OW Bunker Collapse: Tankoil, Petrotec CEO Dennis Tan Implicated in Separate Alleged Singapore Bunker Scam

The allegations were made in court documents filed in February 2015

Legal action taken in Singapore by a former bunker player against Dennis Tan, owner of now-bankrupt Tankoil Marine Services Pte. Ltd. (Tankoil) and other related entities implicated in the collapse of OW Bunker, alleges that Tan was involved in another Singapore bunker related scam prior to his involvement with OW Bunker subsidiary Dynamic Oil Trading (DOT).

Ship & Bunker understands that legal agreements currently in place between certain parties related to the action prevent them from publicly discussing the matter, and as such Ship & Bunker has taken the decision to refer to the former Singapore bunker supplier in question that took the legal action as the Former Singapore Bunker Supplier (FSBS).

In court documents filed in February 2015, which have been seen by Ship & Bunker, FSBS allege that Dennis Tan and his company Petrotec Pte Ltd (Petrotec), which OW Bunker trustee Soren Halling-Overgaard has recently described as being essentially the same entity as Tankoil, managed to fraudulently build up a debt of over $13 million through a seemingly elaborate ruse involving bunker payments.

In its Statement of Claim, which named both Petrotec and Dennis Tan as defendants, FSBS describes how from September 2011 to around August 2012 Petrotec and FSBS had traded bunker fuel with each other in Singapore.

"Rather than settling each transaction individually, the parties agreed to net off their respective delivered sale and purchase positions at the end of each calendar month based on physical deliveries to each other in that month," FSBS stated.

Credit

One of FSBS's employees had initially granted Petrotec a US$2 million limit in respect of any balance due under a Net-Off Statement, a limit FSBS says was reduced to $1 million on or around April 2012.

This credit was given despite the fact that, as FSBS stated, the employee had "no previous dealings" with either Petrotec or Tan, and was aware that Petrotec "had no prior experience of bunker trading."

FSBS goes on to allege that despite all parties being aware of those credit limits, Tan, Petrotec, and the FSBS employee manipulated the particulars of the net-off payments such that a debt of $13.1 million had amassed in the 12 months to August 2012.

"The Plaintiff's Actual Exposure ought not to have reached such an amount and this arose out of the actions taken by [the FSBS employee] which were instigated and/or requested by [Petrotec] and/or [Dennis Tan]," said FSBS.

Payment Manipulation & Payback

As a specific example of the alleged manipulation, FSBS said that for November 2011's delivers - i.e. the third month of FSBS's dealings with Tan and Petrotec - no Net-Off Statement was raised by FSBS at all, despite its exposure actually being almost $6.5 million.

As a result, for that month FSBS instead ended up paying Petrotec $2.8 million for the bunkers it had purchased and were delivered by Petrotec.

Having allegedly uncovered the deception in 2012, FSBS describes that it then entered into an agreement with Petrotec to repay the outstanding amount owed via the unauthorized credit.

Under the agreement, Petrotec was to pay FSBS $500,000 by November 15, 2012, and then commencing January 2013 pay them $500,000 in regular monthly installments until the debt was paid off.

In addition, while the debt was still outstanding Petrotec would also have to deliver "a minimum of 1,500 – 2,000 MTs fuel oil product each calendar month to [FSBS] commencing October 2012."

FSBS goes on to state that Petrotec "has delivered some fuel oil products to the Plaintiff but since around 18 October 2014 has failed and/or refused and/or neglected to make further deliveries to the Plaintiff."

At that point FSBS said the net balance owing to it had been reduced to a little over $1.5 million, and, taking into account interest owed, was ultimately seeking through its legal action a total of almost $2.5 million plus ongoing interest.

On March 6, 2015, Petrotec / Tan filed its defense along with a counter claim "for loss and damage to be assessed which it has suffered by reason of the Plaintiff's Misrepresentations."

On June 25, 2015 the claims by both parties were withdrawn with no order as to costs.

Dynamic Oil Trading

While the working relationship between FSBS and Petrotec was not in any way an unusual mechanism in itself, the ability for Tan's company to be extended a seemingly unauthorized level of high credit bares a striking familiarity with the recently revealed workings of Tan and the now defunct DOT.

In DOT's case, Tan's Tankoil entity appears to have been extended credit of $156 million as at November 7, 2014, according to an investigation by OW Bunker trustee Soren Halling-Overgaard.

In November 2014 OW Bunker filed for bankruptcy, citing an alleged $125 fraud at DOT as one of the key contributing factors for its decline

The bunker tanker Sophie 9, understood to have been the vessel heavily used by the Tan bunker entities, was arrested in June 2015, and in October was put up for auction with $1 million of fuel on-board.

In August 2015 Tankoil was declared bankrupt.