Mitsubishi Corp (OTCPK:MSBHF) has revealed a rogue oil trader cost the company $320 million United States dollars, causing Mitsubishi stock to drop over 4%.
The company said an employee hired locally by its Petro-Diamond Singapore (PDS) unit engaged in derivatives transactions and disguised them to look like hedge transactions since January of this year.
PDS closed the derivatives position in question.
While trying to locate the trader who had not returned to its Petro-Diamond Singapore (PDS) oil unit after a holiday, Mitsubishi discovered the losses, a spokesman told Reuters.
Mitsubishi said it jumped into action soon after discovering the losses, bringing in an outside lawyer and setting up an investigating team.
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Bloomberg reported that the US$320 million loss would be less than one-tenth of Mitsubishi's projected profit for the year.
The falling crude oil price since July translated into "large losses", it said. Mitsubishi said investigations confirmed that its unit had "sufficient internal controls in place". Calls to Wang's mobile phone wouldn't connect, while a person who answered the phone at Petro-Diamond's Singapore office said he has left the company. The Petro-Diamond trader was sacked on Sept 18 and reported to police the next day. It was founded in 1954.
A long-time trader in the regional market told Reuters: "It is a bit surprising (because) in the Japanese houses, there are a lot of checks and double-checks, but I am not sure what automated compliance systems there are, or if they have any".
The oil market has a long and colourful history of trading busts. Last year, Chinese state oil giant Sinopec suspended two top officials at its trading arm Unipec after US$656 million in losses.
In 2007, Japanese firm Mitsui shut down its Singapore oil-trading operation after a trader - who was imprisoned along with his supervisor - lost US$81 million in hidden trades, Bloomberg added, also citing the suspension a year ago of two top officials at Unipec after the Chinese firm lost US$656 million.