By John Helmer, Moscow
Gennady Timchenko is usually so discreet, he engages lawyers to warn reporters away from peering too closely at his private life . So when his friends, all of a sudden and in unison, start telling a Moscow newspaper that he has decided to move back to Russia, Timchenko is either acting out of character, or he is engaged in damage limitation. The Vedomosti report of October 19  makes Timchenko appear to be running towards Moscow. A day later, a report published in the Geneva newspaper Le Temps makes it appear  Timchenko may be running away from Geneva.
That Gunvor, Timchenko’s oil trading firm headquartered in Geneva, was already in trouble was reported here, following an office search by Swiss prosecutors and criminal investigators in July . That was an affair involving trades in oil from the central African Republic of Congo-Brazzaville. The latest Swiss report goes further. It suggests that if bribes were paid by Gunvor to win Congolese oil contracts, and the money then laundered through Swiss institutions, the negotiations allegedly involved Timchenko and his Swedish partner, Torbjorn Tornqvist, in direct meetings with Denis Sassou Nguesso, President of Congo-Brazzaville. If such a face-to-face negotiation took place; if to that is linked the evidence of the money trail to Geneva; and if the smaller participants are giving state’s evidence against their bosses, then there is a criminal case to which Timchenko may have to respond. The customary place for doing that is usually, even in Switzerland, in awkward conditions of compulsion and confinement. Such a proceeding is not the unconfined negotiation between teams of lawyers at the Anti-Trust Division of the US Department of Justice in Washington, where the charges are usually civil, and the outcome usually a money penalty. That Vedomosti was persuaded to report the possibility of such a civil proceeding in the US regarding alleged manipulation of oil prices for shipments of Urals crude to US customers looks like a blind.
As many hypotheticals as this are commonplace for detective stories, until the denouement. Here is a translation into English of the detective story so far from Le Temps:
How Congo has brought about the fall of a prince of Genevan oil
A former star employee of the Gunvor group is at the heart of an investigation for money laundering. Le Temps has retraced his rapid rise and brutal disgrace.
A finder of oil contracts who dressed as a dandy, a son of an African president and lover of luxury, a banker come in from cold They are three characters of the detective story which is being played out in Geneva, in the very secret world of the raw materials trade.
For almost a year, the bloodhounds of the Public Prosecutor’s Office of the Confederation (MPC) investigate the 30 million dollar remittance coming from Gunvor, one of the worldwide leaders of the oil trade, in parallel with a contract with Congo. As RTS [Radio Television Suisse] revealed in July, the headquarters of the Genevan group was searched. The official who initiated the transfers was sacked. He would have received at least 7 million dollars of back commissions – figure given by Le Matin Dimanche, the accuracy of which has been confirmed. The beneficiaries of the commissions, to report precisely, were a businessman and a consultant close to several African governments. According to an expert on the case file, “the inquiry concerns the use which was made of these funds.”
At MPC, the proceeding is classified as ‘sensitive’, undoubtedly because of its political ramifications. It remains confidential and the people targeted by the investigation have no access there. But Le Temps has been able to reconstruct the facts, thanks to the confidences of those protagonists directly implicated. The affair illustrates the ethical risks which lie in wait in the oil trading sector, for which Geneva is one of the capitals. And it brings up the most taboo question of the business: how does one get oil at a good price in authoritarian states, where corruption is never absent?
Episode 1: the Developer
Everything begins in 2007, when Gunvor, expanding fast, poaches a team of traders from its Genevan competitor Addax. At the head of the team there is Stephen Degenne, a professional, according to a former colleague, reputed for his capacity “to juggle with barrels”. He complains that he lacks room to manoeuvre at Addax. Along with him, he brings five people, one of whom is a young assistant, a Belgian born in Congo-Kinshasa, who will become the chief go-getter to win contracts in Africa.
Recruited by Gunvor with big wages and bonuses amounting to millions, this crack team must get results – and quickly. “He needed a young person to go to make the deal which the older ones weren’t keen to do,” says a professional who knows this episode well. “To take the plane twice a month, go to deepest Africa, dine with people, make contracts.”
In the jargon, this man is called a developer. The young Belgian – whom we will name for short the Developer in order to protect the personality – is the man on the spot. He wants to make it, he is intelligent, he presents himself well. Sophisticated, elegant, he hardly fits the clichéd image of the horse trader as rough and uncouth. He runs a Ferrari and lives in Geneva on the Left Bank of Lake Léman, in a flat furnished with icy refinement. “I think that he was under pressure to make the figure, it’s the rule in this line of work,” confides one of his former colleagues. “Honestly, I was bluffed by [him]. He is a bit of a poser, eccentric, full of himself. I would never have never imagined that he might have so much success.” Nor that his passage through the house of Gunvor would come also to such a tough end.
Episode 2: the Student
For Gunvor, to get a foothold in Africa is a challenge. It is necessary to compete for markets with the giants of the sector, Vitol, Glencore or Trafigura, all based in Switzerland and well established on the continent. From Geneva, the Developer promises generous commissions to those who will bring him the crude – a technique which, in this sector, comes within the framework of normal competition. In Africa, he is found in Ivory Coast, in Ghana. But it is Congo (Brazzaville) which is going to become the goose that lays the golden eggs.
At this moment an unusual personality makes his appearance, an African student living in Geneva, who is struggling to make ends meet. He has high-level political connections in Congo, with the Sassou family, and notably with Denis Christel, nicknamed Kiki, offspring of the president who is reputed for his taste for luxury. Accompanied by a Genevan businessman, the Student gets into contact with the Developer. He travels to Paris, to Brussels, and takes himself to Geneva headquarters of Gunvor, but the business takes time to come to fruition.
