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OIL company CNPC (Hong Kong) has played down last week's Securities and Futures Commission (SFC) investigation into Paragon Holdings and its call for a probe into suspected false accounting, forgery and conspiracy to defraud.

  Formerly named Paragon Holdings, CNPC said the SFC report on Paragon 'will not have any material adverse effect on the financial condition and/or business and/or present management' of CNPC.

  Neither CNPC's management nor the management of its majority shareholder, Sun World, was the subject of an SFC investigation, CNPC said.

  Sun World, a wholly owned arm of China National Petroleum Corp, believed the report would not have any material adverse effect on its continuing ownership of CNPC shares.

  The SFC investigation was launched in November last year after erratic and heavy trading in Paragon shares before the announcement of a takeover in 1993 by China National Petroleum Corp in a back-door listing.

  Helen Lee Ho-yan, SFC director of enforcement, was ordered to look into the share trading and find out who was the beneficial owner of the shares in the key days of trading before the takeover.

  Her report concluded it was likely to be difficult to establish beyond reasonable doubt the beneficial owners and said the chances of successful prosecutions were low.

 Key witnesses lived in China and had not shown willingness to co-operate with a Hong Kong investigation, Ms Lee concluded.

  But she suggested the Attorney-General consider initiating criminal proceedings against Cai Jun and Felix Wong Sin-hua under section 33 (12) of the SFC Ordinance, section 36 of the Crimes Ordinance, or possibly for perjury.

  She recommended the Attorney-General consider criminal investigation for suspected false accounting, forgery and conspiracy to defraud over some documents which could not be verified and 'appeared suspicious'.

  SFC spokesman Bill Weeks said the matter was in the hands of the Attorney-General.

  'At this point our investigation would take the form of providing any information which the Attorney-General's office deems necessary to its investigation if it decides to pursue them,' said Mr Weeks.

  Ms Lee also recommended forwarding a copy of her report to the Insider Dealing Tribunal.

  Mr Weeks said the tribunal had to come to a conclusion on its last hearing, Public International Investments, before it could deliberate on Paragon.

  Mr Wong, who denied being the beneficial owner of the Paragon shares under investigation, has objected to the publication of the final report.

  'There is no need for the general investing public to be made aware of this matter, in particular, in light of the 'findings' which in our view are at best inconclusive,' Mr Wong's lawyers said.

  Mr Cai objected to Ms Lee's report being forwarded to the Insider Dealing Tribunal.

  He said through his lawyers that the tribunal should resolve a case on insider trading in Paragon shares 'based on evidence to be adduced to it.

  'It should not rely on conclusion [sic] drawn by the inspector in a separate investigation, especially when the investigation is conducted for another purpose,' he said.

  Furnishing the report to the tribunal would colour its views 'and prejudice the interest of the parties before the tribunal', Mr Cai said.



CNPC rules out damage from SFC probe call