Brooge Energy investors file fraud complaint against Ernst & Young

12:09 pm Wednesday, December 18th, 2024

By Anna Hirtenstein

(Reuters) -Some shareholders in Brooge Energy have filed a fraud complaint in the United States against Ernst & Young, alleging the auditor failed to identify fabricated revenues in two years of the oil storage firm’s annual reports.

The plaintiffs are Stephen Cannon, Bryant Edwards and Neil Richardson, who were investors in a so-called special purpose acquisition company (SPAC) that bought Brooge in 2019, according to the filing with the United States District Court in the Southern District of New York.

The plaintiffs allege Brooge fabricated revenues amounting to tens of millions of dollars and that Ernst & Young’s audit of the company was fraudulent.

Ernst & Young said it is unable to comment on legal proceedings. Brooge also did not respond to an email seeking comment.

Brooge agreed to a settlement with the U.S. Securities and Exchange Commission in 2023 over fraud charges, which involved paying a $5 million penalty.

“The fundamental financial picture presented by Brooge to plaintiffs was a fraud: in fact, Brooge fabricated between 30% and 80% of its 2018, 2019 and 2020 revenues,” the filing said.

“Brooge could not have effectuated this scheme without critical support from Ernst & Young.”

Brooge, an oil-storage leasing company based in the United Arab Emirates’ Fujairah, was set up in 2013 and counts Mohammed bin Khalifa, the eldest son of the previous president of the UAE, among its shareholders.

Brooge’s shares closed at $1.585 on Tuesday, down from a peak of $12.99 in March 2020.

The board of Dubai-listed shipping firm Gulf Navigation in September approved an acquisition of companies and assets owned by Brooge, including a capital increase, according to UAE state news agency WAM.

One of Brooge’s lines of business was with Coral Energy Pte. Ltd., according to the filing. Coral was later rebranded as 2Rivers and was sanctioned by Britain on Tuesday for allegedly playing a key role in the Russian oil trade.

(Reporting by Anna HirtensteinEditing by Mark Potter)