Auditors probe potential $200m fraud at Aegean Marine

1/11/2018

By Kerin Hope

NYSE-listed company was run by shipping magnate Dimitris ‘The Tiger’ Melissanidis

A probe by international auditors has been looking into whether there was a $200m fraud at Aegean Marine Petroleum Network involving fake transactions with brass-plate companies.

The team of forensic auditors from EY was appointed by US hedge fund managers who joined the board of the global shipping fuel supplier in May after they agreed to drop shareholder lawsuits against the company.

The three funds — led by Tyler Baron of San Francisco-based Sentinel Rock Capital — own approximately 13 per cent of Aegean, one of several Greek shipping companies listed on the New York Stock Exchange.

Aegean, founded by billionaire Greek tycoon Dimitris Melissanidis — known in Greece as “The Tiger” and famous as a former owner and current investor in AEK Athens football club — is one of the biggest suppliers of marine fuel to the global shipping fleet. It was among the first Greek shipping companies to be listed in New York through a public offering in 2006.

Shares in Aegean plunged 75 per cent in June when the company admitted after a preliminary probe that some $200m of receivables may have been “without economic substance”, and informed the US Department of Justice and the Securities and Exchange Commission.

The Swiss commodity trader Mercuria in August acquired almost a third of Aegean in return for providing the company with $1bn in credit facilities plus $30m in cash. The deal ensured that the struggling supplier could continue trading.

According to documents seen by the Financial Times and people in Athens with knowledge of the investigation, the probe has been scrutinising whether four companies — one registered in the United Arab Emirates, two in the Marshall Islands, and one in Florida — were involved in transactions in order to falsify commercial transactions and cover up misappropriation of funds. The companies were named as Abdul Azim Trading, Savina Maritime, South Seas Maritime and Miami Exports Group.

“These were shell companies — they had a PO box address at Fujairah [in the UAE] but didn’t have any real business activities,” said one person familiar with the audit probe.

Mr Melissanidis has denied any wrongdoing. He did not respond to requests for further comment. Aegean’s general counsel, Spyros Focas, has said he would be unable to comment on matters handled by the auditors.

Mr Melissanidis, a hands-on manager according to other members of Greece’s shipping community, ran Aegean as head of corporate development from 2006 until he sold his 15 per cent stake in the company in 2016 for $100m. He stayed on as a consultant with managerial responsibilities but resigned when the US hedge fund managers joined the board.

Several senior executives at Aegean, among them the chief financial officer, controller and supply manager left the company while the probe was under way, the same person said. Aegean’s managing director and chairman of the board were replaced.

The auditors have also examined Aegean’s relationship with Oil Tank Engineering and Consulting, a Marshall Islands company that signed a contract with Aegean in 2010 to build a fuel supply terminal at Fujairah. The project took four years to complete and over-ran its budget by approximately $100m.

Oil Tank had no previous experience of building an oil terminal and has not carried out any further engineering projects since 2014. Auditors have been looking at whether Aegean made payments through Oil Tank to other enterprises in which Mr Melissanidis was involved.

Bank statements obtained by auditors from the National Bank of Fujairah show that payments from Aegean to Oil Tank continued for several years after the terminal was completed.

Auditors have been probing whether these payments were concealed through the use of false accounting entries and forged documents. It appears that between July 2015 and January 2018 Aegean transferred a total of $185.3m to Oil Tank.

In 2016 Oil Tank made a transfer of €2.77m to AEK, an Athens premier league football club controlled in the early 1990s by Mr Melissanidis. He returned in 2013 after AEK had been relegated to the amateur division, as one of a group of investors in a drive that restored the club to its former top-flight status.

The AEK transfer was logged as an interest-free loan to the club to help fund the construction of a new stadium. It is believed Oil Tank also made payments to individual AEK players.

The EY auditors worked out of Aegean’s former head office in Athens’ port of Piraeus, an imposing waterfront building owned by Mr Melissanidis which also houses several Aegean subsidiaries and other family businesses.

These include an international shipping fleet controlled by Mr Melissanidis’s son George; a minority stake in OPAP, a Greek gaming company; a chain of petrol stations across Greece; a real estate business; and a marine waste management company.

“The audit team faced considerable obstacles while they were working,” one person with knowledge of the investigation said. “Attempts were made to ban auditors from accessing relevant documents.”

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