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Tax shelter company and former employee brought down Danish bunker company

In a dramatic case, a Danish bunker and oil trading company along with one of its executives were found guilty of fraud. Finans and ShippingWatch were in the room during all of the court sessions. This is the story.

Photo: Modelfoto/Colourbox

In November 2017, Monjasa and founder Jan Jacobsen were cleared in the protracted fraud case against the bunker company and its founder. Danish Western High Coourt overturned the verdict issued by the District Court in Kolding in 2016 when the Danish company and its former owner were found guilty of gross fraud against a Malaysian customer, Pacific Inter-Link.

The High Court's decision marked the end of the case, which was filed by the Danish Attorney General's Office for fraud and financial crimes.

ShippingWatch, March 2020.

 

The witness squirmed in his chair at the Danish General Consulate in Dubai while the tension grew.

"Is that the best you've got?" he yelled via video-link to the courtroom in Kolding, Denmark.

The question was directed against the defendants and the defense lawyers, which had tried to discredit the man in Dubai in every way possible.

The man was the key witness for the Danish Attorney General's office for fraud and economic crimes – generally known as the Danish Fraud Squad (SØIK). The three charged parties in the case were a Danish bunker company and two senior executives, all currently under court-ordered anonymity.

"We asked for an explanation from (anonymous company) but that didn't help much. Then we went to the police,"

Witness from Pacific Inter-Link
The Danish financial police charged the three parties with perpetrating systematic fraud against a Malaysian customer, Pacific Inter-Link, and the man in Dubai – a former employee of the oil company – was the key witness for the police.

When the defense attorneys finished questioning the witness, they believed that the court could rest easy dismissing his deposition as unreliable.

But that is not what happened.

On Thursday morning, Judge Jan Strange found the company and one of the two charged individuals guilty of gross fraud, while the other executive was cleared of the charges. The company is sentenced to pay USD 1.5 million in penalties while the sentenced senior executive was given a prison sentence of 3 years and 6 months.

The verdict was appealed on the spot and the court-ordered anonymity will be maintained until a final verdict has been made.

Curious fuel consumption

The Danish bunker company is known as a particularly successful growth-company with an impressive revenue.

The case began around 2013 when Pacific Inter-Link, which produces and sells palm oil, found it peculiar that the fuel economy was so poor on the two vessels Concord 1 and Endeavor 1.

Mystery deepens concerning role of tax shelter in fraud case 

The vessels were chartered from a company in Monaco, Sea World Management, which also provided crewing. When the vessels needed fuel, this was reported to Pacific Inter-Link, which ordered the oil from the Danish oil company, as this was Pacific's preferred supplier because of the low prices.

The Danish firm did not physically supply the oil itself. This took place with the help of local suppliers, often the company Tranship in Jeddah, Saudi Arabia.

When the oil had been delivered, the captain or a marine engineer on the receiving vessel would sign a delivery receipt, and the supplier would also sign this receipt which was first sent to the Danish oil firm, and from there sent on to Pacific Inter-Link along with a bill.

When Pacific began to investigate the matter, the company made a disturbing discovery.

Overcharged by 43 percent

Pacific succeeded in obtaining the original delivery receipts from Tranship and they did not correspond to those sent from Denmark.

The receipts sent from Denmark noted much greater volumes than the receipts that Pacific was in possession of.

"We asked for an explanation from (anonymous company) but that didn't help much. Then we went to the police," one Pacific employee explained in court.

According to the employee, the company withheld USD 400,000 in payments to the Danish firm and filed charges with the Danish financial police on March 3rd 2014. Later, Pacific sued the Danish company at the Danish Maritime and Commercial High Court for compensation of USD 7.5 million.

According to Pacific, the amount was symbolic of an average overcharging of 43 percent, systematically carried out by the oil firm in order to bill Pacific for larger amounts of fuel than were actually supplied.

Pacific handed over large amounts of documentation to the financial police, which also conducted dawn raids at several locations in Denmark on April 24th 2014 at 8 am.

Shortly thereafter, the case took an unusual turn when the Malaysian customer suddenly withdrew the charges in a letter dated July 17th 2014.

According to this letter, Pacific Inter-Link had continued its own investigation into the case after the charges were filed, and the CEO of the Malaysian company, Fouad Hayel Sayed, believed that they now had a "clear view of the complicated matter".

The Danish company, according to the letter, had presented Pacific Inter-Link with comprehensive documentation and there was no longer a reason to uphold the police charges.

Tax shelter at center of fraud case against Danish bunker company 

"We would like to take this opportunity to express our gratitude for the collaboration with the Danish police in this matter, and we apologize for any inconvenience that has arisen in this regard," wrote Fouad Hayel Sayed.

However, the letter did not mention that Pacific Inter-Link and the Danish company had made a settlement deal shortly before, which meant that the oil firm had transferred USD 3.8 million to Pacific. According to the Pacific employee, questioned during the trial, one condition of the settlement was for Pacific to withdraw the criminal charges.

