CARRIAN Investments Limited (CIL) achieved an undeserved, but very considerable, standing in the market in its brief life and by the end of 1981, it was the seventh-largest company in Hong Kong, the High Court was told yesterday. The liquidators said it managed to build this enormous reputation with contrived transactions. The court heard of George Tan's manipulations of his private company, Carrian Holdings Ltd (CHL) and CIL. He inflated and deflated prices as he swapped assets between the companies to boost CIL's profits. The first step was the buying and selling of Gammon House (now the Bank of America Tower), Christopher Carr QC, for CIL's liquidators, said. A 75 per cent interest was bought by CHL in July 1980 and then sold to CIL - that is Tan sold it to himself and then agreed to sell it to Bylamson, a company owned by the Lam family. A public announcement was made of the sale, giving a truly spectacular profit of $441 million, which was included in the interim results for the half year up to September 30, 1980. This was over 100 times greater than the $3.8 million profit for the equivalent period of the previous year. There were a number of difficulties, the most fundamental being that the sale to Bylamson was a sham, Mr Carr said. Bylamsom was only a middleman, the real buyer being a $2 company in which Tan was interested, Wallop. 'Effectively through corporate vehicles and manipulated transactions, Tan had sold Gammon House to himself,' Mr Carr said. Price Waterhouse found no faults in the interim results although counsel said they were 'crawling with problems'. There was no genuine sale, and even if there had been the transaction was completed on October 31, 1980 and so could not be included in the interim results. This transaction dominated the nine-month year-end results for December 1980, but Mr Carr said Tan had decided he could squeeze a bit more out of it and he made three adjustments and an extra profit of $113 million. Tan said Bylamson had agreed to pay an extra $50 million, they were paying extra interest of $34 million and a foreign currency exchange loss of $29 million was being waived in CIL's favour. This showed Tan controlled all aspects of the sham transaction, Mr Carr said. He claimed Price Waterhouse lost its independence on this audit, as audit partner Rodney Bell was an investment adviser to CIL and in January 1981 became a member of CIL's acquisition committee. In April 1981 he joined CIL for three months, while still a partner and in July 1981 joined CIL as group financial director. Another Price Waterhouse audit manager joined CIL in June 1981 and John Marshall, another partner, joined Carrian in early 1982. Turning to the 1981 accounts, Mr Carr said Carrian had a relatively quiet first six months, but its accounts for the year end were 'wrong in just about every material particular'. The accounts were a lie from beginning to end and Price Waterhouse should have detected that without difficulty. CHL injected a huge parcel of assets into the public company for $1.133 billion. CIL paid $25 million cash and the balance was paid by a new issue of CIL shares, tripling CIL in size.