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Sunday, 4 October 2009
Feisty exchange at insider trading court case
The court hearing on the Monetary Authority of Singapore’s case against a former employee of WBL Corp resumed yesterday, starting with the cross-examination of an expert witness for MAS.
The court hearing on the Monetary Authority of Singapore’s case against a former employee of WBL Corp resumed yesterday, starting with the cross-examination of an expert witness for MAS.
Defence lawyer challenged Christopher Chong on the assumptions that the market did not expect WBL to mark a net loss for the third quarter of fiscal 2007 and the claim that the impact of this information on WBL shares was material.
MAS, which is suing former WBL general manager Kevin Lew for insider trading, is represented by Senior Counsel Cavinder Bull from Drew & Napier. Mr. Lew is represented by Senior Counsel Thio Shen Yi from TSMP Law Corp. The hearing resumed after a four-month break.
Mr. Thio asserted that based on past quarters of waning net profits and poor performance of a key client, investors would have expected a loss in Q3 FY’07 even in the absence of a profit warning.
WBL had issued a profit warning on its Q3 FY’07 results on July 17, 2007. But at a group management council (GMC) meeting on July 2, 2007, where Mr. Lew was present, internal forecasts on a potential quarterly loss and impairment costs on Thai subsidiary Wearnes Precision Thailand (WPT) were made.
Mr. Lew sold a total of 90,000 WBL shares at $4.98 per share two days after the GMC meeting and was said to have avoided a loss of $27,000 as a result.
MAS is seeking a civil penalty of $81,000, which is three times the alleged loss that was avoided.
In a feisty exchange with the defence lawyer yesterday, Mr. Chong reiterated that past quarters of waning profits would not have led investors to expect a loss in the group’s Q3 results for fiscal 2007. Though WPT had been making losses for the past three years to 2007, the loss had shrunk in Q2 2007 from Q1, he noted.
‘For an investor to say this company is going into a loss, another information is needed into this puzzle - that is to say the profit warning,’ Mr. Chong told the court. ‘That information of a high likelihood of impairment is a price-sensitive information that investors did not have.’
Mr. Chong has more than 10 years of experience in analysing insider trading cases and has previously testified in court for the Commercial Affairs Department. He co-founded ACH Investments, a specialist corporate advisory firm, and sits on several boards of listed companies.
Mr. Thio went on to challenge the claim on market impact of WPT impairment. He argued that WBL had a history of making impairments, with major provisions and charges running up to as much as $63 million in fiscal 2005 following a streamlining of business.
He also asserted that WBL had not made a decision on the WPT impairment yet by July 17, 2007 (the date of group profit warning) because of the prospect of getting a new customer as well as a potential buyer. Mr. Chong argued, however, that this could have been a deferment of decision on impairment rather than not making an impairment at all.
This second round of hearings will take place over the next two weeks.
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Feisty exchange at insider trading court case
By LYNETTE KHOO
02 October 2009
The court hearing on the Monetary Authority of Singapore’s case against a former employee of WBL Corp resumed yesterday, starting with the cross-examination of an expert witness for MAS.
Defence lawyer challenged Christopher Chong on the assumptions that the market did not expect WBL to mark a net loss for the third quarter of fiscal 2007 and the claim that the impact of this information on WBL shares was material.
MAS, which is suing former WBL general manager Kevin Lew for insider trading, is represented by Senior Counsel Cavinder Bull from Drew & Napier. Mr. Lew is represented by Senior Counsel Thio Shen Yi from TSMP Law Corp. The hearing resumed after a four-month break.
Mr. Thio asserted that based on past quarters of waning net profits and poor performance of a key client, investors would have expected a loss in Q3 FY’07 even in the absence of a profit warning.
WBL had issued a profit warning on its Q3 FY’07 results on July 17, 2007. But at a group management council (GMC) meeting on July 2, 2007, where Mr. Lew was present, internal forecasts on a potential quarterly loss and impairment costs on Thai subsidiary Wearnes Precision Thailand (WPT) were made.
Mr. Lew sold a total of 90,000 WBL shares at $4.98 per share two days after the GMC meeting and was said to have avoided a loss of $27,000 as a result.
MAS is seeking a civil penalty of $81,000, which is three times the alleged loss that was avoided.
In a feisty exchange with the defence lawyer yesterday, Mr. Chong reiterated that past quarters of waning profits would not have led investors to expect a loss in the group’s Q3 results for fiscal 2007. Though WPT had been making losses for the past three years to 2007, the loss had shrunk in Q2 2007 from Q1, he noted.
‘For an investor to say this company is going into a loss, another information is needed into this puzzle - that is to say the profit warning,’ Mr. Chong told the court. ‘That information of a high likelihood of impairment is a price-sensitive information that investors did not have.’
Mr. Chong has more than 10 years of experience in analysing insider trading cases and has previously testified in court for the Commercial Affairs Department. He co-founded ACH Investments, a specialist corporate advisory firm, and sits on several boards of listed companies.
Mr. Thio went on to challenge the claim on market impact of WPT impairment. He argued that WBL had a history of making impairments, with major provisions and charges running up to as much as $63 million in fiscal 2005 following a streamlining of business.
He also asserted that WBL had not made a decision on the WPT impairment yet by July 17, 2007 (the date of group profit warning) because of the prospect of getting a new customer as well as a potential buyer. Mr. Chong argued, however, that this could have been a deferment of decision on impairment rather than not making an impairment at all.
This second round of hearings will take place over the next two weeks.
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