THE big scandal revealed in the past 12 months has its roots in 1993. The takeover of Paragon Holdings by China National Petroleum Corporation stirred misgivings at the time. In the week before CNPC announced its bid for Paragon, the value of the locally listed shell company's shares shot up from 10.5 cents to 40 cents a share. The CNPC bid came in at 15 cents a share. Helen Lee Ho-yan, Securities and Futures Commission director of enforcement, was ordered to investigate. It was a major investigation and, for the first time, the ability of regulators to gather information in China was tested. But the findings which were ready for release in May recommended the freezing of a block of more than 50 million shares because Ms Lee had been unable to determine beneficial ownership. She investigated share purchases ordered by Felix Wong Sin-hua and Cai Jun through Tunlin Securities. Ms Lee said Mr Cai was described as the purchaser of the shares but she said there was evidence that Mr Wong was the real buyer. The SFC was told that 10.3 per cent of Paragon's capital was bought through Tunlin in the names of J P Liu and Sun Shan Fa between March and May and the proprietor of Tunlin said Mr Wong ordered the purchases and paid for the shares. But Mr Wong said he had no interest in the Paragon shares concerned but was merely settling payments for Mr Cai. When Mr Cai was interviewed, Ms Lee said he told the SFC that he was acting for a mainland party 'whose identity changed with each version of the facts given by Mr Cai'. Some 51.43 per cent of Paragon shares were held in an account of Good Link Group. Ms Lee made 'many unsuccessful attempts to elicit information from the various PRC parties concerned'. But she failed to get information that could have established the owner of the shares. A long-running saga also concluded with the Insider Dealing Tribunal reaching a decision on insider dealing of Public International shares. Like Paragon, Public International was the target of a back-door listing by mainland interests and, like Paragon, a flock of profiteers were around to take illicit advantage of the situation. Public International's moment came in late 1992 when its shares began performing erratically. This year, the tribunal handed down orders against former director of Nikko Securities Don Lau and two Malaysian Chinese, Leong Kwok Nyem and Amy Foong Swee Heng. The Stock Exchange of Hong Kong was at the centre of a series of other scandalous revelations. The exposure of former Ming pao Enterprises chairman Yu Pun-hoi as a convicted fraudster and an ex-convict led to further disclosures. Mr Yu had been convicted of cheque kiting and illegal possession of a weapon in Canada while he was a student. His next mistake was fail to declare his convictions to the stock exchange on the directors' statutory declaration form. As a consequence, Mr Yu was forced to quit the board of Ming Pao and relinquish control over the locally listed newspaper publisher. There were some other directors of companies who were exposed. Savio Lam, a director with knitting machine distribution company Win Win, was found to have been involved with a gang which robbed a jewellery shop in Tsim Sha Tsui at knife-point in the early 1970s. Mr Lam was also forced off the board of Win Win.