By Gram Slattery and Ricardo Brito
RIO DE JANEIRO/BRASILIA (Reuters) - The chief executive of a natural gas pipeline unit of Brazilian state oil firm Petrobras (SA:PETR4) has been removed, the company told Reuters on Thursday, after a middleman in a graft scheme implicated him in plea bargain testimony.
Transportadora Brasileira Gasoduto Bolívia-Brasil (TBG), which operates a 1,610-mile pipeline transporting natural gas from Bolivia to Brazil, said its board approved the removal of Ivan de Sá on Wednesday at the request of Petrobras, its majority shareholder.
TBG did not state the reason for his removal, nor offer any further details.
Reuters had asked TBG and parent firm Petrobras on Tuesday about the previously unreported plea bargain testimony. In the testimony, reviewed by Reuters, a middleman said that Sá helped coordinate a scheme in which Petrobras employees purportedly accepted bribes from commodity trading firm Vitol in return for cut-price oil contracts.
On Wednesday, Sá denied the allegations in a statement sent through TBG's press office.
"Mr. Ivan de Sá received with confusion and indignation the information that his name had been mentioned in plea bargain testimony, TBG said. The allegations "do not rise above mere insinuation, speculative in character, without any basis in fact or proof."
Sá is one of the highest-profile executives at Petrobras hit by graft allegations since President Jair Bolsonaro took office in January, pledging a break with years of corruption. Scores of politicians, business leaders and even Petrobras CEOs have been charged with bribery schemes over the past five years.
Sá took the helm at TBG in May, according to his LinkedIn (NYSE:LNKD) profile. Until April, he was chief executive of fuel distributor Petrobras Distribuidora SA (SA:BRDT3), which was privatized in July. He was previously a manager in Petrobras' trading unit.
Petrobras said it had immediately begun internal inquiries after learning about the plea bargain testimony and had removed employees named in the testimony from their positions. It added that it was not pre-judging employees and that the allegations did not yet appear to be backed by material evidence.
Petrobras Distribuidora said in a statement that the events described in the testimony "had no relation to the firm."
JAIL YARD CONVERSATION
According to the documents seen by Reuters, which summarize a plea deal reached in August with federal prosecutors, oil industry veteran Carlos Henrique Nogueira Herz testified he had helped funnel bribes to Petrobras employees in return for sweetheart fuel trades with trading firms Vitol and Trafigura from 2011 to 2014.
Herz also testified that Sá had helped to manage a scheme in which employees in Petrobras' trading unit manipulated an algorithm determining when and where to buy oil. He said the manipulation made Petroleo Brasileiro SA (SA:PETR4), as Petrobras is formally known, buy Vitol oil at inflated prices.
Herz said he did not have direct knowledge of the specific scheme. The testimony does not make clear when it supposedly took place. Herz said Carlos Roberto Martins Barbosa, at one point a high-ranking Petrobras trading manager, told him of Sá's role during a jail yard conversation.
The two were detained together in December 2018 and January 2019, according to the court documents, after both men were charged over allegations they belonged to a criminal group funneling bribes to Petrobras employees.
Herz provided dozens of pages of e-mails and bank statements detailing the bribery scheme as a whole, though none of the e-mails and bank statements reviewed by Reuters referenced Sá.
In a statement, Vitol said it would not be appropriate to comment on Herz's testimony "beyond reiterating our zero tolerance policy in respect of bribery and corruption" and cooperating fully with authorities.
Trafigura said in a statement that it was aware of reports of Herz's testimony but had not been contacted by Brazilian authorities in relation to the allegations.
"Any suggestion that Trafigura's current management knew that its payments would be used to make improper payments to employees of Petrobras is not correct," the statement said. "Trafigura has a zero tolerance policy on bribery and corruption."
A law office representing the former trading manager Barbosa did not answer phone calls or a message sent to an e-mail address listed on registration documents.
A lawyer for Herz did not respond to requests for comment on Facebook (NASDAQ:FB) and LinkedIn. The lawyer's offices did not pick up phone calls. Prosecutors did not respond to a request for comment.
The oil trading investigation became public knowledge in December when prosecutors said that Vitol, Trafigura, Glencore (L:GLEN) and Mercuria Energy Group used intermediaries to pay at least $31 million in bribes to Petrobras employees. In return, the Petrobras employees sold them oil at below-market rates and offered privileged information that gave them an edge over competitors when trading with the oil firm, prosecutors said.
The companies, which together control about 10 percent of the world's daily oil consumption, have said they are cooperating with the Brazilian investigation.