LEKOIL Should Have Detected Fraud, Report Says

An independent committee established by the board of LEKOI, has concluded, among other things, that the Fraud perpetrated against the company “should have been capable of being detected by internal or external parties engaged to advise” on the transaction that led to the company being misled about a loan purportedly granted by the Qatar Investment Authority (QIA).

LEKOIL’s shares on the AIM section of the London Stock Exchange went on a nose dive when the company disclosed that a “loan agreement with the Qatar Investment Authority (QIA)” announced by the Company on 2, January 2020 was indeed false.

Following the discovery that the Facility Agreement had not been entered into with the QIA, but instead with certain individuals falsely purporting to represent the QIA, the Board established an independent committee of the Board to investigate the origination and execution of the Facility Agreement and steps which might reasonably be taken to retrieve monies paid in association with the Transaction.

LEKOIL will review her internal corporate governance guidelines following the results of the investigation into the origination and execution of the loan agreement earlier announced by the Company on 2, January 2020, purportedly with the Qatar Investment Authority (QIA).The Committee was supported in its review by Kroll Associates UK Limited (“Kroll”) acting as third-party forensic investigators. Advice was taken from Herbert Smith Freehills LLP, legal counsel engaged at the time of the Investigation, on discreet issues arising from Kroll’s work.

The results of the Committee’s Investigation:

  • The Facility Agreement was a part of a fraud perpetrated against the Company. The Facility Agreement, and the sums to be received by LEKOIL pursuant to it, are not legally binding.
  • There is no evidence of any complicity of any Lekoil Director or employee in the fraud.
  • The Chief Executive Officer (“CEO”) led the interaction and negotiations with the individuals falsely purporting to represent the QIA, on behalf of the Company, prior to ultimate approval being given by the Board to enter into the Facility Agreement.
  • The Company has a legal claim to recover the $450,000 paid to Seawave Invest Ltd and its principals, in its capacity as introducer of those falsely purporting to represent the QIA.
  • The Board only approved the execution of the Facility Agreement after a third-party global risk consultant engaged to undertake the due diligence investigation on Seawave, provided a report, based on public record search, that did not identify any “red flags” on Seawave or its principals.
  • The fraud, whilst relatively elaborate and sophisticated, should have been capable of being detected by parties engaged to advise on the Facility Agreement, internally or externally, prior to its execution.
  • The due diligence undertaken by the Company, including the above mentioned third-party due diligence report, prior to the signature of the Facility Agreement proved to be inadequate.

 



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