Sunday, 21 April 2013

Late MCA leader accused of stealing A$20m from Aussie firm (2)

I wrote before about Zheng He Global Capital, the Australian listed company named after the famous Chinese explorer:

I doubt if Zheng He would be happy with his name being used given the rather unfortunate events that happened in the company.

The Sydney Morning Herald followed up on this case with several articles, written by "Insider", Ian McIlwraith. Below the texts in full, here some interesting snippets:
  • "The deal appears to have been a little more complex than that, though, because the money was moved into Zheng He accounts near the end of each month, and out again at the beginning of the following month - meaning Zheng He's bank statements each month showed that the money was there, but in reality it was being used by Lin's companies". This kind of tactics is rumoured to happen more often in China, with certain banks supporting this kind of dodgy tactics.
  • Robert Payne only lasted two days as director, as described in the second article, aptly titled "Short Stay"
  • "That is a shame, because if it is delisted, shareholders may never hear about how the hunt for the money is going". And that is exactly what happened, the company is delisted, and I doubt if the ASIC (Australian Securities and Investments Commission) is able to do anything at all about what occurred.
Highly unsatisfactory and unjust for the investors of Zheng He Global Capital, who lost their investments, and not exactly good PR for Malaysia.

Disappearing, reappearing loans test ASIC's reach (May 30, 2012)

Australia's relations with Malaysia may be tested again if the corporate watchdog pursues claims that a former Malaysian government minister, Dato Tan Tian Hong, took more than $20 million from an ASX-listed company to repay a personal debt.

The now suspended, China-based credit guarantee company Zheng He Global Capital told shareholders this week that Tan, who died last year, used his position as executive chairman to organise secret 136.79 million yuan ($21 million) loans to 10 companies associated with fellow Zheng He director, Rong Cheng Wei.

Zheng He's acting chairman, Andrew Smith, who has spent this year trying to unravel what happened, believes the loans were designed to use the public company's cash to repay $US18.8 million borrowed by Tan from Wei in April 2010 to facilitate Zheng He's public float.

Tan might be out of reach, but Smith has sent letters of demand to his deceased estate in Malaysia.

Fascinatingly, about the same time as Smith's lawyers were drawing up those demands, Tan's widow, Catherine, used her family's 55.3 per cent shareholding in Zheng He to demand the appointment of four new directors to the board.

With no hope of beating that board challenge, Smith yesterday afternoon bowed to the inevitable and convened a board meeting, agreeing to the new appointments.

It will be interesting to see whether they decide to continue legal action against the Tans. Insider suspects investors in Zheng He can kiss that money, and probably their investments, goodbye.

Smith, though, may have bought them some insurance. Insider hears he met representatives of the Australian Securities and Investments Commission yesterday and provided them with a detailed file on all the events.

ASIC's difficulty is going to be that while Zheng He is in Australia, the business that made the loans is in China, the accused ''thief'' is now dead, and the other former director said to be involved in the suspect loans, Wei, is also in China. Insider understands neither Tan nor Wei have assets in Australia, apart from Zheng He shares.

The political thorn for ASIC's chairman, Greg Medcraft, will be that Tan was a respected leader of the Malaysian Chinese Association political party, and served as a deputy finance minister and deputy minister in the Prime Minister's office under former Malaysian strongman Dr Mahathir Mohamad. Mahathir and his wife attended the funeral.

The Zheng He loans story does not, however, end there. Rong Cheng Wei's companies, according to Smith, defaulted on all the loans - leaving Zheng He indebted to the banks last August.

Smith said that in a recent meeting with Wei ''he confirmed that, as a consequence of the defaults under the finance arrangements, the … loans had now been repaid in full''.

In Zheng He's prospectus, Wei was not only credited with playing a role in the financing of Zhouning county's public welfare system, he was awarded ''the Excellent Entrepreneur award from Zhouning county's police force from 2003 to 2006''.

Tan's widow signed an agreement last August taking responsibility for the loan defaults, according to Smith, and the deposit around that same time of 140 million yuan into Zheng He bank accounts, by two China-based companies associated with a Lin Liang, were assumed to be the product of that agreement.

In February this year, a routine audit found the cash was no longer in the company's bank accounts, having been withdrawn on the authorisation of Lin (who had been appointed chairman of Zheng He's China subsidiary).

Smith's investigation in recent weeks discovered that Lin believed his companies had only ever been lending the money to Zheng He, and had taken it back.

