Laws may have been broken at Tee International: PwC

Singapore

MAINBOARD-LISTED company Tee International has released its external investigator summary, which reported that former group chief executive Phua Chian Kin had admitted to taking company funds to repay his own debts as well as satisfy margin calls.

PricewaterhouseCoopers Risk Services, in a 13-page executive summary released by Tee on Tuesday, also noted that Singapore Exchange (SGX) Rules and the Companies Act may have been breached due to Mr Phua's actions including ordering remittances in and out of the company's coffers - if done without shareholders' approval.

The chief financial officer of the group at that time, Yeo Ai Mei, executed the majority shareholder's orders in relation to the remittances.

Last year, independent auditors Deloitte & Touche noted during their audit of Tee that the group had paid S$3.75 million to Mr Phua and Oscar Investment, an offshore company he controls. Mr Phua was relieved of his CEO duties last September but remains a director.

According to the PwC report, Tee subsidiary PBT Engineering received S$2.8 million from Oscar on July 19, 2018, purportedly to be used as a fixed deposit to secure a facility line with a bank for the operations of the group. PBT later repaid Oscar the amount via a cheque, which was cleared on July 24, but the payment voucher was only issued three weeks after the funds transfer, under Ms Yeo's instructions.

Tee unit Trans Equatorial Engineering transferred S$500,000 to Mr Phua's personal account on Feb 12 last year, which was jointly approved by Mr Phua and Ms Yeo. The latter said there was a request from Mr Phua for the purposes of a "corporate exercise".

However, Tee's internal auditors were told a different story last October by Mr Phua, who admitted that S$165,000 of the funds were used to repay his loan from a moneylender while the remaining S$335,000 were purportedly used to satisfy margin calls from stock brokers.

Trans and PBT transferred S$1 million and S$2 million respectively in March last year to Oscar. Ms Yeo told PwC that Mr Phua had requested the funds for a "corporate exercise", so she instructed the treasury to perform the transfers.

Mr Phua told the audit committee in July last year that the S$3 million was to qualify the group for a project in Cambodia. However, he told the internal auditors that he had used S$251,478 of the S$3 million for partial repayment of a S$1.5 million personal loan, while S$2.5 million was used to repay a loan taken by Oscar from a third party.

PwC noted that the loan Oscar had taken out was a back-to-back loan arrangement Mr Phua had with Tee's majority-owned listed unit, Tee Land, for the funding of a project.

Mr Phua told PwC that he thought it was "appropriate" for him to request monetary aid from the group when he was in financial difficulties, and that he had the intention of repaying the loan to Tee within the same month.

He further said his pride had resulted in contradictory statement given to different parties, as he "did not want the audit committee to know he was in need of cash". He had furnished loans to the group periodically in the past when it was in financial needs, whereas this time, he was the one in need of money.

Mr Phua and Oscar have repaid all the sums to Tee, as of August last year.

PwC noted that laws and bourse rules may have been flouted as a result of these remittances including interested-person transactions and an inaccurate announcement to the SGX.

Further, PwC said there was a breakdown of Tee's internal controls of payment processes, and potential non-compliance with the Corporate Governance Code.

In its statement, Tee said it is reviewing the findings of PwC and will address the matters raised, with updates to be provided on the steps taken and to be taken.

The PwC summary came one day after Tee clarified that Ms Yeo had resigned after being asked to do so due to her involvement in the remittances.

SGX Regulation (SGX RegCo), in a regulatory announcement after the PwC summary was released, said it expects issuers to have in place appropriate internal controls to monitor material disbursements of issuer's funds. The issuers and their directors must also ensure that procedures are in place to monitor interested-person transactions for compliance with the listing rules.

It will review the summary as well as other matters to do with Tee for potential breaches of the listing rules.

The counter closed 0.2 Singapore cent or 4.4 per cent down at 4.3 cents on Tuesday, before the PwC summary went public.