By Kosaku Narioka
Japan's Mitsubishi Corp. said a subsidiary has lost about $320 million on energy derivatives, after a rogue employee in Singapore entered into secret unauthorized trades and then lost money as crude prices fell.
Mitsubishi said on Friday it had quickly closed the positions, which it uncovered in August when the employee was absent from work. It said it fired the employee on Wednesday and filed a complaint with police in Singapore the following day.
"[Mitsubishi Corp.] recognizes the seriousness of this matter and shall be redoubling efforts throughout the entire MC Group to ensure that it does not happen again," it said.
The Japanese trading house said it was examining the potential impact on earnings for the current financial year from the losses at the unit, Petro-Diamond Singapore (Pte) Ltd.
The company said the employee, who was handling crude-oil trades with China, had disguised the derivatives trades as hedges, and manipulated data in the unit's risk-management system. Mitsubishi said the trader is a male Chinese national, but didn't disclose his name. It said his whereabouts were unknown.
Oil prices have been volatile this year, with benchmark Brent crude futures peaking above $75 a barrel in April, and falling below $60 by early August.
Petro-Diamond Singapore is a wholly-owned subsidiary of Mitsubishi Corp. The unit was founded in 1989 and had 48 employees as of July, according to a Mitsubishi spokesman.
The city was the venue for one of the most notorious rogue-trading scandals in history. In 1995, Singapore-based derivatives trader Nick Leeson brought down Barings PLC, Britain's oldest merchant bank, with unauthorized bets on the direction of the Tokyo stock market. In more recent years, similar rogue-trading episodes in Europe have caused big losses at Société Générale SA and UBS Group AG.
Mitsubishi's losses pale in comparison with those suffered by its rival, Sumitomo Corp., in a copper-trading scandal in the 1990s. Sumitomo blamed rogue trader Yasuo Hamanaka for $2.6 billion in losses, and Mr. Hamanaka was later found guilty in Tokyo of fraud and forgery.
With a market value of roughly $39 billion, according to Refinitiv, Mitsubishi is the largest of Japan's general trading companies. Its history dates to the 19th century, and its business interests range widely, including energy, metals, machinery and chemicals.
Mitsubishi and other Japanese trading companies play an outsize role in the country's economy, combining businesses in a way that is unusual for U.S. and European companies. Mitsubishi Corp., the core company of a conglomerate that was broken up after World War II by U.S. occupation authorities, is a big investor in oil and gas developments. It also owns a majority stake in one of Japan's largest convenience-store chains and a smaller stake in sister car maker Mitsubishi Motors Corp.
Write to Kosaku Narioka at email@example.com