(Bloomberg) — Trafigura Group’s $1.1 billion loss in a suspected multi-year fraud in Mongolia was a “humbling experience,” the trading giant’s new chief said in his first public comments on the scandal.
Richard Holtum, who took over as Trafigura chief executive officer in January, said that he was encouraging the company’s traders to speak up if they saw things that did not make sense.
“I think had our people been empowered to ask the question why, maybe we’d have caught this much earlier,” he said at the FT Commodities Global Summit in Lausanne, Switzerland.
Trafigura said in October that it faced a loss of $1.1 billion in Mongolia as a result of manipulation of what it described as data and documents and deliberate concealment of overdue debts by its own employees. It was the second highly embarrassing loss to hit the trading house in as many years, after it revealed a loss of over $500 million in an alleged nickel fraud the previous year.
Holtum said that Trafigura had missed the giant losses in the tiny oil market of Mongolia because its office in the country was isolated from the rest of the company, partly as the Covid-19 pandemic prevented executives from traveling there. There was also a “language issue,” with a limited number of Mongolian speakers in Trafigura’s wider staff, he said.
“That in no way is to excuse what happened, but that is essentially how it happened,” he said.
The CEO said he could not guarantee that Trafigura would not be a victim of fraud again in the future, but that the company had upgraded its “plumbing” to try to prevent similar issues.
The loss has been “an enormous catalyst for change internally, because people felt that pain in their pockets and realized and knew that this could not continue,” he said.
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