Indian Oil Corporation probes allegation of US firm bribing its officers

Albemarle Corporation was caught for bribery by the US authorities in 2017 and then settled the case in September 2023 by paying a hefty fine of more than USD 198 million to avoid prosecution.

New Delhi: State-owned Indian Oil Corporation (IOC) has begun a probe into allegations of a US speciality chemicals firm bribing its officials 15 years back to obtain contracts to supply catalysts, according to a company's regulatory filing.

Albemarle Corporation, a global speciality chemicals supplier that develops and sells catalysts used in the operation of oil refineries, allegedly "paid approximately USD 1.14 million in commission to India intermediary company relating to Indian Oil Corporation business and obtained approximately USD 11.14 million in profits on that business between approximately 2009 and 2011," according to a US SEC order dated September 28, 2023.

Albemarle was caught for bribery by the US authorities in 2017 and then settled the case in September 2023 by paying a hefty fine of more than USD 198 million to avoid prosecution.

In a filing, IOC said it is "neither party to nor is there any allegation against the company in relation to the proceedings" in the US SEC.

"However, the company has initiated an internal fact-finding review concerning the incident, which allegedly occurred in 2009 to thoroughly understand the facts surrounding these allegations and to determine the appropriate steps to be taken," IOC said.

The state-owned firm said it has "always upheld and is steadfastly committed to maintaining the highest standards of governance, transparency and regulatory compliance across all jurisdictions of its operations".

The firm and its subsidiaries own, and operate 10 out of India's 22 oil refineries. These have a total capacity to refine 80.8 million tonnes per annum of crude oil into fuels like petrol and diesel. It also controls about 40 per cent of the fuel market.

"We assure our stakeholders, partners and employees that we are a law-abiding company, fully compliant with all laws," India's largest oil firm said in the filing.

According to the SEC order, an Albemarle consultant and sales agent paid bribes to unnamed decision-makers at IOC between 2009 and 2011 and to a private sector customer between 2009 and 2017 to obtain and retain catalyst orders and secure sensitive, non-public information for Albemarle.

The agent came into play after the Indian firm threatened to place Albemarle on a "holiday list" as a sanction for purportedly failing to meet a performance guarantee, which would have barred the US firm from future business in India.

"India agent contacted Albemarle Middle East personnel to advise that it was aware of the 'holiday list' issue and that it could help Albemarle avoid the 'holiday list'. Albemarle, contracting through Albemarle Netherlands, then engaged India agent as a consultant and later sales agent, despite the high probability that India agent would use a portion of its compensation to bribe a senior decision-maker at India state-owned customer," SEC order said.

The agent, who was not named in the SEC order, claimed that its board of directors included two former senior IOC officials.

"An Albemarle subsidiary regional director alerted an Albemarle sales executive, who was employed directly by Albemarle and based in the United States, of his understanding, based on a July 2009 call with an India agent, that the agent would make corrupt payments to keep Albemarle off the holiday list and obtain business from the Indian oil company and other customers," it said.

The regional director warned the sales executive by email that it was "clear to [him]" that the India agent intended to use a portion of its commission to "handle" the senior India official, as well as officials "many levels below".

"The regional director expressed his concern that engaging an India Agent would cause Albemarle to violate the FCPA," the order said.

"On August 13, 2009, despite the regional director's warning, sales executive signed a backdated consulting agreement between Albemarle Netherlands and India agent." The agreement called for payment of a 3 per cent commission to the India agent, a rate three times higher than that paid to Albemarle's existing agent for India. Shortly after Albemarle retained India agent, the threat to place Albemarle on the "holiday list" was withdrawn.

Between 2009 and 2017, Albemarle also paid Indian agent an excessive commission to obtain catalyst orders from Indian private customers.

According to the SEC, Albemarle, who has dealings with around 700 refineries in the world, bagged several contracts with IOC and companies in Indonesia and Vietnam through corrupt practices and bribery of more than 63.5 million dollars.