THE key scandal revealed in the last 12 months - the takeover of Paragon Holdings by China National Petroleum Corporation (CNPC) - stirred misgivings at the time but the roots of the affair go back to 1993. 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. The CNPC bid came in at 15 cents a share. The then-financial secretary, Sir Hamish Macleod, ordered Helen Lee Ho-yan, director enforcement with the Securities and Futures Commission (SFC), to investigate. It was a major investigation and the first test of regulators' ability to gather information in China. But, at the end of an investigation whose results were only released in May, Ms Lee was forced to recommend the freezing of a block of more than 50 million shares because she had been unable to determine beneficial ownership. Ms Lee's investigation focused on share purchases ordered by Felix Wong Sin-hua and Cai Jun through Tunlin Securities, and who their silent backers were. 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 brought through Tunlin in the names of J. P. Liu and Sun Shan-fa between the start of 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 and 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'. About 51.43 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 which could establish exactly who owned the shares. A long-running saga also concluded with the Insider Dealing Tribunal eventually making orders in the case of insider dealing in the shares of Public International. 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 started to behave erratically. Matters were not resolved until this year when the Insider Dealing Tribunal handed down orders against former director of Nikko Securities Don Lau and two Malaysian Chinese, Leong Kwok-nyem and Amy Foong Swee-heng. Meanwhile, the stock exchange was the centre of a series of scandalous revelations during 1994 and 1995. The dramatic exposure of former Ming Pao Enterprises chairman Yu Pun-hui as a convicted fraudster and ex-convict produced a succession of other 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 to fail to declare his convictions to the stock exchange on his director's statutory declaration form. In the aftermath of his unveiling as a former criminal, Mr Yu was forced to quit the board of Ming Pao and has subsequently lost control over the locally-listed newspaper. Another director caught for the same offence was Savio Lam, a director with knitting machine distribution company Win Win. He was found to have been involved in a jewellery robbery in the early 1970s. Mr Lam was forced off the board of Win Win. And Robert Low, a senior partner at a major local law firm and a non-executive director on the boards of several local companies, was also brought into the limelight because of his past record and his failure to declare it. Mr Low had been sent to jail in the early 1960s over a corruption case. He did not mention his conviction in his declaration, either, and suffered the same fate as Mr Lam and Mr Yu.