CAD probes troubled gold trader Genneva

More news from the raid on Genneva's office in Singapore:

Genneva Pte Ltd, the gold trading company that has been the subject of a literal run by its customers, is under investigation by the Commercial Affairs Department (CAD) for alleged "financial improprieties".

Its Orchard Tower offices were raided by CAD yesterday. The office is closed and its website is frozen. A number of employees were taken in for questioning. The police has confirmed that investigations are ongoing.

Matthew Kurian of Regent Law, who is retained by Genneva as its legal counsel, said that the firm is conducting its own internal investigation and has appointed forensic accountants. "The company intends to honour all its obligations. They are coming up with a plan."

A letter by Lim Kieng Justin, who has just taken over as Genneva general manager, said that the discovery of financial improprieties "some time back" has led to a delay in the payment of discounts, commissions and fulfilment of buy-back guarantees. The letter, dated Sept 28, was posted on the Web.

Mr Lim is a director of an apparently related company, Genneva World Pte Ltd, which was registered for business in March this year. He is not a director of Genneva.

Mr Lim wrote that the directors have lodged the necessary police reports and put in place new management staff. ". . . the directors are in the midst of negotiations with an external party who is prepared to assist the company and see it through this financial crisis. The objective of the directors is to ensure that all obligations to the company's customers and consultants are met."

He also wrote that the company would organise dialogue sessions with customers and agents in 7-10 working days. He urged customers and agents to remain calm and "help us work out (an) amicable solution for everyone".

Genneva is understood to have received several letters of demand from aggrieved customers who have entrusted gold to the firm or are owed the fulfilment of Genneva's buyback undertaking.

BT reported last week that at least two customers have filed suits in the Subordinate Court for Genneva to fulfil the terms of its buyback. At least one has secured an interlocutory judgement pending an assessment of costs. Prior to the judgement, Genneva did not respond nor contest the suit. Mr Kurian said that Genneva was looking into making an application to the courts for the judgement to be set aside and to file a defence.

Goh Kok Yeow of De Souza Lim & Goh, who represents the plaintiff Lee Bee Ghok in the case, said: "We will not agree and will vigorously oppose the application because they have no legal reason to do so."

Genneva operates under a police licence that allows it to deal in second-hand gold. Its model is to sell gold to customers at a hefty premium to the market. As at August, it listed a price of $96 per gram on its website. The indicative retail gold price at UOB yesterday was about $70.15 per gram or $70,149 per kilobar.

Genneva customers buy gold at a 1.5 or 2 per cent so-called discount off its list price. Genneva undertakes to buy back the gold in one or three months, at the list price, and customers pocket the 1.5 or 2 per cent discount. Assuming a monthly rollover, they stand to earn as much as 24 per cent year. Lately, some customers have been offered a discount of as much as 2.5 per cent.

The last few weeks have seen Genneva grapple with its worst case market scenario - that of a rush among customers for the exit. In that time, it has imposed a limit on the daily buyback of gold that it can do - reportedly five kilobars a day. Agents are also reportedly owed commissions for more than six months.

Three Genneva directors - Marcus Yee Yuen Seng, Ng Poh Weng and Chin Wai Leong, who are also directors of Genneva Sdn Bhd - are being sued by Bank Negara in Malaysia for alleged illegal deposit taking and alleged offences under anti-money laundering laws. The case is ongoing.

Genneva is in the Monetary Authority of Singapore's Investor Alert list, which tells investors to be on guard against unlicensed entities. Other gold companies such as The Gold Guarantee and Asia Pacific Bullion are also on the list.


Written by Genevieve Cua from Business Times, website.