Oil Trader Fired by Mitsubishi Denies Allegations
The Chinese trader fired by Mitsubishi Corp for allegedly losing $320 million in oil trading denies allegations that his bets were hidden, saying he was acting on his managers’ orders and there were no unauthorized transactions.
Joseph Chen, the Singapore-based lawyer who represents Wang Xingchen, the oil trader previously at Mitsubishi Corp, said the losses at Mitsubishi’s unit Petro-Diamond Singapore were due to «premature» settlement of the derivatives positions by the company.
«Our client takes the position that he had not engaged in unauthorized trades in crude oil derivatives,» Chen said in a statement. Wang was hired by Petro-Diamond to help expand its business with Chinese counterparties, especially the independent Chinese refiners that are seen as an emerging force in that country’s massive oil industry, «Bloomberg» reported (behind paywall), quoting sources.
Questions About Internal Control
On Friday, Japan’s biggest trading house said it expected Petro-Diamond to book the losses after discovering an unidentified trader «repeatedly» engaged in unauthorized crude derivative deals since January, disguising them as hedging transactions. The loss represents some 6 percent of Mitsubishi’s projected profit for the year.
The latest case of trading losses raise questions about internal controls at its trading unit even though the company said they were sufficient. The transactions were discovered in mid-August after a slump in oil prices spurred large derivatives losses at the company, Mitsubishi said in its statement. Brent crude fell about 20 percent from the end of May through early August.
Absent From Work
The employee was absent from work at the time, the firm said. The trader manipulated data in Petro-Diamond’s risk management system so that the transactions looked like they were related to real deals with customers, Mitsubishi said.
After recognizing that they could result in a loss for the company, it closed the derivatives positions. The trader was fired on Sept. 18 and reported to police the following day, it said.
Followed Internal Procedures
Chen told Bloomberg that his client followed internal reporting procedures and policy at all times and his trades were reviewed by Petro-Diamond’s finance team. «Internal controls were in place» throughout the duration of the period in question, he said.
Wang, also known as Jack, was on vacation and then medical leave in August, according to his lawyer. He did not abscond from work and chose to remain in an obscure location because of concerns for his safety, Chen said. The Singapore Police Force confirmed that a report has been filed and it’s looking into the matter, but declined to provide any other information.
The company said it subsequently conducted an internal review of its unit and concluded that it has sufficient controls in place, adding that it has tightened governance to ensure that any similar «improprieties can be detected at a much earlier stage.»
