Sunday, October 25, 2020

Ferrexpo Plunges After Auditor Resigns Amid Money Laundering Probe


Ukrainian iron-ore producer Ferrexpo Plc plunged the most in three years after its auditor resigned amid a money laundering investigation at a charity supported by the company.

Ferrexpo announced on Friday that Deloitte LLP had resigned without providing any details about the reason. Three days ago, the company disclosed a disagreement between the auditor and Ferrexpo’s board over the role of majority shareholder and Chief Executive Officer Kostyantin Zhevago at the charity, called Blooming Land.

The shares fell 25 percent, the most since December 2015, to 201.80 pence as of 12:20 p.m. in London, giving it a market value of $1.5 billion.

For Ferrexpo, the investigation into the charity is fueling worries about governance and financial controls at the company. Ukrainian authorities are probing whether the charitable foundation was used to launder money and evade taxes. There are indications that some funds may have been “misappropriated,” Ferrexpo said on Tuesday.

- Advertisement -

“Any further potential problems with corporate governance are able to trigger the stock’s selloff, even if they do not significantly undermine the current sound fundamentals of the company,” said Alexander Martynenko, the head of corporate research at Investment Capital Ukraine LLC in Kiev.

On Tuesday, Ferrexpo said its board had a “unanimous view” that Zhevago didn’t have influence over the charity. That clashed with Deloitte’s assessment. The auditors have been “unable to conclude” whether the CEO has significant control, according to Ferrexpo’s statement.

If Ferrexpo board members start changing their opinion, or if the U.K. or Swiss regulators start questioning the links between Blooming Land and Zhevago, the company could face further trouble, wrote Dmytro Khoroshun, an analyst at Concorde Capital in Kiev.

“If Zhevago was able to prove he was not related to Blooming Land, he could have done so already at the stage of Deloitte’s inquiry, preventing the auditor from resigning,” he said in a note.

Accounting Irregularities

- Advertisement -

The problems at Blooming Land came to light earlier this year after Ferrexpo’s auditors received bank statements from the foundation containing “irregularities.” Ferrexpo has set up an independent review committee to investigate discrepancies in payments to the charitable foundation, established primarily to coordinate the company’s philanthropic activities.

A spokeswoman for Deloitte and a spokesman for Ferrexpo declined to comment. Under U.K. rules, the auditor is likely to make its resignation letter public in the next two weeks.

Through donations to Blooming Land, Ferrexpo says it supports charitable activities in Ukraine. A unit of the iron-ore miner gave the foundation about $110 million over the past six years to fund causes such as diabetes awareness and care of the elderly.

The resignation of Deloitte also comes as the so-called big four accounting firms face increased scrutiny. Last week, the U.K.’s Competition and Markets Authority renewed its demand for the firms to split their operations into separate business units.


Julius Baer to deny two former CEOs their bonuses over money laundering scandal

Julius Baer will withhold millions of francs in bonuses from its former chief executives Boris Collardi and Bernhard Hodler, as a result of a...

Goldman Sachs executives to cover part payments of $3 billion fines in 1MDB scandal

Nine current or former Goldman Sachs executives, including CEO David Solomon, will have to pay back hundreds of millions of dollars in compensation over...

Goldman Sachs agrees $3 billion settlement with US DoJ over 1MDB corruption scandal

Goldman Sachs has agreed to pay nearly $3bn (£2.3bn) in the US to end a probe of its role in Malaysia's 1MDB corruption scandal. The...

Hong Kong fines Goldman Sachs $350 million over 1MDB scandal

Goldman Sachs ignored multiple red flags over the multibillion-dollar fundraisings it arranged for state fund 1Malaysia Development Berhad, Hong Kong’s financial regulator said on...

Texas attorney general Ken Paxton fires top aide who accused him of bribery

Lacey Mase, one of the top aides who accused Texas Attorney General Ken Paxton of crimes including bribery and abuse of office, has been fired, she told The...

Latest News

This Week

Texas AG Ken Paxton fires second whistleblower who accused him of bribery

A second whistleblower has been fired from the Texas attorney general’s office after reporting his boss, Texas Attorney General Ken Paxton, to law enforcement for...

Crown Resorts chairman Helen Coonan admits casino ‘enabled’ money laundering

Crown Resorts chairman Helen Coonan has conceded the casino giant facilitated money laundering at its Melbourne casino, but blamed it on "ineptitude" rather than...

Fundraiser Elliott Broidy pleads guilty in foreign agent case linked to 1MDB

Major Republican Party and Trump fundraiser Elliott Broidy pleaded guilty Tuesday to acting as an unregistered foreign agent, admitting to accepting millions...

Goldman Sachs executives to cover part payments of $3 billion fines in 1MDB scandal

Nine current or former Goldman Sachs executives, including CEO David Solomon, will have to pay back hundreds of millions of dollars in compensation over...

Adblock Detected!

Our website is made possible by displaying online advertisements to our visitors. Please consider supporting us by whitelisting our website.

Enable Notifications    Ok No thanks