Vitol: Tough work but staff stay loyal due to huge bonuses
Jim Armitage is the City editor of The Independent and London Evening Standard group of newspapers. He has been a reporter and editor for more than 20 years and was recently shortlisted for the Press Gazette financial journalist of the year and The Society of Editors financial journalist of the year awards. He contributes news, investigative reports and comment to the Independent titles plus a daily column in the Evening Standard.
Deputy Business Editor
Wednesday 23 July 2014
When it comes to the financial industry’s richest and most risk-taking executives, few top those in the world of energy trading.
With high-level contacts in governments, boardrooms and even the secret services, their decisions can make or break countries and politicians.
Their job is to strike deals to get oil, gas and coal from producing countries – often in poor or unstable parts of the world – to mainly developed markets hungry for energy. They live and breathe their “P&L” – profits and losses which dictate their bonuses or annual share allocations.
Profits from such trades can be huge, and the work too unsavoury for mainstream companies like Shell and BP.
The industry’s founding father, Marc Rich, made himself a billionaire before fleeing criminal charges in the US of tax evasion and trading with Iran during the hostage crisis. Although pardoned by Bill Clinton in one of the last acts of his presidency, the late Mr Rich never returned to the US, spending the rest of his days in Switzerland, where his business became what is now the FTSE-100 giant, Glencore.
Vitol, whose internal leaked accounts value the business at $8bn, is seen as little better, or worse, than other big players like Glencore and Trafigura, but it has had its fair share of scandal over the years.
Staff tend to stay at the firm due to its spectacular pay and massive share awards, which effectively lock employees into the firm. Last year, which was relatively weak by Vitol’s standards, it paid dividends to its shareholders – mainly staff – of $110m out of turnover totalling $307bn.
Vitol’s LPG (propane) trading arm is said to be typical of its structure. It is said to have been set up by David Hughes several decades ago. Lee Goldsmith, who joined in 1994, is his second in command. Both men are based in London and run a fleet of dozens of ships.
Distillates trading is said to be run by Kenya Matsumoto, a trader at BP before joining Vitol in London. His main traders, Toby Davies, Nick Fay and Sameer Khatri are said to run the business out of London in what is said to be an operation worth $250m a year.
As Libyan rebels were attempting to topple Colonel Gaddafi, Vitol offered to supply them the oil they needed to fuel their efforts. The deal was that the rebels would pay Vitol back for its shipments when they came to power. It is assumed Vitol hoped to profit in the longer term from the sales, while securing a strong position in post-revolution Libya.
The Conservative international development minister Alan Duncan, who is a former Vitol adviser, lobbied for a division within the Foreign Office to control Libyan fuel supplies. When questions arose about potential conflicts of interest for Mr Duncan, Vitol denied he was involved with brokering deals with the Libyan rebels – saying they were arranged through Qatar with the knowledge of the Foreign Office and other international authorities. “It was a gamble, but it was a reasonable gamble,” said Mr Taylor of the deal.
Reuters reported in 2012 that Vitol bought two million barrels of Iranian fuel oil at a time of international sanctions. Vitol made the purchase through its Bahrain subsidiary, which was not subject to trading restrictions. A Vitol spokesman said the company had “at no stage broken any sanctions on trading oil”.
In 2007, Vitol pleaded guilty in a New York state court to theft and was ordered to pay $17.5m in connection with giving what Manhattan District Attorney Robert Morgenthau said were “kickbacks” to Iraq for oil bought under the United Nations oil-for-food relief programme. Vitol denies they were “kickbacks”, describing them as “surcharges” demanded by the Iraqi state oil company.
Vitol paid $1m to the Serbian paramilitary leader Arkan to help salvage a secret deal to supply oil to a company in Slobodan Milosevic’s Serbia, according to The Observer. The Vitol executive Bob Finch reportedly used Arkan as a fixer after a deal in the country collapsed. The company says it only delivered oil after sanctions were suspended following the Dayton peace accords. At the time of its investigation, Mr Finch told The Observer: “I have met Arkan once… It does not look good, I agree.” Vitol said there was no illegal conduct. Arkan, later indicted on war crimes, died in a hail of bullets in Belgrade.
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