According to a report by Polish news website Onet, the state-owned oil refiner PKN Orlen set up a Swiss-based trading business, Orlen Trading Switzerland (OTS), despite a warning from its internal security unit that the move would pose risks of fraud and could expose the company to a breach of oil sanctions.
Orlen cancelled contracts to buy Venezuelan oil and refined products after losing around 1.6 billion zloty ($397 million) on prepayments for deliveries it never received. The contracts were signed by OTS, which is now being audited, and prosecutors are investigating former Orlen management activities linked to the oversight of the trading unit.
Onet cited what it said was a report by Orlen’s internal security unit, which warned that setting up the Swiss-based trading business would pose risks. However, the decision to establish OTS was made by the entire 11-person management board of Orlen and was in line with the company’s corporate governance procedures, according to a statement by former CEO Daniel Obajtek.
Earlier this month, Orlen said its 2023 profit would be hit by the 1.6 billion writedown resulting from OTS prepaying for oil and refining products it had not received by the agreed deadlines. The refiner added that getting the money back was unlikely, as the advance payments were made without collateral to entities with which Orlen had never cooperated before, contrary to standard practice.
Orlen did not immediately respond to a Reuters request for comment on the Onet report. The company’s decision to set up the Swiss trading arm despite internal warnings and the subsequent losses have raised concerns about the oversight and risk management practices within the state-owned energy giant.