Almost 3 years after the stock was suspended with a market value of HK$1.89bn, investors must be wondering whether any criminal charges will be brought in relation to the fraud suspected by the liquidators (see our article of 24-Dec-2008).
On 16-Sep-08 in our article Peace Mark's warning signals, we mentioned that we had received anonymous allegations against Peace Mark (Holdings) Ltd (PM Holdings, 0304) since we took down Egana in Jul-07, but we were were still unable to publish those allegations, for lack of evidence. Now a High Court judgement published on Monday this week (23-Dec-08), which approves the sale of parts of the Peace Mark business to Chow Tai Fook Jewellery Co Ltd, sheds some light on the situation found by the provisional liquidators, Roderick John Sutton and Vincent Fok Hei-yu of Ferrier Hodgson Ltd.
In the judgement (which is a write-up of a decision he made orally in Chambers on 13-Nov-08), Deputy High Court Judge Anthony To Kwai-fung writes in relation to PM Holdings and its wholly-owned subsidiary Peace Mark Limited (PM Limited) at paragraph 8:
"Since taking over the Group, the Provisional Liquidators have serious doubt about the integrity of the senior management of PM Holdings and PM Limited such that they considered the ongoing control of the Group should not continue to be entrusted to the original management...
In the course of their investigation into the debts of the Group, they became concerned over the legitimacy of both sales and trade receivables relating to the Group’s wholesale and distribution business. They thought the Group had partially financed its acquisitions and loss making businesses via a trade finance “money go-round” utilizing sales of non-existent goods to corporate entities controlled by parties with close ties to the management of the Group that actually carry on little, if any, legitimate business. It appears that the Group’s operations are substantially smaller and less profitable than reported in its reports."
Of course, these concerns remain to be proven in court, and any parties involved are innocent unless proven guilty, but it does give you some idea of where the investigations are heading. The Police Commercial Crime Bureau should take an interest in this if they are not already. Watch this space.