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Shirley Yam

Back in the late '90s, China was already hot. Any apparent connection - no matter now flimsy - with Beijing would give a listed company the Midas touch.
With my fellow journalists I used to toy with the idea of registering a company called China State Council Investment Corporation. I could then charge a quarter of a million dollars for every co-operation agreement signed with 'my CSCIC' and become a millionaire within months.
Yet it never went beyond a joke. The regulators would tolerate no fooling around, I sincerely believed.
Having witnessed what has happened with Mongolia Energy Corporation (MEC) over the past years, I now deeply regret my reticence. 
 MEC used to be an investment house involved in property and stocks. It is controlled by Simon Lo Lin-shing, a close ally of property tycoon Cheng Yu-tung. 
Between February and May 2007, MEC surprised the market with the acquisition of several potential coal mines in Mongolia, covering an area of about two-thirds of this city.
However, given its limited capital and mining expertise as well as Mongolia's poor infrastructure, the market and the media wondered if the investment would ever be delivered.
Despite these widely held suspicions, MEC made more than seven announcements on strategic accords signed with various so-called mainland corporations relating to its coal-mining plan in 2007.
Among them are names (provided only in Chinese) that appeared very similar to that of the country's top oil producer, shipping company, power investor and aviation equipment manufacturer that are owned by the central government. 
These all signed a co-operation letter of intent for the development of MEC's mining projects, according to four company announcements in August and September 2007.
For instance, there was (transliterated as China Petroleum Group Corporation), which MEC described as 'a leading Chinese state-owned company dealing with petroleum and natural gas and allocations'.
(The name resembles that of China National Petroleum Corporation , the country's largest oil producer that is often called in the media.)
The letter of intent with this company 'recognises MEC's potential sizeable energy and resources projects in Mongolia and Xinjiang', said a company announcement on September 10, 2007. 
As its share price climbed 16.77 per cent that day, a sharp-eyed Hong Kong journalist pointed out that none of these names existed on the list of centrally owned state enterprises on the website of the country's state asset manager. 
When questioned by the Hong Kong Stock Exchange, MEC stood by its claims. 'MEC is not aware of any exhaustive list of state-owned enterprises under any official internet publication, which is for the person asserting such a position against MEC to bear the burden of proof,' said its announcement. The company's share price lost 5.17 per cent that day.
 The company then sued the journalist for libel. She lost her job. MEC's share price had an annual gain of more than 40 per cent by the end of 2007. 
 It's been four years since then and we have heard no further mention of these strategic accords from MEC. Not even the company's 2007 annual report carried any record. MEC did not proceed with the libel suit against the journalist.
As for the Mongolia mine, it finally started operating in July, according to MEC. However, it provided no details of coal sales.
Then on October 28, the Hong Kong Stock Exchange announced a public censure against MEC, its executive chairman Lo and executive director Yvette Ong, in relation to three of the above announcements. Among them is the signing of a co-operation letter of intent with the so-called China Petroleum Group Corporation.
The censure said they had made statements in the announcements 'which were not accurate in all material respects and were misleading to the company's shareholders and the investing public'.
For that, Lo and Ong will get 24 hours worth of lectures on corporate governance. Nothing else. 
Questions e-mailed to MEC on the censures as well as the whereabouts of the strategic accords had not been answered at the time of going to print. While I  could easily stop here and criticise the impotence of the stock exchange and call for more statutory teeth for  its listing rules, any further action will be a matter for others.
 Under section 298 of the Securities and Futures Ordinance, it is an offence for a company and its directors to make a statement that is 'false or misleading to a material fact'. The maximum penalty is a fine of US$10 million and 10 years' jail. 
The Securities and Futures Commission  earlier disclosed an investigation into Citic Pacific directors who told shareholders there was no material change in the company in a 2009 circular when  it had in fact lost billions in a bet on the Australian dollar. The case was passed to the police. So, what about the MEC directors? Has there been an investigation? The SFC has been silent so far.



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Mongolian company raises questions, but SFC still silent