Bypassed, the Geneva businessman, who does not want to be identified by name, withdraws: “I had a feeling that this story is going to wind up badly”, he points out today. “There were too many intermediaries. The deal was yes one day, no on another day. [The Developer] introduced people interested in the business, [the Student] intervened with his advantages. Sassou, he spoke about it.”
Episode 3: the President
According to several sources, the young African “may have been double-crossed” by the Developer, who would have tied up lucrative contacts with the Congolese, but without him. In 2009, the main shareholders of Gunvor, Gennady Timchenko and Torbjörn Törnqvist, meet the Congolese President, Denis Sassou Nguesso. According to Gunvor, which has confirmed the information to Le Temps, such meetings at the top are standard practice during the negotiation of big contracts between an oil trading company and a government.
A source familiar with the case file details the scope of the transaction: 18 cargoes of 920,000 tonnes of Congolese crude, worth $115 million each, making more than $2 billion altogether. According to this source, the black gold would have been offered with a price cut – a discount – of $4 per barrel, which would have generated a benefit of about $72 million. In oil trade circles, one readily talks of “peanuts” to describe this type of margin.
Typical of some African countries, the price cut fills out the monthly targets of the traders and allows remuneration for the intermediaries who bring about the deal. A source close to the Congolese presidency has nonetheless assured Le Temps that the purpose of the transaction with Gunvor was not to generate commissions. Rather, it was a case of high politics – to allow to Congo to diversify its clients, to loosen the near-suffocating pressure of China or France.
For Gunvor, to the Congolese leaders, it’s first and foremost Russia. The registration of the company is in Cyprus, it employs 150 people in Geneva, but it always sells a lot of Russian oil – 15 to 20% of the volume exported from Russia by tanker, according to its own figures. Its founder Gennady Timchenko is an old acquaintance of Vladimir Putin.
According to two sources, in his contacts with the Congolese the Developer would have hammered out the argument that Gunvor would be able “to open the doors of the Kremlin” for them. “He cultivated the amalgam of Gunvor / Russia, and he chose a good strategy, because nostalgia for the USSR is still strong in Congo,” comments one of the sources.
The sale of 18 cargoes of Congolese oil to Gunvor would have taken place between 2010 and 2012. On the side of this deal, $30 million are paid to two companies, one maintained by someone close to the Congolese power, the other supposed to be a front man. Who controlled these payouts? Did the firm know or did the Developer act alone? This is the crux of the business.
According to the explanations given by Gunvor to BNP Paribas, one of [Gunvor’s] financial backers, the Developer would have acted “unbeknownst to the organs of the company, in recovering funds for himself and for third parties.” “It’s a framework which has escaped the due diligence of the company,” summarizes a banker, taking advantage of a “loophole in its system of control.”
Another person familiar with the file thinks that “Gunvor was overtaken by the scope of activity [of the Developer], who was a free electron, very independent. An employer must keep under close surveillance what the Developer does!” For its part, the oil group maintains that its employee enjoyed the freedom which is normal for this type of work, and insists that its internal controls functioned in the appropriate way.
Le Temps has been briefly able to reach the Developer on his mobile. He speaks of an “old business” which would be “now behind [him]”, and he makes no other comments. His lawyer has declared to Le Temps that his client “operatedin his business for the account of Gunvor in full transparency and accountability to its hierarchy, as well as following the internal rules.” His success in Congo would be due to the fact that he “would have known first of all how to set up and to develop diplomatic links between this country and Russia”, as well as in “the development of plans of innovative transport on the Congo River.” Finally, according to the lawyer, “Gunvor has notified him of a regular termination, and on that occasion, it had not accused him of violation of his contractual obligations.”
Episode 4: the Banker
The Developer also recommended African friends to a banker, a former vice-president of Clariden Leu, an institution through which passed $30 million (and which ended up reporting these transactions to the authorities). With a starlet’s fading blonde, this wealth manager lives in Monaco. According to our information, she opened accounts for the Developer at Clariden – and her company paid commissions for that. Her status has been identified by the investigating officers as “someone required to provide information”.
“They haven’t accused her of anything, the police say that she is in the clear,” claims an associate who does not want to be identified by name. To her the Developer “introduced people, she has managed funds for him. He is convincing, charismatic, perhaps he has used her for she has good relations with the banks.” For this woman, it was apparent that the Developer “represented Gunvor” when he carried out his transactions at Clariden, “and this is also what the bank thought.”
Episode 5: the Prosecutor
At this stage, no arrest has been announced by the MPC. Gunvor has not filed a complaint against its former employee, despite the importance of the amounts which supposedly he would have diverted (the group says it is reserving the possibility of doing that once the investigation will have progressed). To those who are surprised at the slowness of investigations, the federal prosecutor Gérard Sautebin — reputed to be “tough and meticulous”, according to a lawyer – responds that “this type of case depends on a great many small details, details drowned in a multitude of information. It’s a painstaking task.”
In the final analysis, he is not sure that the procedure may end up in a formal indictment or a trial. But it will leave track marks across the oil business in Geneva. Gunvor, scalded by the Congolese experience, would reduce its presence in Africa. The exit of the Developer has weakened its operation. Stephane Degenne, the trader who had taken [Gunvor] in his luggage, has departed for Singapore and from now on takes care of business in Asia.
In Switzerland, international aid agencies and politicians of the left demand more transparency in the relations between oil traders and producing countries. Gunvor, like its rival Trafigura, declares that it obtains the majority of its contracts by “competitive and transparent tender offers”. A certain cynicism continues nevertheless to prevail in the sector. “What astonishes me, it’s not what happened,” comments a member of a negotiating group regarding the misadventure of the Developer. “It’s that there aren’t more such stories spilling out like this one.”