ChinaGate Update
The three chairmen are alleged to have bribed accountants and a financial consultant to inflate their companies' profits in order to meet the minimum listing requirements
Business Times - 20 Dec 2002
In Today's BT
2 IPO clients of Kim Eng in HK under graft probe
But staff of Kim Eng unit not among those detained
By
Loh Hui Yin
(SINGAPORE) Hong Kong's anti-graft agency is investigating bribery scams involving two companies which Kim Eng Capital has done work for.
So far, however, no staff member of Kim Eng is among those detained.
Kim Eng Capital, the corporate finance unit of Kim Eng Holdings (HK), sponsored the initial public share offers of household products manufacturer Gold Wo International Holdings in March 2001, and circuit board maker Fu Cheong International Holdings in March this year.
The chairmen of the two companies and the chairman of digital camera manufacturer Yue Fung International were among the 21 people detained so far by the powerful Independent Commission Against Corruption (ICAC)) this week for allegedly inflating the companies' profits to meet listing criteria.
A senior manager from international accounting firm Ernst & Young LLP was also among those detained, according to reports in the Hong Kong media.
Yue Fung International, a shareholder in the other two companies, was listed in 1997.
The trio, whose counters have been suspended since Monday, are all listed on the main board of the Hong Kong Exchanges and Clearing (HKEx).
ICAC officers raided the offices of the three companies, which are located in the same building, and seized computers and documents on Monday.
They are studying the material from the three companies as well as 17 other private firms.
Kim Eng Holdings (HK), which is listed on the HKEx, is part of stockbroking firm Kim Eng Holdings, which is headquartered in Singapore.
Listed in Hong Kong in 1998, Kim Eng Holdings (HK) has been regarded as one of the better so-called 'local' houses, particularly for the quality of its research reports.
Winnie Kong, director of Kim Eng Holdings (HK), told The Business Times in a telephone interview from Hong Kong: 'None of our staff has been approached for questioning by ICAC, or arrested by them. The ICAC has also not visited our office.' 'It is business as usual. There has been no effect on our existing clients and potential business,' Ms Kong said.
As sponsors of Gold Wo's and Fu Cheong's initial public offers (IPOs), Kim Eng Capital had to, among other things, prepare their applications for a listing and lodge them with the HKEx.
On her reaction to the ICAC's probe, Ms Kong said: 'We were very shocked to hear about all this. The first we knew was on Monday night when the Hong Kong media asked us about it. We work with firms of the highest integrity and standards.'
The three chairmen are alleged to have bribed accountants and a financial consultant to inflate their companies' profits in order to meet the minimum listing requirements.
The discovery of this latest alleged scam has spurred discussion in the territory on the tightening of regulations on accountants and listing sponsors. The Hong Kong Society of Accountants said it would present a reform plan to the government soon.
Last week, Hong Kong's Secretary for Financial Services and Treasury Frederick Ma suggested that listing sponsors who fail to fulfil their responsibilities could be 'named and shamed'.
The Securities and Futures Commission, he said, has been asked to strengthen the regulation of listing sponsors to ensure that these professionals will effectively assume their roles and responsibilities.
The Yue Fung and related companies' case is the latest alleged scam to affect Hong Kong-listed companies.
A few months ago, Euro-Asia Agricultural (Holdings), a stock once favoured by investors, was alleged to have overstated its revenue manifold. It has since closed its Hong Kong office and its founder Yang Bin has been arrested by the Chinese government for alleged tax evasion.
Observed a banker in Singapore: 'We are just seeing the skeletons coming out of the cupboard, particularly those listed on GEM (second board). Approval processes for GEM listings have been lax in the past and the government probably wants to clean up now.'
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