Freeze of assets in ChinaCast case to stay

Judge unmoved byex-accounting chief's claims of innocence over education firm

PUBLISHED : Wednesday, 13 November, 2013, 3:17am
UPDATED : Wednesday, 13 November, 2013, 3:17am

A Hong Kong judge has extended an order freezing the assets of Jim Ma Jim Lok, a former chief accounting officer of ChinaCast Education, an education services provider formerly listed on Nasdaq.

In September, the US Securities and Exchange Commission charged ChinaCast's former chief executive, Chan Tze Ngon, with stealing tens of millions of dollars from investors in its Nasdaq initial public offering and charged Jiang Xiangyuan, ChinaCast's former China president, with illegally dumping ChinaCast stock after he helped steal company assets, the SEC said on its website.

ChinaCast delisted from Nasdaq in June last year.

On June 19 this year, Mr Justice Louis Tong Po-sun granted an injunction freezing the Hong Kong assets of Ma, Chan, Jiang and Antonio Sena, a former chief financial officer of ChinaCast.

Ma maintains he is not involved in any fraud in ChinaCast.

In a Court of First Instance ruling on Monday that continued the injunction, Mr Justice Anthony Chan Kin-keung said: "I am not convinced about Ma's explanations. Just looking at the unauthorised borrowings and the pledges, there is a strong inference that there were too many irregularities to have escaped an honest chief accounting officer. It is very difficult for such unlawful acts to have escaped Ma."

Ma was the ChinaCast executive responsible for dealing with its auditor, Deloitte Touche Tohmatsu. In February, a group of US funds sued the accounting firm in a US court for investors' losses from ChinaCast. Deloitte said it would vigorously defend itself, The Wall Street Journal reported.

In 2011, there was an internal conflict within ChinaCast culminating in the sacking of Chan and Jiang in March last year, while Sena resigned, Monday's ruling said. Ma was fired a month later.

The new management found financial records and other documents in the Shanghai offices of ChinaCast's subsidiaries had been removed or destroyed, it said. In March last year, Chan tried to prevent the new management from entering the Shanghai premises by changing locks, it added. Company chops and other documentation required to run ChinaCast had been removed on Chan's instructions, the ruling said.

As the end of June 2011, ChinaCast had 858 million yuan (HK$1.09 billion) in cash. ChinaCast's new management found that from July 2011 to April last year, more than 762 million yuan had been removed, part of which was used to repay unauthorised loans, the ruling said.

Between 2010 and 2011, more than 780 million yuan of loans were taken out by ChinaCast's mainland subsidiaries, it said. The current management of ChinaCast said these loans were unauthorised as the group had ample cash reserves.