1. IntroductionThefocus of this paper is to analyse the ethical and unethical operations of TrafiguraPte Ltd. It is a Singaporean multinational commodity trading company. Trafigurapte Ltd is listed as 54th place when ranked by revenue by Fortune Magazine. They have 4000 employees, a revenueof US $ 136.
4 billion but a notably low net income of US $ 0.887 billion in2017. Their operational market targets approximately 36 countries worldwide. Theirbusiness fields include sourcing, storing, blending and the transportation ofraw resources such as oil, refined petroleum products, and metals such as ironore or coal.
Additionally, they trade, build, or purchase stakes in pipelines,mines, smelters, ports and storage terminals1.It´s the world largest metal and second largest oiltrader. In 1993 Trafigura splitoff from an even more controversial group, Glencore International AG, which wasrun by Marc Rich. Rich was accused by the US of sanctions-busting to Iran and atax evasion. However, he was pardoned by the US president, Bill Clinton, in20012 on the president’s last day in office before George Bush wassworn in. 2. Notable Unethical and Irresponsible Situations InvolvingTrafigura2.
1 Oil for food scandalhttps://www.cfr.org/backgrounder/iraq-oil-food-scandalTheOil for Food programme (OFFP) was established in 1995 by the UN to allow Iraqto countertrade oil in exchange for food, medicine or other humanitarian needsfor the Iraqi citizens. The programme was supported and introduced by U.S.
President Bill Clinton in 1995 because Iraq’s citizens where heavily affectedby the economic sanctions aimed to demilitarise the Saddam Regime. The OFFP was terminated in 2003, although thesanctions were affective, multiple cases of corruption were found.3The highest benefactor was The Russian State itself with a total of 1.366.000.000barrels.
Trafigura’s exploitation landed them at 10th4place of over 60 perpetrators listed who have exploited this situation. PatrickMaugein, whom negotiated directly with Iraqi authorities on behalf of TrafiguraCompany 5misappropriatedand benefitted from more than 25.000.000 barrels. These were defalcated byoverloading the authorized bulk under the OFFP. Trafigura denied that it wasknowingly involved in any kind of payments (kickbacks) to get access to the oilthough that is unlikely. 2.
2 Waste dumping in Ivory Coast 2006https://www.amnesty.org/en/documents/afr31/002/2012/en/The IvoryCoast toxic waste dump was an environmental and public health crisis whichoccurred in 2006. A ship chartered by Trafigura hired a local contractor tooffload waste in Abidjan, Côte d’Ivoire(The Ivory Coast). The reason for this wasto avoid paying a 1000€ per cubic meter surcharge imposed by Amsterdam’s PortServices to dispose of hazardous waste in in the Netherlands6. The localcontractor, Compagnie Tommy, improperly dumped the waste in and around the cityof Abidjan in August of the year 2006.
The gas caused by the release of thesechemicals is blamed by the UN and the government of the Ivory Coast for thedeaths of 17 Ivorian citizens and the injury of many more though there areconflicting statistics. The injuries ranged from mild headaches to severe burnsof the skin and lungs. Almost 100,000 Ivorians required medical attention afterthe offer of Prime Minister Charles Konan Banny for free medical care inAbidjan’s hospitals to the city’s residents affected by the gas.7 In Trafigura´sstatement they adamantly denied that the dumped substance contained”slops”, or waste water from washing the holding tanks of ProboKoala, the ship which Trafigura had chartered. An investigation in theNetherlands, in late 2006, confirmed the waste consisted of more than 500tonnes of hazard waste which was made up of fuel, hydrogen sulphide, and sodium hydroxide, known as caustic soda.
Trafiguradenied any waste was transported from the Netherlands, and stated that thesubstances contained only tiny amounts of hydrogen sulphide, and that they hadno knowledge of the improper disposal by the contracted company, Compagnie Tommy.Trafigura officials, including Claude Dauphin who is one of Trafigura’s founderas well as the company’s West Africa regional director8, travelled to Abidjan withthe intention to support in the clean-up. As soon as they arrived they were arrestedand jailed by the Ivorian government9. While the executives werearrested, Trafigura agreed to pay US$198 million for the clean-up efforts ofthe Ivorian government but without admitting any wrong doing.
In return TheIvorian government had pledged not to prosecute the company. Dauphin andhis fellow executives were released following the settlement. In 2008 acivil lawsuit in London was launched by almost 30,000 Ivorians againstTrafigura.
In May 2009 Trafigura announced it would sue BBC for liability afterits News night program alleged the company had knowingly sought tocover up its role in the incident. Additionally, internal Trafigura emailswhich were obtained by The Guardian as well as WikiLeaks in 2009 showed thatthe people responsible were absolutely aware of the danger and ramificationsinvolved from dumping the chemicals. In light of this, Trafigura swiftlysettled the civil suit for US$42.4 million in 2009.
Finally a Dutch court foundalso found Trafigura guilty of illegally exporting toxic waste from Amsterdam10. 2.3 Allegations of Bribes in Jamaicahttp://rjrnewsonline.com/local/court-rules-against-simpson-miller-colleagues-in-trafigura-caseIt has been found that Trafigura made an illegal donation to at the timepresident Simpson Miller of the People’s National Party (PNP) as well as fourother party members in 2006. The sizable donation of over $640,000 to continuean existing oil contract11have brought their motivations and intentions into question. Trafigura wasinvestigated by both Jamaican Regulators as well as Dutch.
