IN the wake of the bad publicity on the announcement of a government investigation into the corporate affairs of Allied Group, the Riady family came to Lee Ming Tee's rescue, agreeing to take shares in Asia Securities International off his hands. On September 17, 1992, in an unconditional agreement, Allied Group sold 193.2 million shares in, or 33.35 per cent of, Asia Securities International to Hongkong China/EIE. This was done at $2.60 a share each, representing a premium of 62.5 per cent over the stock market price. In a letter on September 28, 1992, Stephen Riady of Lippo told regulators: ''The idea of the proposed acquisition was first discussed by Stephen Riady with John Lee on September 4, 1992, and Stephen Riady approached Lee Ming Tee on September 5, 1992, to discuss the possibility of the proposed acquisition.'' Stuart Crosby, the Securities and Futures Commission's (SFC) investigator in the case, said: ''When interviewed in July 1993, Mr Riady said that the transaction originated around September 1992 when Mr Lee Ming Tee telephoned him and asked whether he was interested in buying a listed company.'' Mr Riady claimed Mr Lee definitely made the approach and the letter of September 28 narrated discussion that took place internally after Mr Lee approached him with the proposal. Mr Riady added: ''We fail to see any inconsistencies between Stephen Riady's account of the events in his letter to the SFC of September 28, 1992, and his interview in July 1993 which spell out this chronology of events quite clearly.'' But Mr Crosby concluded: ''These representations are not consistent with the terms of the letter that passed between the SFC and Mr Riady in late September 1992. Clearly, one of the accounts given by Mr Riady was inaccurate.'' Mr Riady gave a number of reasons for paying the mega stock price premium on the shares, which were said to have net asset value of $2.92 each, according to Allied Group, or between $2.54 and $2.72, according to Lippo's own due diligence work. The shares were crucial because it gave control of the company, it gave the group a $1.5 billion company in one fell swoop, and Asia Securities International assets complemented those of EIE's. In representations by Mr Riady, David Yeh, Tony Hidajat, Davy Lee, Lippo and Hongkong China, they said: ''It is a misconception to compare the acquisition of the shares with the market price as the market price was irrelevant in those circumstances.'' They said the share price reflected the book value of the assets in Asia Securities International. Mr Crosby said book value in market share price determination was generally thought to play a very small part. He said the assertion no other big block like this was available was not correct as there was a further 13 per cent that might be available through a holding company called Lanchester at a price less than $2.60. After taking further representation on the justifiability of the $2.60 price paid as against the $1.60 share price available in the market Mr Crosby concluded: ''I remain unconvinced. The Lanchester stake was the Wyllie stake (See background story on Wyllie sale) and its existence and the fact that it was for sale were public knowledge, having been detailed in public announcements.'' In any event, during the sale proceedings Chinachem became involved in discussions with an interest to acquire shares in Asia Securities International for a second time. They were told of the Allied Group sale of shares in Asia Securities International by Charles Chan Kwok-keung of International Tak Cheung Holdings. Nina Wang and director Joseph Leung Wing-kong were advised by Ronald Arculli of Woo, Kwan, Lee and Lo not to act in an underhand manner in the proceedings for fear of breaking takeover regulations. Chinachem then talked to Standard Chartered Asia to buy a block of shares held by them from the time when Bill Wyllie, who formerly controlled Asia Securities International, decided to retire and sell his shares. They bought 77.84 million shares, about 13.4 per cent. A contest of wills began as Hongkong China and Chinachem fought it out in general offers for the remaining shares in Asia Securities Intentional. In the battle, Mr Crosby reported, David Yeh called Canning Fok of Cheung Kong (Holdings), offering to take some shares in Asia Securities International. There is major confusion over a critical stake held by a Singaporean which was apparently bought around the time of Mr Wyllie's retirement, and is a block of shares that forms the basis of the investigation. On June 6, Hongkong China/EIE announced it had more than 50 per cent of Asia Securities International. A day later the SFC issued a freeze on a sale of shares in a restriction notice involving these 54.9 million shares, prohibiting Christfund Securities from paying out the proceeds of the sale of these shares, which had apparently been sold by a Singaporean resident, Mr Wong, to Hongkong China/ EIE. This restriction notice remains in effect today. Mr Hidajat of Lippo told Mr Crosby the Lippo group of companies and Riady family private companies started to dissociate themselves from Allied Group in the first half of 1992. Hongkong China/EIE and Mr Riady deny knowing of the 54.9 million shares. But because of ''inconsistencies'' in Mr Riady's evidence, Mr Crosby said: ''I do not feel able to rely on those denials and claims.'' Once Hongkong China/ EIE agreed to take Allied Group's stake of 33.35 per cent ''Mr Riady and Hongkong China/EIE had a clear motive for ensuring that the relevant shares (the 54.9 million in question) remained in friendly hands. ''As with Allied Group before them, Hongkong China/EIE/Riady interests' control of Asia Securities International on the basis of only a 33.35 per cent shareholding was vulnerable and there was good commercial reason to shore up that control.'' Mr Crosby concluded that Hongkong China/EIE and Allied Group were concert parties in contravention of the SFC Takeovers and Mergers Code.