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Saturday 5 December 2009
Mystery bankers, dodgy deals, missing millions
The auditors travelled to China to probe cash transactions made by Sino-Environment. It turned out to be a rocky journey as the company staff and its supposed ‘bankers’ appeared to have laid roadblocks at every step.
Sino-Environment supposedly paid millions for materials that were never delivered: PwC
By LYNETTE KHOO 05 December 2009
The auditors travelled to China to probe cash transactions made by Sino-Environment. It turned out to be a rocky journey as the company staff and its supposed ‘bankers’ appeared to have laid roadblocks at every step.
The company’s chairman and CEO refused to provide authorisation letters for PricewaterhouseCoopers (PwC) to obtain statements directly and independently from the banks. PwC officers were forced off the premises of one bank by a ‘branch manager’ (as he introduced himself) and had the roller shutters pulled down in their faces.
Elsewhere, a specific bank officer was similarly pre-arranged to meet the auditors and they could not verify the statements they were shown.
Even so, the special audit by PwC found that some $85 million worth of transactions were made by Sino-Environment without board approval and authorisation.
But no raw materials or equipment were delivered despite the purchase agreements nor was there any significant work done at the projects that the group purportedly invested in.
The damning report was released yesterday by the independent directors. PwC, the group’s statutory auditor, was engaged in May to review significant cash transactions from January to June. In March, the company was in possible default on repayment of a $149 million convertible bond issue and its shares have not traded since September.
PwC based its findings on interviews and review of documents available up to Sept 15.
Its report noted that Sino-Environment unit, China Energy Environment, made a payment of about 920 million yen ($14 million) on May 22 allegedly to a Japanese company on behalf of another unit Fujian Thumb Environmental Facilities Co (Thumb Facilities) to buy Denox raw materials.
But as at Aug 26, no raw materials had been delivered. PwC was later informed by the Japanese firm that it did not enter into the purchase agreement, had not received any payment, and did not have an employee bearing the name of the representative who signed the contract.
The management took PwC to Xiamen International Bank rep office in Quanzhou, where there were only the bank officer, receptionist, and a ‘branch manager’. The bank officer came with prepared bank statements and refused to take questions. Here was where PwC was forced off the premises by the ‘branch manager’.
PwC also found that another Chinese subsidiary, Fujian Fuda Desai Environment Protection Co, paid a total of 230 million yuan ($50 million) to various parties from Jan 1 to June 30 to invest in four separate waste power plants projects. However, there were no documents showing that the rights to the rubbish dumpsites had been transferred and no significant work has been carried out on any of the projects.
Later, when the auditors tried to verify the bank documents (on these investment payments) given to them by the management through visiting Bank of Communications, Fuzhou branch, the specific bank officer who met them was a relationship manager for personal banking (according to his name card) - not for corporate banking.
The bank officer only provided the auditors with the documents the following day and refused to let them approach other bank staff to confirm the authenticity of the documents.
PwC noted that there were also instalment payments of 46.50 million yuan made by unit Thumb Facilities to buy equipment for a plant. The auditors said that they are unable to comment on the ‘reasonableness of the costs’ of these assets as they could not inspect them up-close during their site visits nor review any competitive tenders.
The audit findings also showed that another group subsidiary Fujian Weidong EPT Co made two interest-free loans totalling 55 million yuan to two parties not related to the group.
Independent directors (IDs) of the group - Goh Chee Wee and Wong Chiang Yin - yesterday expressed extreme concern about the PwC findings and reiterated their call for the executive directors (EDs) to step down.
‘The findings in the PwC report call into question the conduct of the executive directors, and in particular, the conduct of Mr. Sun Jiangrong, the chairman and CEO of the company,’ the IDs said.
Mr. Sun’s personal financial woes snowballed into lawsuits between him and his creditor, his loss of a 56 per cent stake in the group and led to the group’s possible default on the convertible bonds.
He claimed to have $40 million in the company’s coffers during his phone conversation with David Gerald, president of Singapore Investors Association of Singapore (SIAS) on Monday. But the EDs clarified that this was an estimated aggregate sum which included trade and other receivables.
The IDs said that they were ‘surprised and troubled’ by this change of position and urged the EDs to inform shareholders of the exact amount of cash reserves and remit them to the group’s Singapore bank account immediately.
The EDs had asserted that they would remit the $14 million from the account in a Xiamen bank to Singapore if the IDs agree to certain conditions. The IDs said that ‘to avoid further debate on this issue’, they agreed to the conditions and ‘fully expect the EDs to remit the $14 million from XIB to the company’s Singapore account without delay’.
Mr. Gerald said that SIAS will approach the Chinese embassy in Singapore to relay its concerns.
‘SIAS calls on the authorities in China to immediately demonstrate its willingness to conduct a thorough investigation into this company’s affairs in China and bring any wrongdoing under the weight of the law, if the confidence of Singapore investors in Chinese companies is to be restored,’ Mr. Gerald said.
