THE Allen report into the affairs of the Allied Group shows a close relationship between the Lippo Group, Lippo chairman Stephen Riady and Lee Ming Tee. Mr Allen spotlights loans to companies associated with the Riady family which indirectly controlled a substantial shareholding in Allied Industries and Allied Properties. Also mentioned are loans to joint-venture companies appearing to be owned by Riady family interests and Allied Group. Under a summary of loans reviewed by the report, some $86.87 million of loans outstanding at May 31, 1992 to companies associated with the Riady family were identified. The three companies are Hughendon, Ipswich and Stephens Finance. On one occasion Mr Allen found what appeared to be a back-to-back loan arrangement by the insertion of Stephens Finance between Asia Securities International and a subsidiary of Allied Group. Mr Allen said: ''Mr Stephen Riady maintains that so far as he is concerned the loans made from AsiaSec to Stephens Finance and from Stephens Finance to Charterluck [the Allied Group company] were independent transactions.'' Mr Riady was said to be adamant that they were separately negotiated with different interest rates and spreads. Mr Allen said: ''I believe that these loans were back-to-back in nature and were negotiated to settle Allied Group's outstanding loans from the companies controlled by the Riady family. AsiaSec was at the time controlled by Allied group.'' He said of Mr Riady's version of events: ''I do not consider that explanation convincing. ''The insertion of Stephens Finance between AsiaSec and Charterluck has no apparent commercial benefit and in my view was an arrangement to circumvent the listing rules (Allied Group being a substantial shareholder of AsiaSec), similar to the FSCB mechanism (see below).'' This is firmly denied by the Riady family. With regard to Hughendon and Ipswich, an even more complicated set of affairs was involved. What appears to be at the heart of the matter was who owned Hughendon? Was it Lippo Cayman or a client whose investments were held on trust by Deddy Widjaya? A declaration stating that Mr Widjaya was the real owner of shares in Hughendon was drawn up on August 30, 1991. Mr Riady wrote to the custodian involved in Hughendon, on behalf of Lippo Cayman saying: ''As registered owner of the said shares, you are hereby instructed that the beneficial ownership of the said shares in Hughendon should be transferred from ourselves to Deddy Widjaya.'' The reason why this is important is because Riady interests had some 28 per cent of Morning Star and Ipswich had 25 per cent of the same company. Ipswich, in its securities disclosure return in May, 1992, declared its interest in Morning Star and an executive of Lippo said he thought Mr Widjaya was beneficially interested in the shares. Mr Widjaya is apparently a junior employee of PT Lippobank in Jakarta. Mr Allen said of the declaration of August 30, 1991: ''The inference from Mr Stephen Riady's letter is that until August 30, 1991, Lippo Cayman had been the beneficial owner. ''However a written submission from Mr Stephen Riady, Mochtar Riady and Lippo states that Lippo Cayman held shares on trust for Mr Deddy Widjaya who then held them on trust for Mr Johannes Oentoro [the Lippo client].'' According to the custodian Mr Deddy Widjaya was the beneficial owner to some 10,000 shares in Hughendon. ''Mr Stephen Riady has stated that Mr Johannes Oentoro has always been the beneficial owner of Hughendon and Ipswich. ''If this is true Mr Stephen Riady's August 30, 1991 letter to European Pacific [the custodian] was, to Mr Riady's knowledge, false as was the declaration of trust he signed. ''Furthermore the securities disclosure return in respect of Ipswich's Morning Star shares was also false.'' Mr Allen stresses that the evidence is inconclusive. The Riady family firmly deny any allegations that any infringement has been made of regulations and they also firmly deny they were the beneficial owners of either Ipswich or Hughendon.