Singapore Regulator Sues to Freeze China Sky Ex-CEO Funds
By Andrea Tan-Apr 9, 2012 8:32 AM ET
The Monetary Authority of Singapore is seeking a court order to freeze the funds of Huang Zhong Xuan, the former chief executive officer of China Sky Chemical Fibre Co. (CSCF), which is being probed for regulatory breaches.
The financial watchdog wants to restrain Huang, a Chinese national, from taking or sending money out of his Credit Suisse Group AG account in Singapore as China Sky and its directors may be fined as a result of the probe, according to papers filed with the city’s High Court on March 28.
“It is imperative that assets should be available to satisfy such liabilities,” Lee King See, deputy director of enforcement at MAS said in court papers. “There is a grave risk that the monies in the bank account are being dissipated by” Huang, who isn’t in Singapore. A closed hearing is scheduled for April 11.
The regulator’s move is the latest in a series of disputes the Chinese nylon-fiber maker and its directors have had with Singapore authorities. China Sky and its board are being investigated by the white-collar crime agency for potential breaches of securities laws, after “a number of irregularities” were uncovered by the Singapore Exchange (SGX), according to court papers.
Huang, who quit as CEO on Feb. 8 for what he called personal health reasons, didn’t reply to two e-mails seeking comment. Three calls to China Sky’s number in Fujian were unanswered. MAS said in an e-mailed response to queries it’s not appropriate to comment on current court proceedings.
Huang had transferred about $10 million out of the bank account on March 5 and on March 27 gave instructions to move the remaining $3.7 million, according to court papers.
Credit Suisse provided copies of Huang’s account opening forms and banking details from Dec. 6, 2010 to March 27 to the Commercial Affairs Department who asked for the details on March 26, according to MAS’s court filing.
Edna Lam, a Singapore-based spokeswoman at Credit Suisse, declined to comment.
The Commercial Affairs Department, which began the probe on Feb. 16, is examining possible offenses including making false and misleading statements as well as failing to disclose material information, according to the filing.
Such offenses may be punishable with a criminal fine of as much as S$250,000 ($198,000) and a jail term of as long as 7 years or a fine of as much as S$2 million as a civil penalty.
Huang is also being sued by a unit of Malaysia’s Hong Leong Bank Bhd. (HLBK) for failing to pay S$7.4 million on a share margin facility, according to the lender’s court papers. He had pledged part of his stake in China Sky to the bank, according to the complaint.
Huang, the largest shareholder in China Sky through his Rock Mart Equities Pte has a 37.8 percent stake, according to data compiled by Bloomberg.
The Singapore Exchange sued China Sky in a separate lawsuit on Jan. 6 to compel it to appoint a special auditor to look into transactions between the firm and its Audit Committee Chairman Lai Seng Kwoon as well as an aborted land acquisition in China. The case was dropped on Jan. 16, without a reason provided.
China Sky has disputed that it breached any listing rules or infringed securities law, MAS said in its papers. The Quanzhou City, Fujian-based firm ignored the bourse’s directive to appoint a special auditor and said some demands made by the exchange “were extremely unreasonable” and likened China Sky’s position to a “bullied child.”
Separately, former independent director Yeap Wai Kong is seeking permission to overturn the Singapore Exchange’s public rebuke on Dec. 16.
All three independent directors, Yeap, Lai and Er Kwong Wah, quit Jan. 5, citing non-compliance with the bourse’s order to name the auditor. Group financial controller Hui San Wing resigned on Feb. 8, citing a lack of leadership, guidance and support from the CEO and independent directors.
Investors have pressed for tougher laws to prosecute executives of Chinese firms after scandals from North America to Hong Kong wiped out their market value. Singapore and China do not have an extradition treaty, neither are foreign court rulings automatically recognized in Chinese courts.
China Sky had 2,835 shareholders as at Dec. 9, according to the court papers.
Trading in China Sky shares has been suspended since Nov. 17, a day after the exchange first ordered the company to appoint the special auditor. The shares closed trading on Nov. 16 at S$0.102, tumbling 96 percent from their peak of S$2.74 in October 2007.
The cases are Monetary Authority of Singapore v Huang Zhong Xuan & Anor OS311/2012 and HL Bank v Huang Zhong Xuan & Ors S158/2012 in the Singapore High Court
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