HSBC sues oil tycoon and family to recover $116 million
It is the first bank to take legal action against O.K. Lim and his 2 children over its losses.
HSBC Holdings is suing the Lim family and an employee of bankrupt oil trader Hin Leong Trading to recover US$85.3 million (S$115.7 million) of US$111.7 million that they allegedly obtained with bogus invoices and forged documents, according to court papers seen by The Straits Times.
HSBC, the firm's largest creditor with about US$600 million owing, is the first bank to take legal action against oil tycoon Lim Oon Kuin, better known as O.K. Lim, and his two children to recover its losses.
It is also suing Ms Serene Seng Hui Choo, a manager of Hin Leong's corporate affairs department.
The suit filed on Oct 21 in the High Court came two months after the firm's judicial manager, PricewaterhouseCoopers (PwC) Advisory Services, sued Lim, his son Evan Lim Chee Meng and daughter Lim Huey Ching, both executive directors for more than 20 years, for US$3.5 billion in outstanding debt.
PwC alleged that they breached their fiduciary duties as directors and engaged in fraudulent trading.
The suit also comes after the elder Lim was hit with two charges for abetment of forgery for the purpose of cheating, relating to a fake China Aviation Oil (Singapore) Corp (CAO) cargo sale.
The fake CAO cargo sale is the subject of HSBC's lawsuit.
The Straits Times understands that if the State Courts make factual findings in the criminal proceedings related to HSBC's claims, the bank could rely on those findings to bolster its case and potentially seek judgment against the Lims.
HSBC alleged that the defendants "fraudulently deceived" the bank into lending Hin Leong US$111.7 million by signing forged invoices that were submitted to obtain discount financing earlier this year.
One sales invoice was purportedly for cargo sold to CAO for US$56 million, the other for cargo sold to Unipec Singapore for US$55.7 million.
The suit alleges that the elder Lim had instructed Hin Leong employees to "fabricate" a CAO inter-tank transfer certificate claiming the company had transferred 1.05 million barrels of gasoil to CAO on March 18.
But Hin Leong never sold or transferred the cargo to CAO, and no cargo inspection had been conducted, the suit said.
HSBC alleged that the defendants "disguised the fact that Hin Leong was insolvent" to deceive the bank into lending it money.
It said Hin Leong had suffered US$800 million in losses that were not reflected in its financial statements, and that the elder Lim had told its finance department to hide these losses from the accounts, adding that he "would be responsible if anything went wrong".
On April 9, about eight days before payment was due from CAO, Ms Seng, who was in charge of Hin Leong's finance and accounts department, allegedly told HSBC that Hin Leong "foresaw some 'issues' with repayment from CAO and Unipec".
She told HSBC that Hin Leong will be "remitting funds by way of a 'refund'... and instructed the bank to 'set off' these incoming funds".
That day, the Lim family credited US$17.5 million into Hin Leong's account with HSBC, the suit said. But on April 12, prior to the payment due date of these invoices, the Lims told HSBC in a teleconference that "due to a purported 'miscommunication' within Hin Leong, the financing documents had 'inadvertently'" been sent to HSBC due to an operational error.
The Lims claimed the transactions with CAO and Unipec "did not go through" and apologised for the "errors".
They also agreed to "refund" HSBC, and authorised the bank to "debit any funds standing to the credit of Hin Leong's account... and to set off such funds against the amounts owing to HSBC".
Between April 13 and April 16, the Lim family credited US$7.81 million into Hin Leong's account with HSBC, of which US$4 million was transferred by Mr Evan Lim from his personal account, the suit said.
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