The Greek maritime fuel company Aegean Marine, which is listed on the New York Stock Exchange, is confronted with the danger of having to register losses that could reach 200mn dollars.

There are rapid developments in the case, and the revelations of the new Board of the company regarding the practices of the former Board are shocking, and have mobilised US regulatory authorities. Fake transactions, inflated balance sheet data, and one-sided contracts of the company with businesses of the former main stockholder and founder of the company Dimitris Melissanidis are only some of the heavy charges that are being investigated through exhaustive audits by the new Board. The charges, if confirmed, can result in a lengthy jail sentence.


Stocks plunge

Recent developments have caused a flight of investors and a plunge in the price of Aegean Marine stock in the last 12 months. The price of the company’s stock fell from 4.45 dollars per share at the beginning of the year to one dollar today.

From these revelations – following the investigation conducted by the new Board of Aegean, which now includes independent members appointed by activist shareholders – there arise questions that bring to mind the recent revelations that harmed Folli Follie, caused turbulence in the banking system, and marred the country’s reputation.

As the Tradewinds website reported on 4 June, the company announced that it may have to register losses of 200mn dollars, as the accounting audit of the books revealed the possible adoption of unsuitable accounting practices, in violation of company policy.


The reasonable question

The Greek company noted that money is owed to it by four counterparties, which appear in the economic data of 31 December, 2017. About 172mn dollars were owed by counterparties at the end of 2016, and 85 million were owed at the end of 2017, as Tradewinds reported. Since the new Board noted that there is no economic substance in these transactions, the question reasonably arises whether these transactions were presented in order to illegally inflate the company’s balance sheet.

It should be noted that Mr. Melissanidis sold his 22.5 percent stake in the same company in August, 2016, for 100mn dollars. The valuation of the company increased after that transaction, and Melissanidis may possibly have benefited.


Probe of transactions

The new independent members of the Board, along with accountants and auditors, say they are investigating a number of other transactions that benefited Aegean Marine founder Melissanidis, at the expense of company stockholders.

There were high rents and service charges for the company’s central offices in Piraeus, which belong to Mr. Melissanidis. There was high compensation for company  employees who were close to Melissanidis.

There were contracts and transactions of Aegean Marine with companies that belonged to Melissanidis, such as HEC, Aegean Oil, and Aegean Shipping Management, which unjustifiably benefited Melissanidis. One such example are the contracts between Aegean Marine Petroleum and Aegean Oil, a private company controlled by Melissanidis.

The new Board has stated that it has informed the US Justice Department and the Security and Exchange Commission, due to the seriousness of the issues. In the past, US authorities have imposed multi-year jail sentences and high fines for similar violations.


The HEC buyout that was never completed

The probe of Aegean Marine began shortly after the termination by the company of a consultancy agreement with Melissanidis, its founder and former owner, who today also owns HEC Europe, as Tradewinds reported.

Just a few days ago Platts, a company that provides information and prices on energy and commodities, announced that Aegean Marine missed the 30 April deadline for submitting its 2017 annual report to the SEC, and noted that an important shift in results from last year is expected, and that more time is needed to study the logistical data.

The troubles for Aegean began when the company attempted to buy a marine waste management company, HEC, for 367mn dollars. The controversial agreement, as it was described by international media, did not go forward, because the 27 March deadline set by the contracts was not met, due to a legal dispute.

On 14 March, New York Federal Judge Loretta Preska issued a temporary injunction blocking Aegean Marine’s buyout of HEC.

The judge stated that the transaction with Mr. Melissanidis was improper, as there was no effort for shareholders to vote on it, and because it was scheduled to happen before the company shareholders’ annual meeting.