Fujian Nuoqi alerts police to cash transfers of missing chief Ding Hui
Lax internal controls and poor corporate governance are seen as being behind the troubles of Fujian Nuoqi, which has reported to Hong Kong and mainland police about its missing chairman's unauthorised transfer of 232.05 million yuan (HK$290.9 million) from the company's coffers.
The Hong Kong-listed mainland fashion retailer made the reports to the Ministry of Public Security and Hong Kong police on Monday and Tuesday, the company announced on Thursday night.
"This matter is really bad. The fact that such a large amount of money can be transferred shows the company has very poor internal controls," said Raymond So Wai-man, the dean of the business school at Hang Seng Management College.
The missing money accounts for a large portion of the company's cash, which stood at 350.35 million yuan at the end of last year.
The company's investigation found Ding Hui, its chairman and chief executive, had instructed the transfer of a combined 69.55 million yuan from a Hong Kong account at Bank of Communications on January 27 and April 3 to a British Virgin Islands firm that is not owned by Nuoqi.
The bank account belongs to Nuoqi Fashion International, a wholly owned subsidiary.
Nuoqi also discovered Ding instructed the transfer of a combined 162.5 million yuan from Nuoqi Fashion's Bocom account in Hong Kong to its account at Xiamen International Bank on January 27 and March 11.
Nuoqi said its board was now ascertaining the status of the account's balance at the Xiamen bank.
Nuoqi reported to Hong Kong police on July 23 that Ding was missing, and the company said it was still unable to contact him. Since July 25, Ding's elder brother Ding Canyang has taken over the running of the company.
The fact that Nuoqi is now headed by a relative of the missing chairman who is suspected of absconding with company funds is a sign of poor corporate governance, So said.
The company's new leadership should be independent of the chairman, he said. "One of the basic principles of corporate governance is independence," he said.
The company listed in Hong Kong in January, with CCB International as the sole global coordinator and sole sponsor, while the joint bookrunners and lead managers were CCB International, BOC International and RHB OSK Securities.
One of the risk factors stated the company's prospectus is that it may be difficult to enforce Hong Kong court judgments against its directors on the mainland.
Most of Nuoqi's directors including Ding Hui and Ding Canyang live on the mainland, the prospectus stated.
The company is headquartered in Quanzhou, Fujian province.
"I expect criminal charges will be brought if the chairman can be apprehended. The ongoing issue is the lack of an extradition treaty between Hong Kong and [the mainland]," corporate governance activist David Webb said.
Trading in the company's shares has been suspended since July 23. The stock was issued at HK$2.13 and last traded at HK$1.
The Securities and Futures Commission declined comment on the case.