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Greenpeace loses millions on bad currency bet

Greenpeace’s environmental crusades often draw international headlines and spark controversy. Now the organization is coming under scrutiny not for its activism but for its financial mismanagement.

Efrem Lukatsky/AP

Greenpeace's environmental crusades often draw international headlines and spark controversy. Now the organization is coming under scrutiny not for its activism but for its financial mismanagement.

The Amsterdam-based not-for-profit revealed on Monday that it lost €3.8-million ($5.6-million), after a well-meaning employee entered into a contract intended to minimize foreign currency exchange costs, which instead turned into a big loss.

The employee worked in Greenpeace's International Finance Unit, a team of about 10 people that handles everything from payroll to management of assets such as ships and buildings . Greenpeace International said that last year the staffer used futures currency exchange instruments to take a position the euro wouldn't rise in value against other currencies. The position, which had not been authorized, became unprofitable as the euro rose in the latter part of 2013.

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"What the individual was trying to do, but sadly failed at, was minimize the risk. It wasn't about maximizing profit … this wasn't gaming the market," said Mike Townsley, head of communications for Greenpeace.

The rogue employee has left Greenpeace, but will be replaced.

The organization isn't trying to "make money with money," Mr. Townsley said, but he added that Greenpeace needs to limit the cost of big foreign currency transfers between its global offices in order to fund global campaigns against climate change, deforestation and arctic exploration.

The loss is being publicized ahead of Greenpeace's 2013 annual report, which will show the organization is running a deficit of €6.8-million, including the mishandled currency trade. The group's global budget last year was €300-million.

The loss is a blow to the Greenpeace brand. The organization took to social media to connect with devotees and apologize for the process failures that led to the loss. Since Greenpeace doesn't accept donations from governments or companies in an effort to maintain its integrity, contributions from individual contributors are paramount.

Greenpeace has pledged that the loss will have no impact on its front-line campaigns. The group will absorb the shortfall over time by delaying equipment purchases and deferring other unnecessary investments.

"If Greenpeace were campaigning against a company and we found this kind of thing, what would we want them to do?" Mr. Townsley said. "We'd want them to be open, honest and to take action. We hope that by walking the talk, with transparency and response, that will give our supporters confidence and maintain their trust in our organization. It's a question of integrity."

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Greenpeace believes that if the proper checks had been done on the employee who acted outside of his authority, the issue could have been avoided. An independent audit to improve internal procedures has been commissioned.

While Greenpeace says it will stop using currency contracts for now, and in the future such transactions will require advice from specialists and approval from the finance committee of the organization's board of directors. "We recognize that donors and supporters may be a little shocked and disappointed that we made this loss," Mr. Townsley said.

Other global not-for-profit groups have different ways of investing donors' money.

The Canadian Red Cross Society (CRCS) said its international operations expose the charity to market risks from fluctuating interest rates and foreign exchange, but the management team doesn't see this risk as being significant, and does not hedge or speculate on currency.

CRCS does invest donor funds, but those investments are restricted to short-term securities issued or guaranteed by federal and provincial governments and their agencies. The organization also has an unrestricted capital reserve pool, which invests in a portfolio of bonds and equity securities from Canada and abroad.

World Vision's regional offices use a global internal treasury team to manage currency, cash and investments "to mitigate risk and enhance returns around the globe," said Kathryn Powers, global treasurer of World Vision.

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