The Dutch court isthe same that fined Trafigura for dumping toxic waste in the Ivory Coast asmentioned in 2.1. One notable difference in the handling of this case is that itis a criminal investigation which could lead to criminal charges against thespecific perpetrators who made this happen which differs from other situationslike in the Ivory Coast where it was handled as a civil case. Completeinformation on this case is unavailable as Trafigura is still denyingwrongdoing and is still in litigation a full twelve years after the situation.
3. Analysis of Information and ConclusionWhatwe can take away from this research is that Trafigura seems to regularly findthemselves in a position with compromised ethics. Though I found manysituations pointing to bad ethics standards, I’ve only listed three. To sum up,they have been either accused of or found guilty of bribery, illegal dumping ofhazardous materials resulting in what was described as a catastrophe, andexploitation of a poverty-stricken country for their natural resources. Onething that stands out in each situation is Trafigura systematically and adamantlydenies any wrong doing though on multiple occasions they have chosen to settlewith regulators for a civil fine under the condition they do not have toacknowledge guilt nor criminal wrongdoing. Additionally, it seems they have avery busy public relations department handling damage control because somesituations, bribing officials in Jamaica in particular, have much lessinternational publicity than I would have expected. Also, I could not find anotable Facebook or Instagram page speaking out against Trafigura though otherfirms such as BP have Facebook pages urging to boycott the firm with over667,000 followers in English and an additional 2,800 on a Polish page.
In thecase of Jamaica, Jamaica Observer12 isthe main publisher of news in relation to the situation in Jamaica. It hasn’tgotten much attention from international media. In my subjective opinion thereasons for Trafigura’s lack of values are numerous; they are all likelyrelated to one thing. Profit. My opinion is that both shareholder primacy andcorporate governance are the leading factors. As senior management is underpressure to continually produce value for shareholders they in turn put morepressure on middle managers and the demands, though sometimes unrealisticcontinue to go down the management pyramid effecting the whole company.Employees start to use terms like “just make it happen” or “we need to makethis work”. Many times the employee knows they face being replaced if they areunable to create the vision of the upper management.
Additionally because Trafigurais an exceptionally large MNC the personal responsibility or liability ofemployees can be diluted. By being able to say, “it’s not my problem” or “it’snot my job” because of having specific corporate roles, employees may turn ablind eye to what they know is wrong. They think it isn’t directly their faultand it accomplishes the upper management’s expectations of production or savings.It seems that these two things, production and savings are always whatTrafigura is trying to accomplish. Workingin an obviously volatile place like Iraq during the oil for food scandal Imight assume that the company knew exactly what it was getting itself into.
It’s common knowledge in economics that during countertrade situations such asthis, one party is likely going to get a bad deal and be forced to sell theirgood below market value and suffer an initial loss there. This is exactly whathappened to Iraq but then Trafigura overfilled the tankers and was actuallystealing oil in addition to being able to trade for oil below the world marketprice. Thesituation in Jamaica was somewhat different though it has the same motivation.They bribed an active politician to continue a profitable contract.
If I had toguess, there should have been an investigation on how the first contract cameto be as it may have involved bribery or illegal business activities as well.It’s hard to believe that this situation is the first time that Trafigura hasbribed an official and it is very likely the first contract wasill-gotten. Thecatastrophe in the Ivory Coast is somewhat different physically, though very inline with the other situations of greed and profit.
In the ivory coast whatstands out is the commodity is toxic waste, not oil. Iraq shows greed forinputs of production as well as Jamaica. In Ivory Coast we can see that theyare trying to save money to the bottom line regardless of laws or damage to theenvironment.
I don’t think it’s any coincidence that Trafigura happened to dumptoxic waste in a country that at the time had a GDP per capita of less thanUSD$1000 as it is obviously much more difficult for people in poverty to defendthemselves from a multibillion dollar firm and the army of lawyers they canhire. Inclosing, as long as the ultra-rich MNCs of the world can simply calculate riskand reward scenarios based on profit and civil charges, they have no reason tochange. We need regulators like the WTO and Transparency International to beable to help formulate criminal charges directly to managers that knowinglycreate these unethical, dangerous, and despicable situations. Most importantly,we need these criminal charges to be enforceable.
1 https://www.banktrack.org/company/trafigura/pdf2 https://www.theguardian.com/world/2009/sep/16/inside-trafigura-pollution-conservatives3 https://www.theguardian.com/business/2007/feb/14/iraq.oilandpetrol4 https://www.cfr.org/backgrounder/iraq-oil-food-scandal5 http://news.bbc.co.uk/2/hi/americas/4383474.stm6 https://www.amnesty.org/en/documents/afr31/002/2012/en/7 https://www.voanews.com/a/a-13-2006-11-23-voa22/319097.html8 https://www.ft.com/content/c48c84c6-6d0f-11e5-aca9-d87542bf86739 https://www.reuters.com/article/us-ivorycoast-toxic-release-idUSL1461558720070214 10 http://www.bbc.com/news/world-africa-1073525511 https://www.namibian.com.na/index.php?id=75623=archive-read12 http://www.jamaicaobserver.com/