Alleged fraud surprises activist investors in the shipping fuel company
Alleged fraud surprises activist investors in the shipping fuel company
In May, a group of investor-activists made their way on the board of a Greek fuel shipping company, calling it mismanaged and undervalued.
have declared bankrupt, with its new board of directors claiming that the company had been looted systematically and that the assets that attracted the attention of the activists were largely false.
An internal investigation by the board's audit committee found that more than $ 300 million had been stolen by the founder of Aegean Marine, Dimitris Melissanidis, according to people familiar with the matter. Mr. Melissanidis and a lawyer representing him have not responded to requests for comment.
The investigation found that a set of fictitious companies, fake receipts and documents covered the alleged theft by making it appear that Aegean Marine had legitimate contracts with customers that would explain the missing money, the company announced last week.
Investigators alleged that part of the money went to Mr. Melissanidis, a billionaire, and to his family's businesses, which included a professional soccer team and yacht charters, the people said.
Aegean Marine is cooperating with subpoenas from the US Department of Justice, said the company listed on the New York Stock Exchange. The company filed for bankruptcy Tuesday morning in New York in a move that likely eliminated the value of its shares. A spokesperson for the United States attorney's office in Manhattan, who is leading the investigation, did not respond to a request for comment. No charges have been filed.
The allegations paint a picture of an elaborate accounting fraud that broke up and left the business of the company in ruins.
The fall of the company offers a quick example of the types of risks that activists assume when they try to transform what, from the outside, may seem like a business in difficulty. Even when they do their best to investigate their goals, activists live in fear of the lack of "perfect information."
Some have been stung by stock collapses related to accounting, including Trian Fund Management LP at General Electric Co. From William Ackman Pershing Square Capital Management LP lost $ 4 billion to
after a spiral that started when the short sellers questioned Valeant's accounting.
"It's exactly one of the things that has always worried me the most: you have to rely on your presentations and auditors from the SEC," said J. Daniel Plants, an activist investor. "There, except for the grace of God ... could happen to any of us."
Aegean is a much smaller company than GE or Valeant, but the potential scope of the alleged fraud and the speed of the company's collapse are rare for activists to support.
The group of investors was led by three hedge fund managers, August Roth, Tyler Baron and Justin Moore, who invested a total of $ 7 million.
Aegean Marine sells fuel to supply fuel, serving cruisers, container ships and, for a period, the United States Navy.
While preparing for his initial public offering of shares in 2006, he said that Mr. Melissanidis was no longer very involved in the company.
Aegean Marine is just one part of Mr. Melissanidis' business empire, which also includes service stations, a sports betting company and a top-level football team, AEK Athens FC. His racehorse, Youtalkingtome, won the Greek Derby 2017.
Last December, activists appointed four directors, including Mr. Baron and Moore's father, Donald Moore, a former chief of staff.
in Europe.
Shortly after, Mr. Melissanidis re-emerged at Aegean Marine, and the company reached an agreement to buy him a company for $ 367 million. The agreement would have granted Mr. Melissanidis a 33% stake in Aegean Marine, in addition to $ 40 million in cash and $ 200 million in accounts receivable.
In April, a court in New York stopped the deal after the activists filed a lawsuit, which led to a board meeting where they won three seats, including Mr. Baron and Donald Moore, who was named president.
The new directors realized in a few days that the board had started an audit investigation, people familiar with the investigation said.
They also discovered that the lenders had been surprised to learn of the $ 200 million in accounts receivable in the failed agreement and were pushing to liquidate. Banks stopped giving the company access to daily financing, bankruptcy court documents said, and the business began to spiral downward.
Within a month, Aegean Marine announced that it would eliminate $ 200 million in accounts receivable.
The board activists went ahead, believing that they owed it to shareholders to complete the investigation, the people said.
In addition to stress, employees and an external auditor said that Mr. Melissanidis threatened them, according to people familiar with the events and written reports submitted to investigators. Mr. Melissanidis allegedly told a former executive that he would "cut his balls," the researchers reported.
The internal investigation uncovered several alleged schemes that continued until this year, people familiar with the investigation said.
In the center was OilTank Engineering & Consulting Ltd., a company that Aegean Marine contracted to direct the construction of an oil terminal in Fujairah, United Arab Emirates, in 2010, according to the investigation.
The company's investigators alleged that OilTank stole about $ 285 million during the project by falsifying receipts and through bank transfers that continued during this year. Aegean Marine allegedly sent another $ 31 million to another company controlled by Mr. Melissanidis's family, the investigators alleged.
To hide the traces, the fictitious companies that claimed legitimate businesses were listed in the books, according to the researchers. They alleged that the ghost companies were linked to Mr. Melissanidis and never received any product, according to people. The internal investigation found that the contracts lacked normal paperwork and listed post office boxes controlled by Aegean Marine employees, they said. The quantity of petroleum products specified in the supposedly false contracts exceeded the capacity of the oil terminal in the USA. UU., People added.
-Rebecca Davis O'Brien contributed to this article.
Write to David Benoit in david.benoit@wsj.com and Costas Paris in costas.paris@wsj.com
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