Briefs
Hin Leong — the oil trading giant that is now under interim judicial management — has fabricated documents on a “massive scale” to conceal losses of some US$800 million ($1.1 billion) chalked up over the past decade. “The scale and regularity of the fabrication suggests that the practice was routine and pervasive,” says the interim judicial managers Goh Thien Phong and Chan Kheng Tek of PricewaterhouseCoopers Advisory Services (PWC), in their report dated June 22.
The company — founded by Lim Oon Kuin, who keeps a low-profile but is known within the oil trading circle as “OK Lim” — was found to have overstated its assets by an “astonishing” sum of more than US$3 billion, the report notes.
The bulk of the overstatement consists of US$2.23 billion in accounts receivables which have no prospect of recovery, and another US$0.8 billion in inventory shortfalls.
“Documents that have been forged or are at least of dubious authenticity include bank remittance advices, bank statements, bills of lading, sales contracts, sales invoices, swap trade confirmations, swap trade tickets, deal settlement slips and inter-tank transfer certificates,” says PWC in its report.
Hin Leong filed for bankruptcy protection in April, owing more than a dozen banks and business partners some US$3.5 billion versus assets worth US$257 million.
PWC believes that Hin Leong on its own has no reasonable prospect of being restructured or rehabilitated, unless it is packaged together with other companies controlled by Lim’s family — including the shipping unit Ocean Tankers Pte Ltd — and the Universal Terminal storage facility be bundled together as integrated petroleum trading platform, for any viable restructuring or rehabilitation to be carried out for the benefit of the creditors.
PWC raised several other flags in the report. For example, despite the losses for the past few years, privately-held Hing Leong paid out dividends of US$60 million and US$30 million for FY2018 and FY2017 respectively.
PWC also found out that there have been numerous occasions where the same inventory, carried onboard the massive storage tankers, has been sold to at least two buyers.
When Hin Leong repurchased from one of the buyers, it was then able to obtain a letter of credit facilities amounting to tens of millions. PWC also found traders purportedly with access to the company’s futures trading systems, not listed as Hin Leong employees.
According to PWC, records kept by Hin Leong — like those for inventories — appear “highly questionable”. Meanwhile, the employees also gave conflicting and inconsistent answers when interviewed, adds PWC.
PWC tried to interview OK Lim, but was told by his lawyers he is not medically able to go through the process. A written response to questions posed by PWC was agreed to but remains unanswered as of date of the report.