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Mon 12 Sep 2011 11:07 AM

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Renaissance says $2.9m fraud loss tough to recover

Omani oil services firm uncovered evidence of fraud at overseas arm of its subsidiary Topaz

Renaissance says $2.9m fraud loss tough to recover
Shares of the company, which began falling prior to the July announcement, are down 37.8 percent year-to-date

Oman's Renaissance Services has completed an investigation into the misappropriation of $2.9 million at its Topaz unit and does not expect to recover any of the funds easily, the company said in a statement on Monday.

Renaissance added that the fraud was isolated at one foreign unit and did not find any other similar cases of wrongdoing in other parts of its business.

In a rare act of disclosure for a regional company, the oil services firm said last month that it had uncovered evidence of fraud at an overseas arm of wholly-owned subsidiary Topaz Energy and Marine, which had been on the cusp of a $500m London listing in March.

News of the misconduct sent shares tumbling as investors worried of widespread misconduct and criticised Renaissance's decision to delay disclosure of the fraud, which it uncovered in May, until its second quarter earnings report last month.

Shares of the company, which began falling prior to the July announcement, are down 37.8 percent year-to-date.

"We are confident this is an isolated case, in one foreign subsidiary, in one business unit, and there is no other similar case in any of the other businesses," the company said in a statement on the Oman bourse.

The company, widely held by fund managers in the region, said that the misappropriation of funds occurred over a period of six-and-a-half years and may not be recovered.

"We confirm the amount is fully provided in the accounts. As these sums were misappropriated over such a long period of six-and-a-half years, at this stage, we are assuming we shall not be able to easily recover any of these sums," said the statement.

Renaissance's chief executive told analysts and reporters in July that the financial misconduct began before Renaissance acquired Topaz in 2005 and was not uncovered during the original due diligence process.

Topaz's former chief executive Fazel Fazelbhoy resigned from the company in late May and was replaced by Renaissance chief executive Stephen Thomas. Thomas said Fazelbhoy's departure was not related to the discover of the fraud.

Dubai-based Topaz operates mainly in the Middle East, North Africa and Caspian Sea region, running a fleet of 100 offshore support vessels.

Shares of Renaissance were down 1.12 percent at 0622 GMT.

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