EXCLUSIVE U.S. Justice Department probes suspected manipulation of Platts benchmarks -sources

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WASHINGTON, Oct 4 (Reuters) – The U.S. Department of Justice is investigating suspected manipulation of vitality pricing benchmarks revealed by S&P Global Platts, increasing the company’s crackdown on misconduct within the world commodities market, in line with 4 individuals accustomed to the matter.

London-based Platts is an information and information supplier which focuses on vitality, steel and agricultural commodities. The firm collects knowledge from merchants on their deal costs to find out a day by day market value for various bodily commodities.

U.S. prosecutors are probing suspected manipulative conduct by particular person merchants when submitting these deal costs to Platts’ value assessments for oil and different vitality benchmarks, the 4 individuals stated, with out specifying which of them.

The individuals declined to be named because the probes should not public.

Over the previous 12 months, U.S. authorities have introduced two circumstances of alleged manipulation of Platts’ oil benchmarks by merchants at two completely different corporations, however prosecutors are actually probing related conduct throughout the market, the sources stated.

The beforehand unreported, industrywide probe opens up a brand new entrance within the Justice Department’s crackdown on fraud, bribery and manipulation within the commodities market, elevating the stakes for merchants and corporations globally which day by day use Platts’ benchmarks to cost billions of {dollars}’ value of contracts.

The sources stated prosecutors are centered on merchants’ conduct and gave no indication of suspected wrongdoing by Platts.

In response to a request for remark by Reuters, Platts stated it conducts evaluations to make sure the integrity of its value assessments. Platts publishes knowledge and correspondence used to find out a value evaluation and gives this knowledge to regulators when requested, stated Dave Ernsberger, world head of pricing and market perception for S&P Global Platts.

“We’ve spoken with U.S. and global authorities across a whole range of markets for many years,” Ernsberger stated.

He declined to touch upon any potential probes.

A spokesperson for the Justice Department declined to remark.

COMMODITIES SCRUTINY

Over the previous decade, authorities globally have levied multibillion-dollar fines and pursued prison costs in opposition to banks and merchants for banding collectively to rig world benchmarks, most notoriously the London Interbank Offered Rate.

While U.S. prison authorities pursued circumstances in opposition to vitality merchants within the 2000s associated to benchmark-rigging, within the years that adopted commodities market manipulation was largely the area of civil businesses together with the Commodity Futures Trading Commission (CFTC) and the Federal Energy Regulatory Commission.

Since 2019, nevertheless, the Justice Department, working with the CFTC, has ramped up scrutiny of the commodities market through a specialist unit inside its Washington-based fraud division. That unit has developed subtle knowledge analytics instruments to extra shortly detect misconduct, Reuters reported final 12 months.

While the unit initially centered on commodities futures spoofing, a sort of futures market manipulation, it now has the instruments and experience to dig into different areas of the market, together with trade benchmarks operated by value reporting businesses, stated one of many sources.

The company has additionally investigated a few of the world’s largest vitality buying and selling corporations for bribery, together with Dutch buying and selling big Vitol.

That and one other current case recognized misconduct in relation to Platts’ benchmarks.

When settling bribery costs with the Justice Department in December final 12 months, Vitol additionally settled associated costs introduced by the CFTC. As a part of that settlement, Vitol paid a civil penalty to the CFTC to resolve costs of tried manipulation of two Platts bodily oil benchmarks.

Vitol stated on the time it was dedicated to upholding the legislation and had cooperated “extensively” all through the investigation. The firm neither admitted nor denied the CFTC’s allegations.

In March, a former oil dealer for Glencore Plc (GLEN.L) pleaded responsible to Justice Department costs that he conspired to govern the Platts benchmark for a sort of oil.

The Justice Department alleged that from September 2012 to August 2016 Emilio Jose Heredia Collado directed colleagues to position purchase or promote orders throughout a Platts buying and selling settlement window key to assessing the gasoline oil value, courtroom paperwork present.

Heredia efficiently swayed benchmark costs with the intention to profit himself and his employers, the Justice Department alleged.

He is cooperating with an ongoing U.S. investigation, authorities have stated in courtroom filings as not too long ago as August.

His legal professional didn’t reply to requests for remark. Glencore declined to remark.

“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 stated in a press release.

Other commodities merchants are beneath Justice Department scrutiny. Energy dealer Gunvor Group has stated it’s being probed by U.S. authorities for corruption in Ecuador after a former worker pleaded responsible to bribery costs in April.

Reporting by Chris Prentice in Washington and Jody Godoy in New York
Additonal reporting by Clara Denina and Julia Payne in London
Editing by Michelle Price and Matthew Lewis

A pump jack operates in front of a drilling rig at sunset in an oil field in Midland, Texas U.S. August 22, 2018. REUTERS/Nick Oxford