An executive of Panalpina Airfreight, a subsidiary of the Basel-based global forwarding and logistics corporation Panalpina, was responsible for ? and systematically covered up ? losses amounting to CHF 33 million, generated over a period of 14 months. CEO Bruno Sidler took responsibility for the episode and immediately handed in his notice. The damage to the public image of the company, which has only been listed on the stock exchange since September last year, is certainly enormous.

Over a period of 14 months a long-serving executive of Panalpina?s airfreight subsidiary Panalpina Airfreight Management systematically covered up operative losses of CHF 33 million which he had caused himself ? a fact which went completely unnoticed by both Panalpina?s internal and external auditors. Thus the company?s new year was ushered in by an incident which the managers of the well-established Swiss corporation could have done without ? as could its investors, for whom the news must have triggered unease.

The manipulated accounts at Panalpina were uncovered in mid-December last year by the Panalpina management in charge and were investigated internally ? as well as externally with the company?s auditors PricewaterhouseCoopers (PWC) ? in order to establish the total amount of the loss. They affect one of the company?s core divisions. Airfreight contributed around half of the total turnover of CHF 6.1 billion in the financial year 2004. Chief executive Bruno Sidler took responsibility for his employee?s mistakes and ? after 26 years of company service ? left the corporation with immediate effect. Panalpina chairman of the board Gerhard Fischer has taken ad interim charge of Sidler?s tasks. Fischer made it perfectly clear that Sidler was not involved in the fraud.

The leading employee, who was in charge of trans-Atlantic and trans-Pacific routes in the airfreight division, gambled and lost comprehensively in the management of airfreight capacities, which he chartered for Panalpina between 2004 and 2005. According to Panalpina the guilty executive had rented in too much freight capacity, which he was then not able to sell to other corporate divisions, as the initial purchase price had been too high. Subsequently the man, who had served the company for twenty years, circumvented the supervisory bodies and wrongly booked invoices or simply did not book them at all, instead of informing his superiors of his mismanagement. Panalpina stated very clearly that the guilty executive was not in any way motivated by personal financial gain. Panalpina media spokesman Martin Spohn said, however, that the employee ?deliberately and purposefully? evaded internal checks. This leaves the question open of how it was possible that the loss was not registered at all for 14 months either by external auditor PWC or by the lead manager of Panalpina?s initial public offering, the bank Credit Suisse First Boston.

What of the CEO?s resignation?
The loss resulting from the manipulation will have a negative impact of around CHF 22 million on Panalpina?s corporate results for 2005, and also affect financial year 2004 with a loss of CHF 11 million. The corporation is nevertheless banking on overall profits for the business year 2005 being higher than the previous year?s profit of CHF 111 million.

According to a report published in the Swiss Sunday newspaper the ?SonntagsZeitung?, it was not former Panalpina CEO Bruno Sidler?s ?own wish? to leave the freight forwarding and logistics corporation ?immediately?, as Panalpina had stated in its only official announcement on this issue. After Panalpina informed the public of the accounts manipulation, Sidler had in fact taken overall responsibility for the affair and offered the Panalpina board his resignation. According to the ?SonntagsZeitung? Gerhard Fischer, the chairman of Panalpina?s board, had then accepted Sidler?s resignation. When Sidler was asked whether he would have stayed on as CEO if the board had expressed its confidence in him, Sidler replied that he ?presumably would have said yes?. According to insiders and people familiar with the Panalpina leadership there had reportedly been regular ?tension and contested areas of authority? between 72-year-old Fischer and 49-year-old Sidler. When telephoned by the ITJ, Sidler declined to comment thereon.

The sudden and surprising departure of Sidler, corporate head since 1998, met with extensive disapproval and was regretted by analysts and experts ? who felt that the resignation of the CFO instead of that of the CEO would have been more appropriate. Sidler is accorded a high degree of expertise and credibility. It is more the loss of confidence amongst investors than the financial loss that is damaging, according to Chris Burger, an analyst with Helvea. The shares of Panalpina?s competitor Kuehne + Nagel should be preferred. Either way, the loss of confidence in Panalpina is immense.

Source: International Transport Journal / Robert Altermatt

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