Citic Pacific ordered to pay costs for police case

PUBLISHED : Wednesday, 29 June, 2011, 12:00am
UPDATED : Wednesday, 29 June, 2011, 12:00am
 

Citic Pacific has been dealt a new blow in its long-running battle to stop the Hong Kong police from investigating the company for fraud over a disastrous derivatives loss that the company delayed disclosing in 2008.

The High Court, in a judgment published yesterday, turned down the Beijing-backed steelmaker and property developer's bid to avoid paying legal costs for an earlier court hearing involving law enforcers in March over evidence.

Citic Pacific lost that case in which it attempted to restrict police access to files relating to a HK$15.5 billion loss it made in September 2008 from an unauthorised, wrong-way bet on the future price of the Australian dollar. Citic's board knew of the loss by September 7, 2008, but did not announce it until October 20 that year.

On March 18, Mr Justice Alan Wright ruled the police could see the files. Citic Pacific began a separate action attempting to avoid paying the police's costs for the March hearing.

In his judgment, Wright said the state-owned enterprise must pay three-quarters of the legal fees of the Secretary for Justice and the Commissioner of Police, which people involved in the case estimated would be less than HK$1 million.

Citic Pacific had argued it should not bear the winning side's costs because lawyers for the justice department and the police had asked for some evidence too late. Wright wrote that he 'did not regard that to be a realistic submission'.

The March hearing was the first time the police outlined exact fraud accusations against Citic Pacific, part of state-owned Citic conglomerate.

During the trial, police prosecutor Charlotte Draycott accused the company of defrauding three banks by asking them for loans after it racked up the huge derivatives loss but before disclosing it to the market.

Draycott alleged Citic Pacific borrowed HK$1.75 billion from Bank of China, Industrial Bank of China and Japan's Bank of Tokyo-Mitsubishi UFJ weeks before it revealed its loss.

'They wanted to raise money and they wanted to do that without disclosing their true financial position,' Draycott claimed in a March 10 hearing. 'This is a conspiracy to defraud.'

Draycott claimed Citic Pacific also sought legal advice on how to delay the announcement of the loss so it could to secure the loans, saying: 'While they kept that information secret from the shareholders, from the public and from the exchange, they went to the banks.'

A Citic Pacific spokesman declined to comment.

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