data to regulators when requested, said Dave Ernsberger, global
head of pricing and market insight for S&P Global Platts.
"We've spoken with U.S. and global authorities across a
whole range of markets for many years," Ernsberger said.
He declined to comment on any potential probes.
A spokesperson for the Justice Department declined to
comment.
COMMODITIES SCRUTINY
Over the past decade, authorities globally have levied
multibillion-dollar fines and pursued criminal charges against banks and
traders for banding together to rig global benchmarks, most notoriously the
London Interbank Offered Rate.
While U.S. criminal authorities pursued cases against energy
traders in the 2000s related to benchmark-rigging, in the years that followed
commodities market manipulation was largely the domain of civil agencies
including the Commodity Futures Trading Commission (CFTC) and the Federal Energy
Regulatory Commission.
Since 2019, however, the Justice Department, working with
the CFTC, has ramped up scrutiny of the commodities market via a specialist
unit within its Washington-based fraud division. That unit has developed
sophisticated data analytics tools to more quickly detect misconduct, Reuters
reported last year.
While the unit initially focused on commodities futures
spoofing, a type of futures market manipulation, it now has the tools and
expertise to dig into other areas of the market, including industry benchmarks
operated by price reporting agencies, said one of the sources.
The agency has also investigated some of the world's largest
energy trading companies for bribery, including Dutch trading giant Vitol.
That and another recent case identified misconduct in
relation to Platts' benchmarks.
When settling bribery charges with the Justice Department in
December last year, Vitol also settled related charges brought by the CFTC. As
part of that settlement, Vitol paid a civil penalty to the CFTC to resolve
charges of attempted manipulation of two Platts physical oil benchmarks.
Vitol said at the time it was committed to upholding the law
and had cooperated "extensively" throughout the investigation. The
company neither admitted nor denied the CFTC's allegations.
In March, a former oil trader for Glencore Plc (GLEN.L)
pleaded guilty to Justice Department charges that he conspired to manipulate
the Platts benchmark for a type of oil.
The Justice Department alleged that from September 2012 to
August 2016 Emilio Jose Heredia Collado directed colleagues to place buy or
sell orders during a Platts trading settlement window key to assessing the fuel
oil price, court documents show.
Heredia successfully swayed benchmark prices in order to
benefit himself and his employers, the Justice Department alleged.
He is cooperating with an ongoing U.S. investigation,
authorities have said in court filings as recently as August.
His attorney did not respond to requests for comment.
Glencore declined to comment.
"In both these cases, the regulators did not accuse Platts
of wrongdoing or provide any evidence that attempts to manipulate our
assessments were successful or that our assessments did not reflect market
value," Platts said in a statement.
Other commodities traders are under Justice Department
scrutiny. Energy trader Gunvor Group has said it is being probed by U.S.
authorities for corruption in Ecuador after a former employee pleaded guilty to
bribery charges in April.
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