Auditor Ernst & Young Faces Fraud Allegations Over Brooge Energy’s Fabricated Revenues
A group of shareholders has taken legal action against Ernst & Young, accusing the auditor of failing to detect fabricated revenues in Brooge Energy’s annual reports for two consecutive years. The lawsuit, filed in the United States District Court in the Southern District of New York, alleges that Ernst & Young’s audit of the oil storage firm was fraudulent.
The Plaintiffs’ Claims
The plaintiffs, Stephen Cannon, Bryant Edwards, and Neil Richardson, were investors in a special purpose acquisition company (SPAC) that acquired Brooge in 2019. They claim that Brooge fabricated tens of millions of dollars in revenue, and that Ernst & Young’s audit failed to identify these discrepancies. The lawsuit states that “the fundamental financial picture presented by Brooge to plaintiffs was a fraud,” with fabricated revenues ranging from 30% to 80% of the company’s total revenue between 2018 and 2020.
Ernst & Young’s Response
Ernst & Young has declined to comment on the legal proceedings, citing its policy of not discussing ongoing litigation. Brooge Energy has also failed to respond to requests for comment.
Previous Settlement with the SEC
This is not the first time Brooge Energy has faced allegations of fraud. In 2023, the company agreed to a settlement with the U.S. Securities and Exchange Commission (SEC) over fraud charges, paying a $5 million penalty.
Brooge Energy’s Background
Brooge Energy, an oil-storage leasing company based in Fujairah, United Arab Emirates, was established in 2013. The company counts Mohammed bin Khalifa, the eldest son of the previous president of the UAE, among its shareholders. Brooge’s shares have experienced a significant decline, closing at $1.585 on Tuesday, down from a peak of $12.99 in March 2020.
Recent Developments
In a separate development, the board of Dubai-listed shipping firm Gulf Navigation has approved an acquisition of companies and assets owned by Brooge, including a capital increase. Additionally, one of Brooge’s business partners, Coral Energy Pte. Ltd., was rebranded as 2Rivers and sanctioned by Britain on Tuesday for allegedly playing a key role in the Russian oil trade.
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