Polish oil giant Orlen faces scrutiny over Swiss subsidiary's alleged sanctions violations

Law enforcement authorities in Poland are investigating the activities of Orlen Trading Switzerland, a Swiss trading company from the PKN Orlen group, reported the Polish Radio Zet.

OTS paid 1.6 billion zlotys (about $400 million) to an unverified office that turned out to be a fraud, media reported on Thursday. In Orlen's reporting, it was veiledly called a "one-time write-off" from the oil deal signed by the Swiss subsidiary.

"Due to the lack of supply of crude oil and refined products within the terms specified by certain agreements, the subsidiary company requested the return of the advance payment. The advance payment was not returned within the established terms, the subsidiary company assessed the possibility of debt recovery as unlikely," Orlen's explanation reads.

The OTS director was detained in Poland when he flew from Switzerland to meet with Orlen's new management, but was released on a 250,000 zloty ($62,556) bond.

While the arrest is related to an investigation into years-old VAT schemes unrelated to Orlen, the case may have a much broader international context.

A few weeks ago, Polish Prime Minister Donald Tusk hinted that Orlen could have problems because of its Swiss subsidiary. "There are well-founded fears that due to the activities of this company, Poland will face very serious problems," he said.

According to the Radio Zet source, Orlen Trading Switzerland might have violated the international embargo on oil imports from Iran or Russia.

Orlen denies violating any sanctions.

On April 11, Ireneusz Fonfara, who was previously a member of the supervisory board of Ukrnafta, became the chairman of the board of Orlen.

Orlen had been without a board chairman since February after the dismissal of Daniel Obajtek.