Chang Zhenming expected to be new Citic Pacific chairman as team probes forex losses
Eric Ng 8 April 2009
Citic Group is expected to remove Larry Yung Chi-kin as chairman of Citic Pacific in the next few days and has sent a team to further investigate the company’s huge foreign exchange losses and other possible irregularities, sources said.
The Beijing-backed conglomerate is expected to replace Mr. Yung with the group’s deputy chairman, Chang Zhenming, and appoint several group senior managers to run various Citic Pacific businesses.
Zhang Jijing, a director and assistant president of Citic Group, will assume a lead decision-making role in the daily operations of the Hong Kong-listed company. He was appointed a non-executive director of Citic Pacific on March 25.
“Citic Pacific is expected to announce Mr. Yung’s resignation within days and the appointment of the managers from Beijing will be announced at the same time,” a source said.
Citic Group has no immediate plans to restructure Citic Pacific’s business because Beijing wants to see if there are other irregularities beyond the wrong-way currency bets.
“Citic Group needed to send a team of people to Hong Kong because it wanted to examine all of Citic’s businesses in Hong Kong,” another source said. “The exercise is not only to punish Larry Yung, and it is not just about money - many of Citic’s investments have strategic implications [for the nation].”
Spokesmen for Citic Pacific and Citic Group declined to comment.
Trading of Citic Pacific shares remained suspended yesterday.
Last Friday, Citic Pacific said the Commercial Crime Bureau had executed a search warrant related to an investigation of alleged offences, including false statements by directors and/or conspiracy to defraud.
On October 20 last year, the company disclosed it could lose up to HK$15.5 billion from “unauthorised” trading in high-risk, complex futures contracts on the Australian dollar, euro and yuan. The value of the Australian dollar in particular had fallen against the greenback amid the global financial crisis.
The revelation came six weeks after the board said it first learned about the currency bets, a delay that drew fire from critics who condemned the company’s poor corporate governance.
The Securities and Futures Commission launched a probe into the currency bets, which sources said was focused on whether Citic Pacific had intentionally delayed disclosure.
Citic Pacific said it had intended to use the contracts to hedge its huge capital outlays on its iron-ore mining project in Australia.
The company said deputy managing director Leslie Chang Li-hsien and executive director Chau Chi-yin had resigned to take responsibility for failing to obtain approval before the bets.
At the time, the company said no other directors were involved, but an internal document later showed that executive director Vernon Moore had signed some of the contracts. A spokesman said Mr. Moore merely confirmed the contracts and had no decision-making power over them.
The board demoted Mr. Yung’s daughter, Frances Yung Ming-fong, and reduced her salary for her involvement and her failure to inform the board, a punishment some observers said was insufficient and showed favouritism.
Although the board said it learned about the currency bets on September 7, it stated five days later it was unaware of “any material adverse change” in its financial or trading position since the end of 2007.
An analyst at an American brokerage believed Beijing was unlikely to uproot too many Citic Pacific managers at a time, even if it forced Mr. Yung out.
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Citic Group may replace Larry Yung
Chang Zhenming expected to be new Citic Pacific chairman as team probes forex losses
Eric Ng
8 April 2009
Citic Group is expected to remove Larry Yung Chi-kin as chairman of Citic Pacific in the next few days and has sent a team to further investigate the company’s huge foreign exchange losses and other possible irregularities, sources said.
The Beijing-backed conglomerate is expected to replace Mr. Yung with the group’s deputy chairman, Chang Zhenming, and appoint several group senior managers to run various Citic Pacific businesses.
Zhang Jijing, a director and assistant president of Citic Group, will assume a lead decision-making role in the daily operations of the Hong Kong-listed company. He was appointed a non-executive director of Citic Pacific on March 25.
“Citic Pacific is expected to announce Mr. Yung’s resignation within days and the appointment of the managers from Beijing will be announced at the same time,” a source said.
Citic Group has no immediate plans to restructure Citic Pacific’s business because Beijing wants to see if there are other irregularities beyond the wrong-way currency bets.
“Citic Group needed to send a team of people to Hong Kong because it wanted to examine all of Citic’s businesses in Hong Kong,” another source said. “The exercise is not only to punish Larry Yung, and it is not just about money - many of Citic’s investments have strategic implications [for the nation].”
Spokesmen for Citic Pacific and Citic Group declined to comment.
Trading of Citic Pacific shares remained suspended yesterday.
Last Friday, Citic Pacific said the Commercial Crime Bureau had executed a search warrant related to an investigation of alleged offences, including false statements by directors and/or conspiracy to defraud.
On October 20 last year, the company disclosed it could lose up to HK$15.5 billion from “unauthorised” trading in high-risk, complex futures contracts on the Australian dollar, euro and yuan. The value of the Australian dollar in particular had fallen against the greenback amid the global financial crisis.
The revelation came six weeks after the board said it first learned about the currency bets, a delay that drew fire from critics who condemned the company’s poor corporate governance.
The Securities and Futures Commission launched a probe into the currency bets, which sources said was focused on whether Citic Pacific had intentionally delayed disclosure.
Citic Pacific said it had intended to use the contracts to hedge its huge capital outlays on its iron-ore mining project in Australia.
The company said deputy managing director Leslie Chang Li-hsien and executive director Chau Chi-yin had resigned to take responsibility for failing to obtain approval before the bets.
At the time, the company said no other directors were involved, but an internal document later showed that executive director Vernon Moore had signed some of the contracts. A spokesman said Mr. Moore merely confirmed the contracts and had no decision-making power over them.
The board demoted Mr. Yung’s daughter, Frances Yung Ming-fong, and reduced her salary for her involvement and her failure to inform the board, a punishment some observers said was insufficient and showed favouritism.
Although the board said it learned about the currency bets on September 7, it stated five days later it was unaware of “any material adverse change” in its financial or trading position since the end of 2007.
An analyst at an American brokerage believed Beijing was unlikely to uproot too many Citic Pacific managers at a time, even if it forced Mr. Yung out.
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