Probable criminal proceedings: SECP will conduct Hascol forensic audit


ISLAMABAD: Securities and Exchange Commission of Pakistan (SECP) Chairman Aamir Khan said on Tuesday that the SECP will conduct an investigation and forensic audit into the financial matters of Hascol Petroleum Limited and that criminal proceedings may be pending. engaged if necessary.

The SECP chairman informed the Standing Senate Committee on Finance that the SECP would complete the investigation within three months and take appropriate action accordingly.

Following the conclusions of the investigation, the SECP initiates criminal and civil proceedings against the responsible persons / entities.

Further actions against the auditor may be taken based on the findings of the investigation.

The meeting of the Standing Senate Committee on Finance was held here in Parliament under the chairmanship of the Chairman of the Committee, Senator Muhammad Talha Mehmood.

The president of the SECP indicated that the half-yearly accounts of June 30, 2019 were published on August 29, 2019.

‘Hascol cooperates with SECP’

When examining the accounts, the Commission observed that huge losses in six months amounting to Rs11 billion; other unexplained expenditure amounting to Rs 6.3 billion; Based on information provided by the Company, cases have been observed that the Company has purchased oil at higher prices from Vitol Dubai, a related party and restated for the March-2019 quarterly accounts already published, in which a stated profit of 674 million rupees was converted to loss of 5.42 billion rupees.

The SECP issued a Notice of Cause (SCN) u / s 257 of the Companies Act 2017 on October 4, 2019 to initiate an investigation into the state of affairs of the company. The company challenged the SCN in the High Court of Sindh (SHC).

The court ordered the empty SECP order dated January 10, 2020 not to make the final order. The SECP also filed an urgent hearing request on October 19, 2020. Hearings in the SCN proceedings were held on November 21, 2019, January 9, 2020, September 8, 2020 and the last hearing was on April 22, 2021 .

Subsequently, the company filed the suspension leave request which was accepted by the court on July 30, 2021, the SECP chairman added. The annual accounts as of December 31, 2019 were published on August 11, 2020.

During the examination of the accounts, the Commission noted enormous losses for the year amounting to Rs25 billion; the restatement of the account for the year 2018 declared a profit of 207 million rupees in loss of 215 million rupees and from December 2019 the company announced the name change of the related party Vitol Dubai, as Vitol Bahrain, in its interim and half-yearly accounts.

In view of the findings, the SECP issued a second SCN u / s 257 of the Companies Act 2017 to initiate an investigation into the situation of the company. An Investigation Order was issued and the Investigation Team began its work.

SECP chairman said the company had not held its annual general meeting for the fiscal year ended December 31, 2020, which was scheduled to end May 31, 2021; co-auditor, EY Ford Rhodes, Chartered Accountants resigned in January 2021.

EY informed SECP that Hascol did not provide the file in time to review the opening balances. The other auditor, Grant Thornton Anjum Rahman, chartered accountants also resigned on June 7, 2021.

The reasons disclosed to SECP were concerns about financial records, accounting systems and record keeping at Hascol. In view of the lack of holding of the AGM for the year 2020, a third SCN u / s-132 of the Act was published in June 2021 and an arbitration proceeding is ongoing.

Proceedings brought against the Company’s auditor, Grant Thornton Anjum Rahman, due to their inability to conduct the audit in accordance with applicable laws. Due to the failure to hold the AGM and to submit the annual accounts for the year December 2020, Hascol was defaulted by the PSX on June 25, 2021.

SECP reveals oily business of Hascol, Vitol Dubai

In preparation for the placement of Hascol on the failed meter by PSX, CDC froze common stock held in the central depository system accounts of Hascol’s sponsors, directors and senior management. In addition, during the period from September 2020 to May 2021, various regulatory measures were taken and sanctions were imposed on the company and its directors, added the president of the SECP.

The committee received a full briefing from the State Bank of Pakistan (SBP) and SECP on the issue of Hascol’s financial reporting. The committee was informed that in 2019, the liability rose from Rs24 billion to Rs44 billion compared to 2018.

The company constantly invests in its new projects. The Hascol company suffered a massive loss of profits within a few months. A company, which was operating with a profit of Rs956 million, suddenly suffered a huge loss of Rs116 billion, the committee informed. SECP officials told the committee that the SECP had given instructions to the company.

Two investigations are underway against Hascol, which will be completed in three months. Criminal or civil proceedings against the company will be initiated under the SECP law. Senator Saleem Mandviwalla said it appears the fraud has been planned for years and that a forensic audit should be carried out.

Senator Kamil Ali Agha said that such fraud is not possible if audit firms genuinely fulfill their responsibilities. Senator Musaddiq Masood Malik asked why the SECP failed to take action when the company took such large-scale illegal action. The stock market must protect shareholders’ capital. The standing committee was tasked with carrying out a forensic audit of the HASCOL company.

Senator Talha, in consultation with senators, made suggestions regarding the company’s forensic audit, auditors, penalties and steps to take to hold the company accountable. The chairman’s committee requested reports from 18 banks to the SBP in three weeks.

The chairman of the committee said that a list of those who have given guarantees to these banks should also be provided. The issue of fees on fund transactions by banks was discussed during the meeting of the Standing Committee.

Copyright Business Recorder, 2021

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