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Enoch Yiu

Firm accused of conspiracy to operate deceptive investment schemes in China

The chairman of gold refining and trading company RNA Holdings, along with eight others arrested on Wednesday in connection with a $1.5 billion false accounting and fraud case, have been freed on police bail.

Raymond Chan Fat-chu and his younger brother and deputy chairman, Alexander Chan Fat-leung, were released after posting a $100,000 bail each yesterday.

Two RNA employees and five others were freed on bail ranging from $10,000 to $20,000 each.

The nine were ordered to report back to the police on June 1, a police spokeswoman said.

RNA, listed on the main board, is accused of conspiring with other firms to operate fraudulent investment schemes involving 150 gold and jewellery shops on the mainland between February and April  2001.

In 2001, RNA claimed the 150-shop network was worth $1.49 billion, but it made a $700 million provision for impairment of goodwill a year later. The company reported losses totalling $1.04 billion  for the financial year ending April 2002.

RNA lost $2.11 billion the subsequent year and another $53.17 million last year.

Ernst & Young, RNA's former auditor, has expressed doubts over the company's statement of accounts for 2002 and 2003, and offered qualified opinion on the $700m provision. The firm in September last year replaced  Ernst & Young as auditor with Ting Ho Kwan & Chan.

RNA shares have been suspended from trading since June 2003 pending inquiries by the stock exchange, which has threatened it with delisting if it  fails to provide a plausible business plan before September 3 this year.

The Chan brothers were high-profile figures in Hong Kong, considered by fellow stockbrokers to be generous and aggressive businessmen and victims of the Asian financial crisis.

Raymond Chan was president of the Chinese Gold and Silver Exchange Society from 1996 to 2000. He once controlled four listed companies with businesses spanning  gold trading and jewellery retailing to property investment.

His father started a gold trading business, Tem Fat Hing Fung, in the Western District in 1949. Mr Chan brought it public in 1990 and spun off its core gold trading business as RNA Holdings in 1996.

In 1997, Tem Fat Hing Fung purchased listed property firm Can Do Holdings and  began investing heavily in  real-estate projects in Shanghai, Hong Kong and Malaysia at the peak of the property boom. When property prices collapsed during the 1998 Asian financial crisis, the Chan brothers and their firms  sank in a quagmire of debt.

They turned to their father's friend -  Li Ka-shing - for help. Mr Li's Cheung Kong (Holdings) bailed RNA out  by  buying a large quantity of convertible bonds that would leave the developer with  26.22 per cent of RNA when fully converted into shares.

Mr Li is also a major client of RNA -  his privately owned LOCO Hong Kong hired RNA as a consultant for its gold trading  unit.

Tem Fat Hing Fung has  been renamed as China National Resources Development Holdings, while Can Do  Holdings  is now Goldbond Group Holdings.

Trasy Gold Ex, a software research firm spun off from RNA in 2000 to list on the Growth Enterprises Market, has been suspended since June 2003. Last month, it announced that  ITC Corp had purchased a 50.07 per cent  stake in the  firm for $8 million.



RNA executives in $1.5b fraud case released on bail