UPDATE 17/08/11: Topaz has since responded to reports with a company statement.
Oman’s Renaissance Services has today announced that it has “uncovered some serious issues”, including fraud and financial misconduct within Topaz Energy & Marine, its Dubai-based subsidiary.
In a statement to the Muscat Securities Market, Renaissance has posted a surprise 77% plunge in profit for the first half of this year, to 3.4 million Omani Riyals from 11.7 in H1 2010.
The company has discovered evidence of “fraud, ethical misconduct and control weaknesses” at one of the Topaz subsidiaries abroad, centred around the use of $2.9 million of cash in the business, according to a statement, which adds that malpractice has been going on within the Topaz subsidiary for “a number of years.”
The company also reports “weak financial performance, particularly in the loss-making engineering business; information not disclosed to the Board; evidence of breaches in our Code of Business Conduct- which we have moved quickly to investigate and stamp out; and several one-off issues that are causing temporary financial losses” within Topaz.
All managers of the unnamed overseas subsidiary have been dismissed and the company says it is now working to mitigate potential losses flowing from the discovery. Renaissance has taken direct supervision of Topaz, and will continue managing the company until “trustworthy” leadership is put in place. “We must not only solve these matters but put in place preventive measures to ensure they may never happen again,” the company says.
Renaissance says it continues to conduct an internal investigation with external audit and legal advice throughout Topaz. “The investigation is at an early stage but some further similar concerns have arisen,” says the statement.
Topaz has expanded into West Africa, Caspian, Azerbaijan, Turkmenistan, Kazakhstan, all of which score poorly on Transparency International’s Corruptions Perception Index 2010.
Renaissance’s Chairman, Samir Fancy, who says the first half of this year is “one of the most troubled periods in our company’s history”, has informed the exchange that Topaz has failed to disclose information to the board of directors and has breached the company’s code of business conduct.
Topaz pulled out of a $500 million IPO in London earlier in the year, and the firm’s CEO, Fazel Fazelbhoy, announced his shock resignation to Reuters by text message on 30 May.
Topaz’s COO and CFO have also resigned, says the statement.
“Whatever external factors may affect sentiment, the problems we have encountered internally in Topaz need to be fully resolved before any further contemplation of a listing,” the chairman said.
Renaissance bought Topaz through a share swap deal in 2005 and floating the company had been part of Renaissance’s stategic plan for the business.
Renaissance states that Topaz — which came 16th in our top 30 EPC contractors in the Middle East this year on the back of solid reported results and a healthy order book — is to cut over 100 engineer jobs in a bid to recoup the total cost of misconduct at the company, which it estimates could total $30 million.
Renaissance shares have lost 10 percent of their value in day trading at the time of writing.
