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SCMP Reporter

THE collapse of an American financial corporation has left a number of Hong Kong investors waiting for the return of millions of dollars they invested in high-interest and high-risk bonds.

  Towers Financial Corporation (TFC), based in New York, froze payments on their corporate bonds in February after the United States Government agency, the Securities and Exchange Commission (SEC), launched an investigation into the company.

  The SEC alleged TFC sold US$400 million more in securities than it had in assets to more than 3,000 customers worldwide.

  TFC was effectively declared bankrupt to allow creditors the chance to recover their money.

  Two class actions are being brought on behalf of debtors against TFC and individuals and agencies connected with selling and recommending the bonds.

  TFC bought debts and unpaid bills and accounts from US hospitals, banks and corporations in exchange for insurance payments, US government health care payments, and the chance of collecting the outstanding money.

  It also bought loan portfolios from US government agencies that liquidated the assets of failed banks and savings and loans associations.

  Hong Kong investors who bought are said to have spent millions on the bonds, which offered a high return of between 14 and 161/2 per cent a year.

  Sunday Money was contacted by one woman who invested $200,000 in the bonds, but only received two monthly interest payments before TFC's assets were frozen.

  She and several other investors bought their bonds through Portfolio and Investment Management Services (PIMS), of Pacific Place, she said.

  In promotional material for TFC handed out by PIMS, it was claimed the Chase Manhattan Bank acted as a custodial trustee.

  However, a bank spokesman denied it had acted as a custodial trustee for TFC; instead it only held a ''lock box'' facility for deposits made by TFC customers.

  According to the spokesman, customers with a lock box ask those writing cheques to it to send the money to a post office where a bank is allowed access to it to credit the money to the customer's account.

  But in a letter to bond holders last month, PIMS said the lock box facility ''should have afforded investors significant protection''.

  For PIMS, Timothy Beevor said his company had made every effort to ensure TFC was a legitimate operation.

  He added that the respected US financial ratings agency Duff and Phelps increased TFC's rating to a ''high quality'' AA Plus just weeks before it collapsed.

  PIMS had ''an ethical and moral duty to assist investors'' to get their money returned. ''I cannot walk away from this,'' he added.

  Mr Beevor insisted PIMS, an affiliate of chartered accountants Pannell Kerr Forster, was not the only company to sell the bonds.

  Sunday Money carried out its own inquiries and asked three well-known financial management companies, Matheson PFC, Thomas Spencer and Towry Law whether they had sold these bonds. They said they had not heard of the TFC bonds.



Collapse leaves local investors out in the cold