A director at a collapsed Singapore fuel trader was “asleep at the wheel” when he failed to stop employees fraudulently obtaining trade finance facilities from Société Générale and Maybank, court documents show.

Earlier this year, the Singapore High Court ruled that Goh Jin Hian, a former executive of Inter-Pacific Petroleum (IPP) and the son of a former Singaporean Prime Minister, was liable to pay compensation worth over US$146mn to the trader’s liquidators.

The Singapore courts have in the past week published the judgment decision in full, revealing the case brought by IPP’s liquidators against former director Goh and his role in the oil trader’s eventual demise.

As shown in the court judgment, IPP’s lawyers argued Goh had failed to identify a fraudulent cargo trading scheme which left Société Générale and Maybank on the hook for nearly US$90mn and US$60mn respectively in 2019.

“IPP’s case, in summary, was that Dr Goh had been asleep at the wheel as a director and failed to take the steps required of him under the law to apprise himself of IPP’s affairs,” Justice Aedit Abdullah found.

“Dr Goh’s misfeasance – or, perhaps more appropriately in this context, nonfeasance – resulted in IPP being used as a vehicle of fraud by its other directors and officers. This fraud entailed IPP borrowing large sums from banks on the pretence of financing commercial transactions which were shams.”

As shown in the Singapore judgment, IPP’s liquidators sought compensation from Goh, arguing he was personally liable to repay the bank loans.

Liquidators argued Goh had ignored red flags indicating possible fraud and had no knowledge IPP’s cargo trading business existed, despite being director for eight years.   

Ultimately, the judge “substantially” sided with the plaintiffs, ruling Goh had breached his duty of skill, care and diligence, as well as his obligation to regard the interest of IPP’s creditors, and that he should pay US$146.05mn in compensation.

Goh has appealed the decision.

 

The fraud discovery

Incorporated in 2011, IPP had for years operated as both a cargo and a bunker trader in Singapore.

Under its cargo business, IPP would purchase fuel oil from suppliers and on-sell to firms including Mercuria Energy, Minerva Bunkers and Sinochem International.

“These transactions were usually entered into on a back-to-back basis, meaning to say that the fuel oil purchased by IPP would be delivered directly from IPP’s supplier to IPP’s customer… without IPP taking intermediate physical delivery of the cargo itself,” the Singapore court documents say.

But in mid-2019, the firm’s bunker license was suspended by Singapore’s authorities when it was discovered during enforcement checks that a piece of equipment on one of IPP’s chartered ships – a mass flow meter – had been tampered with.

This triggered a chain of events that saw a fellow director and majority shareholder – Cheung Lai Na, also known as Zoe – place the company in judicial management in August 2019. At this point, Goh tendered his resignation and stepped down from his role as director.

Appointed third-party judicial managers soon discovered that while the bunker business was legitimate, many of IPP’s “back-to-back” cargo transactions were likely based on non-existent trades.

IPP had large volumes of outstanding receivables that were – according to its accounts – due and owing from cargo customers, the court judgment shows. Mercuria was alleged to owe over US$100mn.

But when the judicial managers emailed these supposed customers in September 2019, Mercuria, Minerva, Sinochem and Petco denied the existence of the “vast majority” of the cargo trading transactions.

“This led the [judicial managers] to the conclusion that the sales contracts with these customers, as well as the supply contracts purportedly entered into by IPP with suppliers in order to fulfil these sales contracts, were sham and non-existent transactions,” the court judgment reads.

This was a problem for two major lenders – Société Générale and Maybank – which had provided trade finance to the embattled trader.

In June and July that year – just weeks before the firm was placed into judicial management – IPP had made drawdowns worth US$146mn under a cargo trade finance facility from the two banks.

“This fraud entailed IPP borrowing large sums from banks on the pretence of financing commercial transactions which were shams,” Justice Abdullah notes in the July 11 judgment.

Société Générale separately approved trade finance lending worth over US$10mn for the firm’s bunker activity. However, the judge ruled Goh was not liable to pay these fees as the business was legitimate.

Société Générale and Maybank were not immediately available for comment about the status of the IPP debt.