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Bank of China Ltd. has sued BP Plc in Singapore for its alleged role in making oil deals with a collapsed trader Hin Leong, in the latest effort by a creditor to recoup losses after one of the biggest business scandals in decades.
The Chinese bank requested that BP repay $ 125.7 million that it withdrew from the lender earlier this year based on the sales of diesel shipments to Hin Leong, according to documents provided by Singapore’s Supreme Court. The agreements were part of a “fictitious purchase scheme conspiracy ”to maintain Hin Leong’s liquidity as no actual transactions took place, the bank said.
The lender also demanded $ 187.2 million from Hin Leong Trading Pte founder Lim Oon Kuin and his two sons, the documents showed. The lump sum includes BP-related agreements and certain other overdue payments on short-term loans or letters of credit.
BP vigorously refutes the Bank of China accusations and will defend its position, the company said in a statement, without elaborating. Bank of China and the Lim family have not responded to emails seeking comment. Lim has previously denied falsifying documents in a case brought by HSBC Holdings Plc, saying they were issued “in error.”
Singapore, a major oil trading hub, was hit by defaults and suspected fraud this year, hitting the lenders who finance the opaque world of commodity trading in the city-state. While the main players were mid-sized commercial companies like Hin Leong, some leading global companies have also been caught up in the debacle.
It is not the only blow the Bank of China has received this year from oil. At the beginning of this year It agreed to reimburse some investors after one of its oil-related trading products collapsed amid a drop in crude prices.
Hin Leong’s creditors, which also include HSBC and Singapore DBS Group Holdings Ltd., is struggling to recover funds from the insolvent company, which has an outstanding debt of $ 3.5 billion. The Bank of China case, filed in late November, came after HSBC and the merchant’s court-appointed managers, PricewaterhouseCoopers, began take legal action against the Lim family.
Simultaneous Sale
The disputed diesel deals were carried out in the first two months of this year. BP withdrew a total of $ 125.7 million in three letters of credit in early February from the Bank of China, the court document showed. Hin Leong bought a combined 1.5 million barrels of diesel from BP in the deals and the major oil company was able to produce documents to prove the authenticity of the exchanges.
Hin Leong court managers subsequently informed the bank that these exchanges were fabrications backed by nonexistent charges financed by at least 27 letters of credit, including all three from the Bank of China. The lawsuit alleges that Hin Leong was able to maintain a semblance of financial stability and liquidity by selling and repurchasing counterfeit shipments backed by letters of credit worth $ 624 million.
“HLT manufactured documents on a large scale,” the Bank of China said in its lawsuit. “The forged documents allowed HLT to trick the banks into granting it financing and also acted as supporting documentation for profits or fictitious profits.”
Bank of China quoted the court-appointed manager as saying that the trading company sold diesel to BP, which the oil company later sold to Hin Leong at a higher price. Given the gap between the selling price and the purchase prices and the short period of time between the deals, it appears that the transactions were intended solely to provide Hin Leong with liquidity, the bank said, citing designated managers.
Bank of China claimed that it was not aware of the “simultaneous sale” and buyback transactions, claiming that the documents were falsified to “induce” the bank to make payments. He would not have made payments if he had known the statements were false, he said.
