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Queries over missing S$33m: Allied Tech outlines escrow account fund flows
CATALIST-LISTED precision engineering firm Allied Technologies outlined the flow of funds from its escrow account with law firm JLC Advisors in a filing on the Singapore Exchange (SGX) on Wednesday night.
Allied Tech was responding to queries from SGX RegCo over the S$33.4 million of net proceeds it raised in 2017, its S$30 million acquisition of a 51 per cent stake in Asia Box Office (ABO), its S$25.2 million acquisition of a 51 per cent stake in Activpass Holdings and the disposal of equity in two companies.
The queries came in the wake of the disappearance of JLC lawyer Jeffrey Ong, along with S$33.2 million held in the escrow account. Ong has since been arrested and charged in court.
The escrow account was first created to hold its 2017 fundraising exercise proceeds.
Allied Tech initially considered Elitaire Law, which handled the placement exercise, as an escrow agent for the proceeds. But as the proceeds were sizeable, the board thought it was more prudent to engage a sizeable law firm and engaged JLC, which Elitaire had recommended.
The board provided the same rationale for sums received from the disposal of its subsidiaries - Allied Machineries (Shanghai) Co (S$12.3 million) and Allied Technologies (Suzhou) Co (S$23 million), placing both receivables in the escrow account.
Allied Tech disclosed that Elitaire had not explicitly recommended Mr Ong, who was the only JLC employee Allied Tech dealt with at all material times.
As for proof of monies in the escrow account during Allied Tech's financial reporting periods, such as quarterly results, Allied Tech said that Mr Ong had provided notices of balance available in the account after every transaction, and that the group had periodically checked the account's balance against the notifications received.
As to the position of JLC partner Pok Mee Yau, Allied Tech said her appointment as an independent director on Oct 31, 2017, took place after the escrow agreement was put into place on Oct 23. While it was aware of Ms Pok's position, the board had "already finalised JLC's engagement as the escrow agent, and the signatories for the escrow agreement had already been decided".
The group clarified that Ms Pok's then position as a partner of JLC did not pose any concern to the board and that she was not a signatory for the release of escrow monies to be placed with the law firm.
Ms Pok and Mr Ong were in charge of legal documentation for Allied Tech's failed acquisition of a stake in payment solutions company 8travelpay Intelligence & Technology (Shanghai) Co, for which JLC was paid S$105,745.
With regard to the S$30 million acquisition of a 51 per cent stake in ABO, Allied Tech disclosed that the amount was paid to Platform Internet Capital (PIC), which owned ABO, on April 4, 2018.
Before Kenneth Low Si Ren joined Allied Tech as an executive director on June 27, 2018, he bought - on June 5 - a 49 per cent stake in PIC and effectively ABO, two months after Allied Tech acquired the majority stake in ABO.
SGX Regco also asked about an intercompany loan of S$3.6 million that was paid to ABO on July 12, 2018.
Allied Tech said the loan was for working capital requirements as ABO had just completed a major project and was pending account receivables from it. However, it admitted that there was no formal agreement for the inter-company loan. ABO had also transferred US$500,000 received from a booking agent refund to the JLC escrow account despite not having a formal agreement with JLC.
Allied Tech said it was because ABO did not have a US dollar denominated bank account yet, and asked JLC to receive the funds on behalf of ABO.
More ABO transactions were later held in trust by JLC, most of which were done prior to Allied Tech's acquisition of ABO.
As at end-2018, JLC held S$1.1 million on behalf of ABO. But by April 2, 2019, the monies had been fully returned to ABO.