Midas board flags suspicion over seal, signings in loan papers

Singapore

THE board of troubled railway parts maker Midas Holdings has raised suspicions over the way in which an alleged board resolution that had been used to provide liability guarantees for 400 million yuan (S$82.3 million) in loans was signed.

The debt-laden Chinese firm, which is embroiled in round-tripping scandals and management dispute, had been called to the court under civil suits filed by Chinese moneylender Jilin Provincial Micro Refinancing Corporation.

In the first hearing held on June 26, it was found that the loan-guarantee document was sealed with a rubber seal meant for parcel deliveries, and not with the company's common seal, the Midas board said in a regulatory filing on Wednesday.

The actual common seal is kept in Singapore, and meant to be used on important documents.

According to the board resolution, directors Chan Soo Sen and Tong Din Eu had abstained from voting on it. But they were unaware of the board meeting convened at the company as stated in the board resolution, nor were they informed of such board meeting or resolution, Midas said.

"Both Mr Chan and Mr Tong were absent at the signing and no effort to ratify the resolution was made."

As a result, the chief financial officer of the company has no record of the three loans made by Midas' unit Jilin Midas or the board resolution that approved the 400 million yuan guarantee.

It is also unclear whether the former CEO Patrick Chew had signed the board resolution. Photos of Mr Chew signing certain documents had been submitted as court evidence. The board noted that the signature of Mr Chew is in Chinese, and not his usual signature.

"If Mr Chew did sign the board resolution, it will contradict his earlier denial about his ignorance of the underlying loans related to the guarantee. If Mr Chew did not sign the board resolution, then forgery could have occurred."

In June, Midas also found that its Chinese unit Shanxi Wanshida Engineering Plastics has been engaged in round-tripping and has previously undisclosed, unauthorised bank accounts.

On June 7, the board obtained bank statements for Wanshida's account with the Industrial and Commercial Bank of China's branch in Ruicheng. These showed evidence of round-tripping, made to create the impression of a 60.6 million yuan loan by Wanshida to Luoyang Midas Aluminium Industries.

Separately, another apparent set of round-tripping transactions was found between Wanshida and Jilin Midas. As Jilin Midas is under judicial management, the board has no access to its bank statements and said it will verify if round-tripping has also taken place here at a later date.

The Midas board has also found other irregularities linked to undisclosed loans.

In May, the board declared that the company cannot operate as a going concern, while the firm's auditors said separately that its auditor reports for Midas from 2012 to 2016 can no longer be relied upon.

Trading in Midas remains suspended.