SEC lays charges against Energy Earth
Financially beleaguered Energy Earth Plc (EARTH) has been accused by the Securities and Exchange Commission (SEC) of falsifying details related to its actual level of indebtedness in an attempt to conceal information from investors and justify entering a business rehabilitation plan.
The market regulator has filed cases against 11 individuals who are current or former directors of Energy Earth with the Department of Special Investigation for further legal proceedings.
The SEC has accused Energy Earth of falsifying information or withholding important details on the company’s increased debts worth 26 billion baht.
There were many complaints regarding the company’s substantial debts after the Energy Earth submitted its financial statement in last year’s first quarter. That debt hike caused shareholders’ equity to decline to -15.65 billion baht from 10.35 billion, said the SEC.
Based on that information, Energy Earth’s board of directors later approved a business rehabilitation plan for the company in July 2017, prompting the SEC’s suspicion about the debt.
The SEC investigation found that the minutes from the board of directors meeting and information filed with the Stock Exchange of Thailand did not contain clear and factual information on the company’s increased debts, most of which were associated with special damages or opportunity costs.
In line with accounting standards, such debts could not be recorded as liabilities in the firm’s financial statements. The company’s legal adviser had said Energy Earth was not liable for debts classified as special damages based on a contract with its contract partners, according to Energy Earth’s special audit ordered by the SEC.
But Energy Earth had neglected to review details of those debts before including them as liabilities and filing to enter business rehabilitation, said the SEC.
“Eleven current and former directors of Energy Earth jointly supported falsifying or withholding details of such debts. This is considered an act of deception against investors and creditors, leading them to believe Energy Earth has liabilities exceeding its assets,” said the SEC.
The market regulator is also in the process of examining the company’s fair value assessment and financial statements.
Earlier, the Central Bankruptcy Court issued an order to approve Energy Earth’s business rehabilitation plan and appointed EY Corporate Advisory Services as the planner. The planner’s appointment was subsequently announced in the Royal Gazette on Oct 24, 2017.
Energy Earth entered financial straits after failing to redeem two lots of bills of exchange (B/E) worth a combined 90 million baht that were due in June 2017, saying the company’s cash flow had been squeezed after its overdraft line of credit was halted.
Energy Earth’s financial problems snowballed when a raft of its B/Es defaulted, triggering cross-default debentures worth 5.5 billion baht, compounded by the company’s failure to seek fresh sources of funding from financial institutions.