Oman's Renaissance Services to check for fraud at unit

Renaissance Services, the Omani oil services company, recorded its biggest share slump in years after it revealed fraud and ethical misconduct in one of its units.

Renaissance Services, the Omani oil services company, has taken over a unit it says was mired in "financial misconduct", and costs from restructuring it could reach as high as US$30 million (Dh110.1m).

In a filing this week with the Omani bourse, the company said three top officials at its subsidiary Topaz Energy and Marine had resigned and that it could fire more than 100 employees as part of the restructuring.

Stephen Thomas, the chief executive of Renaissance, has taken over the top role at Topaz while it investigates signs of fraud and other ethical lapses.

"At the moment we have no intention to press charges," Mr Thomas said yesterday. "There is only one manager who has been dismissed in connection with the business ethics violations, and that is a junior level finance manager from an overseas subsidiary. These business ethics issues are quite frankly history in our organisation."

The problems at Topaz added to an already rough year for Renaissance, with its net income from the first half falling by 77 per cent to 2.26 million rials (Dh21.4m), from 9.79m rials in the same period last year.

"Renaissance shall maintain this direct management role until the problems are resolved and the Topaz organisation is stabilised again under trustworthy specialised industry leadership," wrote Samir Fancy, the chairman of Renaissance, in the bourse filing.

"If not arrested, these matters could damage the company's reputation and sap morale."

Shares of Renaissance on the Muscat exchange lost a 10th of their value on the news, reaching 0.621 rials in their biggest drop in nearly six years, as the investment bank EFG-Hermes cut its recommendation for Renaissance to "neutral" from "buy".

As part of the restructuring, Renaissance ended a joint venture with the British energy services company Doosan Babcock and began the process of withdrawing from a boatyard in Kazakhstan. Ending that contract contributes to costs this year that could reach $30m, Mr Fancy acknowledged.

That represents a sharp turn in fortunes for Topaz, which as recently as March was poised for a $500m initial public offering (IPO) in London.

Fazel Fazelbhoy, its former chief executive, showcased expansions into Brazil and West Africa and Topaz publicised an award it won for corporate social responsibility.

"We had allowed the organisation to grow in preparation for the larger business that would have emerged after the proposed IPO," Mr Fancy wrote. "Unfortunately, the leadership model deployed was a command and control functional hierarchy."

The questions at Topaz first arose in April over the use of $2.9m of cash at an overseas subsidiary. Topaz has a joint venture in Saudi Arabia and subsidiaries in Oman, Qatar and the Caspian, which serves Azerbaijan, Kazakhstan and Turkmenistan.

"The investigation uncovered evidence of fraud, ethical misconduct and control weaknesses over a number of years," Mr Fancy wrote.

"The investigation is at an early stage but some further similar concerns have arisen. It is our intention to bring these matters to the attention of the appropriate authorities in the relevant jurisdictions where applicable."

The ongoing investigation puts another obstacle between Topaz and a London listing, which was delayed in March because of fears that regional unrest could sway investor sentiment.

If an IPO moves forward, Renaissance would separately list Topaz's engineering and offshore vessel divisions, the company said. The company is now in talks with banks to refinance an IPO.

Published: August 16, 2011 04:00 AM


Editor's Picks
Sign up to:

* Please select one

Most Read