Hong Kong regulator seeks court order to disqualify former Far East executives
Three former senior executives have allegedly made improper transfers worth US$7.8m in 2007
The Hong Kong Securities and Futures Commission (SFC) is seeking a court order to disqualify former Far East Holdings International chief executive Duncan Chiu and two senior staff for improper fund transfers made more than a decade ago.
The order, if approved by the court, could bar the trio from holding directorships or managing a company for up to 15 years.
The regulator alleged that the three, including Chiu’s brother Derek Chiu, a former Far East non-executive director and financial controller Michael Lui Hung-kwong, had made improper transfers worth a total of HK$61 million (US$7.8 million) in 2007, according to a SFC statement on Tuesday afternoon.
They had conducted the company’s business or affairs in a manner involving defalcation, misfeasance or other misconduct, resulting in Far East’s shareholders not being given all the information as they might reasonably expect and unfairly prejudicial to Far East’s shareholders, it said.
The Chiu brothers were no longer directors of Far East Holdings, according to the company’s 2017 annual report, but they still held director positions in the company’s subsidiaries.
The SFC’s action followed an investigation into the alleged transfers from the company’s bank accounts to the personal bank accounts of the then chairman Deacon Chiu Te-ken – the Chiu brothers’ late father – to subscribe for initial public offer (IPO) shares on behalf of Far East, the statement said.
In 2012, Duncan Chiu and Lui, along with Wendy Yung Kim-bing, a former personal assistant to Deacon Chiu were acquitted of charges of stealing HK$61 million by a Hong Kong court. The judge then referred the case to the SFC.
The SFC alleged that Duncan Chiu had “breached his fiduciary duties to the company by failing to obtain the prior approval of Far East’s board for the transfers, the subscription of IPO shares through the chairman, and the apportionment of allotted shares and of profit and loss between Far East and the chairman”.
Not only did he fail to return the unused balance of the transfers – a sum of about HK$59.2 million – to Far East in a timely manner, but he also did not disclose the HK$61 million as an “amount due from a director” in the company’s 2007 annual report, where the transfers were essentially a loan to the chairman, the SFC said.
Lui, the regulator alleged, had failed to act with due diligence in approving the transfers. Together with the Chiu brothers, he had retrospectively created minutes of directors’ meeting, falsified information to bolster or support Far East’s explanation for the transfers.
Proceeding of the case will depend on the court’s decision. The first hearing of the SFC petition will be heard in the Court of First Instance on June 21.