He also admitted, however, that Pacific's CEO had been shown certain documents in relation to the settlement, but he did not know what they contained, and during the case, the Danish firm's defense attorney said that the settlement could not be interpreted as an admission of guilt. It was simply a matter of eliminating a "litigation risk".

Although Pacific withdrew the charges, the Danish financial police continued the investigation, and the material, according to the prosecutor, was so strong that charges were made against the company and the two executives in December 2015.

Tax shelter in the middle

The defendants have pleaded not-guilty throughout the case and accused the financial police of "swallowing the bait" when Pacific tried to use the police in a commercial dispute.

And when the financial police found suspicious circumstances in the investigation, this was only because detectives and prosecutors were not adequately familiar with the bunker industry.

I had to spend a lot of money on the crew because of the chief engineer who was kind of an asshole

Piergiuseppe Babini in an e-mail to the defendant
During the case, a somewhat spectacular company played a pivotal role: Templar.

The company operates out of Monaco and was closely tied to Italian Piergiuseppe Babini, who according to his LinkedIn profile, served as General Manager of Sea World Management until April 2014. This was the company that chartered vessels and crews to Pacific.

Templar is seemingly registered in the tax haven St. Vincent and the Grenadines, and the Danish Fraud Squad was particularly interested in transfers of millions from Denmark to Templar. The transfers were, according to the verdict, evidence of profit-sharing from the overcharging of Pacific.

Every time Pacific was overcharged, the proceeds were thus consistently split 60/40 between Templar and the Danish oil company. Later, this distribution became 70/30 on the request of Piergiuseppe Babini, who wrote an e-mail to one of the defendants in 2012:

"(...) I had to spend a lot of money on the crew because of the chief engineer, who was kind of an asshole."

According to the financial police, Templar needed the money to buy off the crew on the vessel.

Credit bureaus have no knowledge of pivotal tax shelter in fraud case 

According to the defendants, Templar, however, was a regular subcontractor, and Templar had, as such, supplied the "missing" oil volumes which the financial police mistakenly believed were a result of overcharging.

Templar has access to very cheap oil, so-called off-spec, which means that there is no guarantee that the oil meets regular ISO standards, and so Templar had entered into an "open book" deal with the Danish oil company.

Templar would get 60 (later 70) percent of the price that the Danish company paid to the other supplier, and the e-mail from Babini meant nothing more than business tactics from a man whose employees apparently wanted to be paid more.

Cryptic e-mails

But the court did not believe that explanation.

Templar is completely unknown in the shipping world and practically no communication existed regarding deliveries from Templar, while there was plenty from Tranship.

On the other hand, there are e-mails with cryptic wording, quotation marks, and expressions including "actual delivered to vessel".

The defense attorneys argued that the words actual delivered meant currently delivered, and when quotation marks were used in an e-mail with attached delivery receipts from "the "two" deliveries", this was to emphasize that two deliveries had taken place.

Witness in criminal case: Sale of cheap bunker oil was risk-fraught 

These e-mails left no doubt in the courtroom, however, that fraud had been committed and fictive delivery receipts had been made with the purpose of deceiving Pacific Inter-Link.

The key witness for the financial police, who as mentioned above was questioned via video-link to Dubai, was a former employee of the oil trader, and he was thus the person that Pacific contacted when oil was ordered.

As such, he was also the person who located the subcontractors, so that the oil could be bought and supplied, but the situation was special when it came to Pacific, he said in court.

If Pacific Inter-Link asked for for 1,000 tons of fuel for example, his boss told him to order 700 tons. And he never had anything to do with Templar.

He could not answer what others had done, but one night he received a call in the middle of the night, because a fuel control was headed to one of Pacific's vessels:

"I was supposed to call the physical supplier (subcontractor, -ed.) right away because now they had to deliver the quantity that was ordered," he explained.

The employee left the oil firm in 2012 to start his own bunker oil company. After leaving, the company had reported him to the police due to a number of transactions with a company in Angola, and the defense attorneys thus argued that he had a clear revenge motive.

"Is that the best you've got?"

That was when the former employee reacted:

"Is that the best you've got? What happened to that case?" he yelled, referring to the fact that the local Danish police department later dropped the charges against him.

When, Henrik B. Sanders, the lawyer representing the sentenced senior executive later presented his final statement, he asked the court to disregard the testimony of the former employee as unreliable.

As we know, that did not happen. Instead, the court disregarded the statements from Sanders' own client. According to the verdict, he was deeply involved in the fraud.

He was the one who made the calculations for the profit-sharing. He was in touch with Templar, and he personally booked the deals in the company's accounting system.

Apart from his prison sentence of three and a half years, the court also decided to strip him of the right to head a company in Denmark or abroad, and he may not work professionally in oil trade for the next five years.

"The nature of the crime and the severity give reason for obvious danger of exploitation," the ruling reads.

The sentenced individual as well as the company will appeal the verdict.

Danish bunker company found guilty of fraud

Defense team: No proof of fraud at Danish bunker firm

Prosecutor calls for four year prison sentences in bunker fraud case

Witnesses missing in criminal case against Danish bunker company 

Court sets date for verdict in case against Danish bunker company 

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