The deal appears to have been a little more complex than that, though, because the money was moved into Zheng He accounts near the end of each month, and out again at the beginning of the following month - meaning Zheng He's bank statements each month showed that the money was there, but in reality it was being used by Lin's companies.

Short Stay (June 8, 2012)

Robert Payne, who joined the board of the floundering Zheng He Global Capital on May 29, looks like setting a record for the briefest appearance on the board of a listed company.

Zheng He told the market late yesterday that Payne has quit - and his resignation is backdated to June 1, which means that he lasted a mere 48 hours on the board of a company that once had aspirations to be a financier to China but is now looking collapse in the face.

Insider is not wholly surprised that Payne has departed. The last time Zheng He was mentioned here was when the Malaysia-based major shareholder decided to nominate him and three others to the company's board, giving them voting control.

Their nominations had come hot on the heels of Zheng He's executive chairman, Andrew Smith, launching legal action against entities associated with that same shareholder after spending some months trying to find out why $20 million had disappeared from the company's bank accounts.
Smith fell on his directorial sword on May 30, after the new directors rolled across the boardroom border - as did two other former directors.

He had already fired himself as an executive the day before, although his termination was not due to take effect until last Friday.

Insider also hears that not long before he did leave, Smith had delivered a fat file to the corporate walloper on the results of his investigations, showing where he thought the $20 million had gone.

The question now is whether the Australian Securities and Investments Commission wants to chase an investigation through Australia, China and Malaysia.

Small and suspended from ASX but law is the law (August 3, 2012)

ZHENG He Global Capital might be a tiny company, and it has been suspended from ASX trading for nearly six months - but that does not excuse it from complying with the Corporations Act.

Yet, from what Insider can work out, it is now a fortnight since it became a two director company, and neither of those live in Australia.

For those of you who do not sleep with a copy of the legislation, Insider can tell you that Australia's company law says very clearly that a public company must have a minimum of three directors - and at least two of them must be Australian residents.

Zheng He fails on both hurdles, judging by its most recent announcements to the ASX - although with $20 million of shareholders' funds having inexplicably evaporated from the company's bank accounts in China, that may be the least of the sins committed against investors.

Local investors only know about the missing money, and its circuitous path through Chinese businessmen and the family bank accounts of Zheng He's deceased former chairman, Dato Tan Tian Hong - who was also a deputy finance minister of Malaysia - because of the efforts of former chairman Andrew Smith.

Smith tracked down how and where the $20 million went, although Zheng He's empty coffers and the fact that any litigation would require going to court in both Malaysia and China limited his efforts. He was planning to send a legal letter of demand to the Tan family when the former chairman's widow, Catherine, used her family's 55.3 per cent shareholding in Zheng He to thrust four new directors onto the board.

Rather than spend money holding an extraordinary meeting to defend their position, the existing board fell on their directorial swords, and Tan's four nominees took control.

Based on the filings of those four with the Australian Securities and Investments Commission on their appointment, Insider can only conclude that Zheng He has been in breach of the law since May 30 because only one of the men, Melbourne-based Robert Payne, lived in Australia.

Payne resigned within 48 hours, which makes Insider wonder whether Payne realised that consenting to being a director of Zheng He may not have been the smartest thing he had done.

Of the three remaining directors, two lived in Malaysia and the other in China. On July 20, one of the Malaysian directors quit, leaving two people. No explanations were given for either departure, and there was no indication that the company acknowledged it was in breach of the law and had plans to remedy the situation.

Insider finds it difficult to believe that ASIC is not aware of Zheng He's status, because the word was that former chairman Smith made a complaint to the corporate regulator before he left.

Not only that, the new board of Zheng He has said nothing about its plans for a company that has no employees, no business - but does have a theoretical $20 million claim against interests associated with its major shareholder.

Old favourites appear once more in ASX hall of shame (August 24, 2012)

Finally, one of Insider's favourite listed companies, Zheng He Global Capital, is also facing delisting for not paying fees. As noted earlier this month, Zheng He has had only two directors, neither of them Australian residents, since July - which would seem to put it in breach of a whole lot more than not paying listing fees. Maybe those two are too busy trying to recover the $20 million that shareholders thought was the company's assets, but turned out to be claimed, and banked, by the Malaysian-based family that is Zheng He's largest shareholder.

That is a shame, because if it is delisted, shareholders may never hear about how the hunt for the money is going.

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