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TEE International investigating unauthorised transactions worth over S$6m linked to CEO

MAINBOARD-listed engineering group TEE International is appointing an external third party independent investigator to look into unauthorised transactions totalling S$6.55 million made by its subsidiaries to related parties.

The transactions, which took place from July 2018 to May 2019, were allegedly made under the instruction of group chief executive and managing director Phua Chian Kin, said TEE International.

Transactions from certain related parties to the subsidiaries had also taken place during that period. The board and executive committee were reportedly similarly unaware of these remittances.

TEE International clarified that monies under the remittances have been fully repaid by and to the group as of August 29.

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The unauthorised remittances were discovered by the group over the course of preparing for its financials for the full year ended May 31, 2019. Remittances amounting to S$3 million were recorded as "other receivables", and external auditor Deloitte raised a red flag when it was unable to verify the nature of the remittances.

Overall, the unauthorised transactions included S$3.75 million paid by two subsidiaries to Mr Phua and Oscar Investment, an investment holding company wholly and beneficially owned by Mr Phua and incorporated in the British Virgin Islands. The money was paid over four transactions that happened on Feb 12, Mar 1, Mar 4 and Mar 8, 2019.

The subsidiaries in question were TEE International's wholly owned units PBT Engineering and Trans Equatorial. PBT Engineering provides turnkey solutions for commercial, industrial and institutional buildings, while Trans Equatorial provides addition, alteration and upgrading of existing buildings, as well as mechanical and electrical engineering services.

In response to queries from the Singapore Exchange, TEE International said on Sunday that Mr Phua claimed the money was used to pay for certain expenses to secure a relevant engineering project for the group. But no supporting documents have been provided by Mr Phua to support the nature of these remittances, what the money was paid for, and to whom it was paid to, said TEE International.

Separately on July 19, 2018, S$2.8 million was paid by Oscar Investment to PBT Engineering. Mr Phua claimed that the funds were placed into a fixed deposit account to activate a banking credit line granted to PBT Engineering. Repayment was made on July 24, 2018.

Mr Phua has since been removed as an authorised signatory for all payments. Meanwhile, internal auditor Protiviti Pte Ltd and the Business Control and Risk department of the group have widened the scope of review on key internal controls in selected areas, including the authorisation of payments made from the company's subsidiaries. The review commenced on Sep 2.

Pending completion of the review, Mr Phua has been relieved of his current role and duties as group chief executive and managing director, the group said on Friday. Taking over his positions in the interim is Phua Boon Kin, the deputy group managing director.

Mr Phua Boon Kin has also succeeded Mr Phua Chian Kin as a member of the executive committee and nominating committee. The latter will remain as an employee of the company.

Deloitte said in a letter to the company on Friday that it is unable to ascertain the nature and purpose of the remittances and the benefits of them to the group. It requested certain information from TEE International, including whether there were other similar payments made by any entity within the group to or for the benefit of Mr Phua and/or his family members. This include payments made to entities in which Mr Phua is interested in 20 per cent or more of the total voting power there in, such as Oscar.

Asked by SGX about whether there has been similar remittances that were undisclosed, the company said the board is currently not in a position to determine this.

In view of the inconclusive outcome of Deloitte's review, the board is in the process of engaging an external investigator to carry out further checks. This would include special reviews to cover the financial year ended May 31, 2018 and up to August 31, 2019.

TEE International will apply to SGX for an extension of time to hold its annual general meeting for FY2019 and to release its Q1 results for FY2020.

Shares of TEE International closed at 4.6 Singapore cents on Friday, up 2.2 per cent or 0.1 Singapore cent.