(Bloomberg) -- Poland’s government stepped up calls for an in-depth investigation into the affairs of the country’s oil champion Orlen SA after the company booked a $400 million loss on crude it ordered but didn’t receive. 

Orlen’s shares extended losses on Friday. The developments follow this week’s revelations that during the tenure of former Orlen chief executive officer Daniel Obajtek, the company’s Swiss trading unit didn’t receive barrels that it undertook prepayments for, forcing the state-run parent to write off 1.6 billion zloty, or $400 million. 

The unit’s payments were made to oil intermediaries with which the company had never dealt before and without security, Orlen said in a statement on Thursday. The loss and the unusual nature of the payments call into question the company’s corporate controls.

The write-off is “a huge loss, which indicates extreme irresponsibility,” Finance Minister Andrzej Domanski told Radio Zet on Friday, calling on prosecutors to carry out an “thorough” probe. Tomasz Siemoniak, the minister in charge of special services, told Wp.pl that prosecutors are dealing with Orlen with “utmost seriousness.”

Orlen has been at the center of controversy under Obajtek, a loyalist of Poland’s previous populist administration. In January, prosecutors started several probes into Orlen’s acquisition of oil refiner Grupa Lotos SA as well as its pricing policies, which caused shortages of fuel at filling stations last year.

Discount Valuation

Shares in the refiner fell as much as 2.5% on Friday before closing 0.5% lower in Warsaw. The stock lost 2.2% on Thursday.

“So far, the market reaction isn’t big as investors had already priced the company at a discount, taking into account the already low corporate governance standards,” said Kamil Kliszcz, an analyst at mBank SA. “This fraud case, even though it’s substantial, isn’t a total surprise, given the ongoing audit of the company by the new government.”

Finance Minister Andrzej Domanski urged prosecutors and other services to “thoroughly” look at what Obajtek was doing, while Tomasz Siemoniak, the coordinator for Poland’s special services, told Wp.pl that prosecutors are dealing with the Orlen case with “utmost seriousness.”

Obajtek said on X that responsibility for the Swiss unit’s transaction is with its current managers. Responding to a different dispute over tenders, he said that audits showed that various Orlen procurement processes were done legally and with oversight from the country’s security services. 

Michal Rog, a former Orlen management board member in charge of trade and logistics who worked with Obajtek, said in a statement sent to state PAP newswire on Friday that as of late February, the company had open contracts for diesel deliveries from Bahrain, crude and heating oil supplies from Venezuela as well as agreements for oil from South Sudan.

According to Rog, all the Swiss unit’s business partners were verified by the company and all were ready to fulfill their contracts. In its statement on Thursday, Orlen said that the suspect deliveries were scheduled to be completed by the end of January.

A former CEO of the Swiss unit, which was set up by Orlen in August 2022, was detained in Poland two months ago as part of an investigation into tax fraud from last decade unrelated to the oil company, according to the prosecutors office in Bydgoszcz, Poland. He was released on 250,000 zloty bail. Poland’s special services are also checking whether Orlen hasn’t breached Russian sanctions, Radio Zet reported, without citing anyone.

Since Obajtek’s departure, Orlen’s new management has announced a total of $3.8 billion in write-offs and said it will probably not pay any extra dividend as it continues to audit the firm’s finances.

“What could have a negative effect on the company is any new information that it broke embargos and faces a penalty, or that the Swiss unit’s troubles are a systemic issue,” mBank’s Kliszcz said. “On the other hand, a meticulous audit of the past helps some investors believe that the new management will tidy up procurement and investment policies, which could bring substantial savings.”

--With assistance from Konrad Krasuski.

(Updates with closing price, new details and comments from a former Orlen manager, starting in the second paragraph.)

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