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Hascol Petroleum; a fraudulent scam

The Hascol Petroleum narrative illustrates a firm that rose to lofty heights only to face a dramatic fall. At its peak between 2010 to 2018, Hascol’s revenue increased by 52.7% from Rs7.9 billion to Rs234 billion. But fast forward to the present day, everything has changed. At the end of a year marked by turmoil and instability, the company’s CEO was shifted twice and the CFOs have quit several times. For the fiscal year ended on 30th December, 2019, the corporation lost Rs26 billion and has managed to lose Rs20.9 billion in the third quarter of 2020, according to its recently issued report. Hascol is burdened by a massive debt load of Rs58 billion. The corporation owes money to 14 banks that are now forming a coalition to try reorganizing the company.

Foundation of Hascol and its Rise

Hascol was founded as a private limited business in 2001. In 2005, the government granted the company an oil marketing license, allowing it to buy, store, and distribute the petroleum products such as high-speed diesel, gasoline, fuel oil, and lubricant. In 2014, the Karachi Stock Exchange listed Hascol as public company.

The company has continuously managed to boost revenues during the duration of its existence and rose to become largest oil marketing company (OMC) in Pakistan. From 2009 to 2018, it increased its revenue from Rs10.3 billion to Rs274 billion with only minor fall in 2015. However, the company’s revenues increased by an incredible 52.7% every year on average between 2010 to 2018. It has almost maintained positive net incomes for the majority of its existence, given its cost of sales has also been relatively high. It lost Rs275 million in 2010 and Rs123 million in 2018, but had a net income of more than Rs2 billion in the three years before 2018.

Downfall in 2019

In the year 2015, Hascol had an exceptional year when its net cash flow was Rs22 billion but it came down to negative Rs12 billion in 2018 and negative Rs16 billion in 2019. Company’s revenue fell from Rs274 billion in 2018 to Rs180 billion in 2019, while net income dropped from Rs123 million in 2018 to Rs26 billion in 2019.

Fast forward to July 2021, the Senate’s Standing Committee on Petroleum revealed that Hascol’s management had made Rs7.5 billion in bogus purchase orders, and that the company’s CEO had defrauded the company of Rs8 billion in oil. The company has committed fraud of over Rs75 billion. This massive corruption has resulted in the loss of investors’ tens of billions of rupees. On the Committee’s request, relevant investigative bodies are to be made to thoroughly investigate the case.

What went wrong

#1 Disregard of Background Screening

Nowadays, businesses face various significant issues one of which is employee fraud. The collective integrity of a company is determined by the individual integrity of its employees. In Hascol’s case, negligent hiring on the authority’s hands resulted in growing malpractices in the company. Employees on executive level were involved in smuggling of diesel products. In 2015, an oil tanker loaded with 60,000 litres of diesel was seized by Anti-Smuggling Organization (ASO) Hyderabad. Upon inquiry, the driver provided documents which revealed that the tanker belonged to Hascol Private Limited.

Hascol’s top management is allegedly accused of doing corruption of multi billion rupees. This alarming drop in ethical standards has major ramifications for all businesses. The petroleum company once rose to become the second largest oil marketing company in Pakistan. Companies with this magnitude must have an efficient and functional fraud prevention strategy. With effective measures and proper pre-employment as well as continuous background screening of its workforce, Hascol could have avoided onboarding of dubious employees which could have resulted in somewhat different circumstances.

#2 Lack of Due Diligence

It is reported that investors of Hascol Petroleum have lost great deal of money as a consequence of fraudulent activities of the company’s executives. Although the loss could have been mitigated if proper and timely measures were taken at the investors’ end.

Hascol has been allegedly maintaining multiple sets of books in attempt to hide all the wrongdoings. Moreover, the repeated resignations of company’s top level management and most imperatively of its auditors were not any hidden matter. With comprehensive due diligence, the investors could have had better understanding of the associated risks ultimately reducing chances of the financial loss to a great extent.


The illegal operations and poor accounting practices at Hascol led to the failure and downfall of the business. The case signifies the importance of taking timely preventive measures to identify and alleviate red flags before they prevail to dismantle the business. However, the approach is often underestimated because executives want to reach a settlement as soon as possible and overlook some essential variables that can be essential in obtaining a clear understanding of the target and therefore increasing the chance of successful deal in future.

Employee ethics are an evident key to preventing fraud in any company which is why companies must take considerable measure to ensure that the individuals they hire are the proper fit for the role they are going to be held responsible for.