THERE ARE 495 people working in the financial department of Guangdong Kelon Electrical Holdings. Apparently not one of them noticed 269 million yuan vanishing into the accounts of three mysterious new customers. April was a busy month for the refrigerator maker. Cash was forked out for raw materials that would either never arrive, or partly appear without invoices. So it seems money was siphoned from Kelon's accounts. Given that this happened in three, very large lump sums over a short period, it is a modus operandi that threatens to make the balaclava-and-shotgun approach look sophisticated. This was just one of several irregularities highlighted in Kelon's interim results this week as it admitted revenue had been inflated by a substantial 430.55 million yuan last year on the watch of allegedly mischievous ex-chairman Gu Chujun. The revelations confirmed suspicions that all was not quite what it seemed on the firm's balance sheets, opening yet another dark chapter in the life of the white-goods producer. It was mentioned several times in the announcement that Mr Gu is being investigated by police across the border for alleged 'economic crimes'. Four others are also under investigation. The snap conclusion is that a small cabal of executives managed to pull the wool over the eyes of many others on a very large scale and with relative ease. Yet among the board members who were oblivious to it all are former academics, diplomats, aeronautics graduates and members of the stock exchange's listing division. Then there were the checks, balances, committees, rules, regulations and paper mountains of disclosure that should have prevented any irregularities in the first place. But as anyone acquainted with Hong Kong's corporate history should realise, it takes only a small group of individuals in a position of tight control - either over management or a company's shares - to send a business into freefall. In any other part of the world, such an episode would be a class action lawsuit in the making, against directors, accountants, sponsors, lawyers and anyone else linked to alleged wrongdoing, however remotely. Cases such as Kelon's expose the dearth of recourse available in Hong Kong to the stakeholders who bought into the refrigerant growth story. Similarly, the collapse of Moulin Global Eyecare Holdings earlier this summer has become a cautionary tale of great growth aspirations degenerating into an unmitigated meltdown at the hands of a few individuals. And the shareholder-remedies option is a very long shot, indeed. On paper, aggrieved stakeholders can go ahead and sue. But the legal route is not for the faint-hearted. Hong Kong's loser-pays system remains a potent barrier to shareholder activists, even if they have relatively deep pockets. Class actions that take advantage of economies of scale are still not part of the legal landscape. This warranted a brief mention in a supposedly far-reaching overhaul of the litigation process, but has not been acted upon. Similarly, a 'no win, no fee' system that could make shareholder lawsuits more financially viable has been talked about for decades, but has still failed to appear in any tangible form. The Law Reform Commission has been studying their feasibility, but given the government's track record of implementing the body's proposals - only one in 16 of its reports has been acted upon since the handover - and a legal profession that seems apathetic over the issue, radical change any time soon seems unlikely. This leaves a skewed sense of governance in Hong Kong; there is no 'push-pull' effect where shareholder activists with bona fide legal force behind them can force companies to raise the bar. Several years ago, David Webb attempted to set up a statutory shareholder group that could defend the interests of small investors, but the government failed to pick up that ball and run with it. Instead it has issued consultation paper after consultation paper in what seems to be an endless attempt to pussyfoot around the real issue of reform, treading on as few toes as possible so as not to give offence to the powerful or politically important. As cases like Moulin and Kelon show, there are obviously flaws in this great paper exercise. And while the government continues to tinker, shareholder groups in other countries have been popping up and putting companies on the spot. It may be that these groups would give cases like Moulin and Kelon a wide berth - the main protagonists being either on the mainland or unlikely to possess any cash worth trying to claw back - but fear of a financial backlash could be a powerful deterrent to directors considering similar misdeeds. In lieu of a more litigant-friendly environment, it would at least give shareholders some chance of remedy. It would also make Hong Kong finance more interesting - for all the right reasons, for a change. The prospect of being hit in the pocket is a valuable house-training exercise for directors, sponsors, accountants and underwriters. It might also spare a small corner of the rainforest from paper milling.