Judicial manager PwC suing OK Lim and his 2 children for US$3.5b

Singapore

THE judicial manager for insolvent oil trader Hin Leong Trading is suing patriarch Lim Oon Kuin, better known as OK Lim, and his two children for US$3.5 billion, alleging that each of them breached their fiduciary duties as directors and engaged in fraudulent trading.

The claim of US$3.5 billion represents the full amount of Hin Leong's outstanding debts. Judicial manager PricewaterhouseCoopers (PwC) Advisory Services is also seeking to clawback another US$90 million in dividends that the Lim family paid to themselves in previous years out of Hin Leong's bogus profits, according to court documents filed last Friday and seen by the The Business Times.

PwC argued in the statement of claim that OK Lim, his son Evan Lim Chee Meng and daughter Lim Huey Ching acted deliberately to conceal Hin Leong's losses and "present a vastly misleading picture of its financial health" to deceive banks into lending it money.

"They did this through fraudulent activity including, among other things, the creation of fictitious gains to conceal accumulated trading and other losses, the forgery of documents, the manipulation of (Hin Leong's) accounts through irregular accounting entries, the overstatement of (Hin Leong's) inventory and the obtaining of financing through improper means," PwC wrote.

PwC's findings challenge earlier claims made by Evan Lim about the role he played in helping Hin Leong to hide US$800 million in futures trading losses from its audited financial statements over the years.

He had said in his first affidavit filed in April: "I am not personally aware of how and why these losses were not reflected . . . I understand from my father that he gave instructions to the finance department to prepare the accounts without showing the losses and told them he would be responsible if anything went wrong. I signed off on Hin Leong's financial statements on the instructions of my father."

But PwC now alleges that Mr Evan Lim and his sister "knowingly participated" in the creation of documents for 780 fictitious swap trades, and personally authorised money transfers between Hin Leong's own bank accounts, which were disguised as payments from counterparties.

PwC said: "Given the magnitude and extent of the fabricated gains and forged documents, Evan Lim and Lim Huey Ching, as executive directors of (Hin Leong), ought to have known that fictitious swaps trades were created to conceal (Hin Leong's) losses, inter-bank transfers were executed to give the false appearance that payment was received in respect of these swaps trades, and that documents were forged to support these fictitious swaps trades."

Mr Evan Lim has handled swaps trading since at least 2016, while Ms Lim was personally in charge of Hin Leong's finance and accounts departments, PwC added.

All three Lims were involved in obtaining financing for Hin Leong through various improper means, PwC further alleged.

Between December 2019 and March 2020, the Lims caused Hin Leong to enter into transactions for the sale and immediate re-purchase of cargo.

They then misled banks into issuing letters of credit to finance the purchase leg of these transactions when the cargoes were in fact non-existent, claimed PwC. The Lims are therefore personally liable for US$623 million outstanding under 26 letters of credit, PwC claimed.

The Lim family also caused Hin Leong to submit 27 fabricated sales contracts to obtain financing from 15 banks by way of 61 separate loans, PwC claimed. Twelve of the 27 sales contracts were submitted for multiple loan applications. The total value of financing obtained was US$1.24 billion, of which US$1.15 billion remains outstanding as at April 27.

Separately, Hin Leong also fabricated 21 bills of lading under the instructions of OK Lim to procure financing from lenders, so he is personally responsible for the outstanding debt of US$572 million arising from these facilities, PwC claimed.

Mr Evan Lim and Ms Lim further misled HSBC into lending Hin Leong US$112 million by signing off on two invoices that were submitted to HSBC to obtain discount financing under a so-called silent discounting framework earlier this year, PwC said.

One sales invoice was purportedly for cargo sold to China Aviation Oil (Singapore), or CAO, for US$56 million. The other invoice was purportedly for cargo sold to Unipec for US$56 million. Under "silent discounting", HSBC undertakes not to contact Hin Leong's counterparties to verify the sales.

On April 12, prior to the payment due date of these invoices, Mr Evan Lim and Ms Lim admitted to HSBC that the transactions with CAO and Unipec never occurred, PwC said. The pair claimed that the sales invoices had been submitted to HSBC because of an "operational error", PwC said.

On Aug 14, the Commercial Affairs Department of the Singapore Police pressed its first charge against OK Lim for the abetment of forgery for the purpose of cheating relating to the fake CAO cargo sale. Police investigations are ongoing into other offences allegedly committed by the elder Mr Lim.

PwC was appointed by the Singapore Court to supervise Hin Leong's debt restructuring exercise in April after banks froze its credit lines amid concerns over Hin Leong's ability to repay them.

Drew & Napier lawyers led by Senior Counsel Cavinder Bull and Chia Voon Jiet are representing PwC in the claims against the Lim family. The Lim family is represented by Davinder Singh Chambers.