He also urged the IDs, together with shareholders, to take action to appoint a new board to ensure that the company’s remaining assets are fully protected.
2 comments:
Mystery bankers, dodgy deals, missing millions
Sino-Environment supposedly paid millions for materials that were never delivered: PwC
By LYNETTE KHOO
05 December 2009
The auditors travelled to China to probe cash transactions made by Sino-Environment. It turned out to be a rocky journey as the company staff and its supposed ‘bankers’ appeared to have laid roadblocks at every step.
The company’s chairman and CEO refused to provide authorisation letters for PricewaterhouseCoopers (PwC) to obtain statements directly and independently from the banks. PwC officers were forced off the premises of one bank by a ‘branch manager’ (as he introduced himself) and had the roller shutters pulled down in their faces.
Elsewhere, a specific bank officer was similarly pre-arranged to meet the auditors and they could not verify the statements they were shown.
Even so, the special audit by PwC found that some $85 million worth of transactions were made by Sino-Environment without board approval and authorisation.
But no raw materials or equipment were delivered despite the purchase agreements nor was there any significant work done at the projects that the group purportedly invested in.
The damning report was released yesterday by the independent directors. PwC, the group’s statutory auditor, was engaged in May to review significant cash transactions from January to June. In March, the company was in possible default on repayment of a $149 million convertible bond issue and its shares have not traded since September.
PwC based its findings on interviews and review of documents available up to Sept 15.
Its report noted that Sino-Environment unit, China Energy Environment, made a payment of about 920 million yen ($14 million) on May 22 allegedly to a Japanese company on behalf of another unit Fujian Thumb Environmental Facilities Co (Thumb Facilities) to buy Denox raw materials.
But as at Aug 26, no raw materials had been delivered. PwC was later informed by the Japanese firm that it did not enter into the purchase agreement, had not received any payment, and did not have an employee bearing the name of the representative who signed the contract.
The management took PwC to Xiamen International Bank rep office in Quanzhou, where there were only the bank officer, receptionist, and a ‘branch manager’. The bank officer came with prepared bank statements and refused to take questions. Here was where PwC was forced off the premises by the ‘branch manager’.
PwC also found that another Chinese subsidiary, Fujian Fuda Desai Environment Protection Co, paid a total of 230 million yuan ($50 million) to various parties from Jan 1 to June 30 to invest in four separate waste power plants projects. However, there were no documents showing that the rights to the rubbish dumpsites had been transferred and no significant work has been carried out on any of the projects.
Later, when the auditors tried to verify the bank documents (on these investment payments) given to them by the management through visiting Bank of Communications, Fuzhou branch, the specific bank officer who met them was a relationship manager for personal banking (according to his name card) - not for corporate banking.
The bank officer only provided the auditors with the documents the following day and refused to let them approach other bank staff to confirm the authenticity of the documents.
PwC noted that there were also instalment payments of 46.50 million yuan made by unit Thumb Facilities to buy equipment for a plant. The auditors said that they are unable to comment on the ‘reasonableness of the costs’ of these assets as they could not inspect them up-close during their site visits nor review any competitive tenders.
The audit findings also showed that another group subsidiary Fujian Weidong EPT Co made two interest-free loans totalling 55 million yuan to two parties not related to the group.
Independent directors (IDs) of the group - Goh Chee Wee and Wong Chiang Yin - yesterday expressed extreme concern about the PwC findings and reiterated their call for the executive directors (EDs) to step down.
‘The findings in the PwC report call into question the conduct of the executive directors, and in particular, the conduct of Mr. Sun Jiangrong, the chairman and CEO of the company,’ the IDs said.
Mr. Sun’s personal financial woes snowballed into lawsuits between him and his creditor, his loss of a 56 per cent stake in the group and led to the group’s possible default on the convertible bonds.
He claimed to have $40 million in the company’s coffers during his phone conversation with David Gerald, president of Singapore Investors Association of Singapore (SIAS) on Monday. But the EDs clarified that this was an estimated aggregate sum which included trade and other receivables.
The IDs said that they were ‘surprised and troubled’ by this change of position and urged the EDs to inform shareholders of the exact amount of cash reserves and remit them to the group’s Singapore bank account immediately.
The EDs had asserted that they would remit the $14 million from the account in a Xiamen bank to Singapore if the IDs agree to certain conditions. The IDs said that ‘to avoid further debate on this issue’, they agreed to the conditions and ‘fully expect the EDs to remit the $14 million from XIB to the company’s Singapore account without delay’.
Mr. Gerald said that SIAS will approach the Chinese embassy in Singapore to relay its concerns.
‘SIAS calls on the authorities in China to immediately demonstrate its willingness to conduct a thorough investigation into this company’s affairs in China and bring any wrongdoing under the weight of the law, if the confidence of Singapore investors in Chinese companies is to be restored,’ Mr. Gerald said.
He also urged the IDs, together with shareholders, to take action to appoint a new board to ensure that the company’s remaining assets are fully protected.
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