Scouring accounting footnotes to prevent tunnelling; Framework needed to tackle insiders’ stealing of corporate wealth

http://www.businesstimes.com.sg/opinion/scouring-accounting-footnotes-to-prevent-tunnelling

Scouring accounting footnotes to prevent tunnelling

KEE KOON BOON

933 words

19 August 2015

Business Times Singapore

Framework needed to tackle insiders’ stealing of corporate wealth.

IMAGINE that the S-chip (Singapore-listed China stocks) fraud with its “missing cash phenomenon” and the penny stock scandal never happened – because there was a way to prevent them.

While accounting information and disclosures may be abused to deceive, instead of being used to inform, there is a countermeasure if one only looks for it. For fraud perpetrators actually, if inadvertently, leave behind a trace of their accounting transgressions in the footnotes of annual reports.

Continue reading

Presentation to MAS: A World’s First Fact-Based Forward-Looking Fraud Detection System for Singapore

MAS PresentationLast week, we are honoured and grateful to be able to have the opportunity to share our thoughts and to have a sincere and productive conversation with the top management team at the regulatory authority in Singapore about implementing a world’s first fact-based forward-looking fraud detection framework to bring about benefits for the capital markets in Singapore and for the public and investment community.  Accounting information can be used to inform – or to deceive. We believe strongly that this potential fintech platform that combines accounting data, especially footnotes, with a wide array of contextual information – including unusual related-party transactions; money-go-round off balance-sheet activities; governance, group structure and ownership analysis; textual and linguistic analysis; analysis of event-based “catalysts” (information-based manipulation) and sensitive market announcements (action-based manipulation in prices and volume) – will provide fresh insights and actionable, dynamic, inter-connected analytical information, as opposed to merely descriptive static data or a loose bag of disparate red flags, on Singapore and Asian companies, for the regulator and the public.

Public disclosure of the List of companies in the highest risk decile by the five fraud categories (tunneling fraud; grand capex fraud; M&A deals potion fraud; all-in-the-family expense and liability shift; consolidation craftiness fraud) on the regulatory websites to inform and educate public (Financial Literacy 2.0) can (a) prevent harm before fraud happens, and (b) spur the potentially fraudulent firms to act to improve their corporate governance, e.g. return back part of the expropriated “missing cash”, to get themselves off the List. This will also bring about greater efficiency in the overall regulatory system given the limited resources in going after so many fraudulent cases which may occur and implode systematically during poor market and economic conditions (e.g. the reverse merger fraud wave in U.S. that was concentrated in 2011).

Bubbles and troubles in Hong Kong: Ongoing abusive “open offers” and placings making out in multi-billion-dollar bubbles. David Webb calls on regulators and rule-makers to take action. Hong Kong deserves better if it wishes to make a claim to be a world-class financial centre

http://webb-site.com/articles/trouble2015.asp

Bubbles and troubles in Hong Kong
24th September 2015

As readers may recall, last year, Lerado Group (Holding) Co Ltd (Lerado, 1225) announced the proposed sale of its core business of baby strollers and infant car seats to Canadian listed firm Dorel Industries Inc (Dorel) for HK$930m. Lerado was planning to squat on most of the cash proceeds and only pay out $0.30 per share, or $228m. For this reason, we opposed the sale, because of concern that Lerado would become a cash shell trading at a discount to its net asset value. Your editor, David Webb, is a disclosed substantial shareholder currently holding over 8%. However, the sale was approved by shareholders on 16-Sep-2014 and completed on 31-Oct-2014.

Our concerns have now proven justified, culminating in current egregious proposals not just by Lerado but by other listed companies. We hope to stop them, if the regulators will require certain parties to play fairer. This article is long and complicated, and we thought about breaking it into pieces, but the picture becomes clearer if you assemble the whole jigsaw, so here it is. Apart from Lerado, this article covers transactions by numerous other listed companies in which you may have an interest, and several billion US dollars of bubbles. Continue reading

Hao Wen, Capital VC and Unity; questionable cash investments at extremely high valuations which link together 3 listed companies. David Webb urge the SFC’s corporate misconduct team to investigate

http://webb-site.com/articles/trouble2015.asp

Hao Wen, Capital VC and Unity
24th September 2015

Browsing through documents for a much longer forthcoming story, we came across two highly questionable acquisitions that link together 3 listed companies: Hao Wen Holdings Ltd (Hao Wen, 8019) and two Chapter 21 investment companies, Capital VC Ltd (Capital VC, 2324) and Unity Investments Holdings Ltd (Unity, 0913) that we have warned investors about in the past. Continue reading

Aim’s Chinese disasters offer cautionary tale for chancellor

http://www.ft.com/intl/cms/s/0/a4b710f2-61f8-11e5-9846-de406ccb37f2.html#axzz3mfuQLSl6

September 23, 2015 11:24 pm

Aim’s Chinese disasters offer cautionary tale for chancellor

Kate Burgess

If the UK Chancellor wants a cautionary tale for his initiative to link London and Chinese stock markets, he should look to the Alternative Investment Market.

This week two of the 45 China-­based companies quoted on London’s junior market have either had their operations suspended or their shares. They are just the latest of a long string of Chinese disasters on Aim. Continue reading

Police in Taiwan are investigating the whereabouts of the chairman of a listed company on bail awaiting trial in Hong Kong for fraud, after reports he was abducted in New Taipei City; Missing chairman sees Pearl Oriental shares plunge 15pc

Hong Kong fraud accused feared abducted in Taipei
25 September 2015
Police in Taiwan are investigating the whereabouts of the chairman of a listed company on bail awaiting trial in Hong Kong for fraud, after reports he was abducted in New Taipei City on Sunday.

Wong Yuk-kwan, 68, who is also known as Wong Kun, is accused of defrauding the Securities and Futures Commission in a US oil field transaction. Continue reading

CFOs see earnings shenanigans in 20% of U.S. public firms

http://business.financialpost.com/executive/cfo/cfos-see-earnings-shenanigans-in-20-of-u-s-public-firms

CFOs see earnings shenanigans in 20% of U.S. public firms

James Saft, Reuters | September 25, 2015 2:06 PM ET

If you think the fact that a U.S. company’s earnings conform to accepted standards means they are to be trusted, then allow me to introduce you to the 20 per cent of chief financial officers who disagree. Continue reading

A February takeover bid for Barnes & Noble that sent the bookseller’s stock soaring was fraudulent because the firm behind the announcement lacked funding to do the deal, the SEC said

SEC alleges fraud in failed takeover bid of Barnes & Noble
25 September 2015
A February takeover bid for Barnes & Noble that sent the bookseller’s stock soaring was fraudulent because the firm behind the announcement lacked funding to do the deal, the Securities and Exchange Commission said Thursday. Continue reading