More legal woes ahead for Hin Leong founder O.K. Lim and family
They are involved in a growing number of lawsuits by bank creditors trying to recover more than US$3.5 billion (S$4.7 billion) from the firm.
More legal woes are likely on the cards for the founder of insolvent Hin Leong Trading and his two children, who are now battling a growing number of lawsuits by bank creditors trying to recover more than US$3.5 billion (S$4.7 billion) from the firm.
This was after PricewaterhouseCoopers Advisory Services, the judicial manager of the oil trading giant, filed suit to force oil tycoon Lim Oon Kuin, better known as O.K. Lim, and his two children to repay the US$3.5 billion debt and $90 million in dividends that they allegedly paid themselves even though their company was insolvent. PwC alleged that they breached their fiduciary duties as directors and engaged in fraudulent trading.
Following PwC's suit, HSBC, Hin Leong's largest creditor with about US$600 million owing, took legal action against the family, followed by Bank of China.
One of Singapore's biggest cases of corporate fraud and breaches of accounting regulations, the Hin Leong scandal came to light earlier this year amid an unprecedented collapse in global oil prices as the Covid-19 pandemic swept across the globe and a price war broke out between Saudi Arabia and Russia.
Hin Leong's foundations began crumbling when banks, spooked by defaults at other trading houses like Agritrade International, began withdrawing credit lines.
Compounding the firm's liquidity crunch was the oil price rout. Unfortunately, Hin Leong had not sufficiently hedged against this, and, as a result, was forced to sell its inventory to meet margin calls by numerous banks.
"At the same time, the trade financing loans extended by the banks for Hin Leong's purchase of cargo in the preceding weeks became due. Having depleted its cash reserves to answer margin calls, Hin Leong simply did not have the funds to pay these loans," Lim revealed in court documents filed in April.
Even worse for the banks, he said that Hin Leong sold some of the inventory the company had pledged as collateral for its loans, and used the proceeds as general funds "even though the inventory was the subject of inventory financing agreements with banks." He added that he "told (his finance department) that (he) would be responsible if anything went wrong".
Hin Leong's troubles escalated with a probe by the Singapore police and increased scrutiny by several regulators. In addition to Hin Leong, two other companies related to the Lim family are now under interim judicial management. They are Hin Leong shipping arm Ocean Tankers, and Xihe Holdings, which is owned by Lim and his son, Mr Evan Lim Chee Meng.
In August, a day after the interim judicial managers of Xihe were appointed, Lim was charged with one count of abetment of forgery for the purpose of cheating relating to a fake China Aviation Oil (Singapore) Corporation (CAO) cargo sale. This was followed by an additional charge in September.
HSBC took legal action against the Lim family and a Hin Leong employee after the two criminal charges were brought against the elder Lim, as the fake CAO cargo sale is also the subject of the bank's suit. HSBC alleged that the defendants "fraudulently deceived" it into lending Hin Leong US$111.7 million by signing forged invoices that were submitted to obtain discount financing earlier this year. But, in his defence papers, the elder Lim denied the allegations.
The elder Lim, in his defence filings to the PwC suit, has disavowed his affidavit filed on April 17, in which he alleged that payments made to satisfy margin calls were reflected as "accounts receivables" in the financial statements.
When asked about his statement in his April affidavit, the elder Lim said "his highest level of education is Secondary 2 and as he is not trained to read financial statements, he does not even know what 'accounts receivables' are".
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