CORPORATE GOVERNANCE
Money Matters
by

Why does HKSE stay mum on Energine’s choice of company secretary?

Au-yeung Keung manages to keep his job even though his accountancy registration has been removed for three years

PUBLISHED : Friday, 04 November, 2016, 11:12pm
UPDATED : Friday, 04 November, 2016, 11:12pm

How serious is Hong Kong about the role of a company secretary?

Serious enough to allow one to continue in the job two months after he was suspended from the accountants’ registrar for helping a listed company cheat, using his capacity as a company secretary?

On August 23, Au-yeung Keung was disciplined by the Hong Kong Institute of Public Certified Accountants, and had his registration removed for three years from September 16.

He still remains the company secretary of China Energine International (Holdings), a new-energy company owned by a subsidiary of China Aerospace Science &Technology Corp. that produces rocket launch vehicles. The company has not disclosed the disciplinary action against Au-yeung.

The penalty was related to the fraudulent transactions at Grand Field Group Holdings in 2002 and 2003 when Au-yeung was the company secretary and general manager of financial and commercial affairs at that company.

“He knowingly made or assisted in making misrepresentations or misleading statements to the stock exchange of Hong Kong, that an investment project in a gas pipeline business in 2002 was a genuine one when he knew it was not,” said the accountancy body.

When the capital injection related to the project did not take place and the exchange began to make inquiries, Au-yeung drafted or formulated all the responses.

In those letters, the company insisted the project existed, claiming that progress had been sluggish and the management had been liaising with mainland Chinese officials on the project.

To satisfy the regulators, Grand Field made up a disposal of the project. Au-yeung attended the meeting in which the design and payment for the sham was discussed and filled in the purported agreement before passing it to the chairman to sign.

He even gave specific advice on the accounting treatment when asked by one of the conspirators on how to hide the money trail.

In 2007, the Independent Commission Against Corruption brought the Grand Field management to court and all were convicted. Au-yeung testified under immunity and was not charged with an offence, though one of the charges said the management had conspired with him.

By then, he has already left Grand Field and joined China Energine for a year.

While Au-yeung’s involvement was revealed in the charge sheets and court hearings, China Energine has disclosed none. He has been described only as an accountant with extensive experience as a company secretary and in corporate management.

Energine did not respond to an e-mailed request by the South China Morning Post for comment.

After the final appeal raised by one of Grand Field‘s management team was completed in 2013, the accountancy body began its investigation into Au-yeung’s case this year.

Given his “key role” in the sham, the institute said he was “guilty of dishonourable conduct”. He did not contest any of the institute’s findings.

China Energine’s silence may be excused by the fact that the listing rules do not specifically require any change in the information of a company secretary to be disclosed. But they have detailed the requirements on qualifications, which include professional accreditation – accountant, lawyer or company secretary – or relevant experience.

Why has Energine kept Au-yeung as a company secretary despite his loss of accountancy qualification till September 2019? Is he keeping the job because the company, or the exchange, is satisfied with his experience?

Or are both the company and the exchange unaware of the institute’s ruling against Au-yeung, even though it has been announced in a press release and widely reported?

Similar incidents have happened before.

For years, accountant Mak Kin-kwong had been a popular choice by many listed companies as an independent director until Money Matters revealed his doubtful history in 2011.

Mak was the target of censure for financial irregularities in mainland China. He was the former chief financial officer of a US-listed company whose auditor and every independent director quit. He was then a defendant in three US class-action lawsuits, all alleging false financial statements had been issued. He has resigned from all the directorships following the exposure.

Back then, the explanation was one cannot possibly expect the company or the regulators to monitor every announcement or move by regulators or lawyers outside Hong Kong. Rather, it is the responsibility of the individual to report his or her problem.

Fair enough.

Yet, Au-yeung’s case is about a disciplinary action publicly announced by a professional body in Hong Kong. Why the silence?