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Fraud charges in SembMarine forex case
[SINGAPORE] The long arm of the law has caught up with Wee Sing Guan, some six years after news broke that Sembcorp Marine's former group finance director had undertaken currency bets that cost the group US$303 million in losses and years of legal battles.
Wee, 65, has now been slapped with criminal charges for fraud, over his failure to report those losses.
Wee was charged in court last week on 57 counts of falsifying the accounts of Jurong Shipyard, SembMarine's wholly-owned unit, of which he was a director. He was said to have done it "wilfully and with intent to defraud", by omitting to report the losses incurred on trading positions he held with various banks between 2005 and 2007.
According to the charge sheets, these were hundreds of millions of dollars' worth of marked-to-market losses that Wee had incurred on foreign exchange and options trades positions he held with a host of banks, including OCBC Bank, DBS Bank, BNP Paribas (BNP), Societe Generale (SocGen) and Standard Chartered Bank.
The offences, under the Penal Code, carry a maximum penalty of an unspecified fine and a seven-year jail term, for each charge.
It is understood that the prosecution, led by deputy public prosecutor Kevin Yong, intends to proceed on nine of the 57 charges, taking the rest into consideration.
The next hearing, a pre-trial conference, is scheduled for March 6. Wee is represented by Julian Tay, a senior partner in the litigation and dispute resolution department of Lee & Lee.
The charges come some six years after Wee's alleged wrongdoing first came to light. SembMarine had announced in October 2007 that Wee, then its group finance director, had made large unauthorised currency bets in the euro and the US dollar with 11 banks using the account of Jurong Shipyard.
The news stunned the industry and the financial markets.
Soon after its announcement, SembMarine was locked in a bruising battle with the banks to reduce its losses, with SembMarine arguing that the transactions were invalid and not binding.
It fired Wee from the group, while Jurong Shipyard said that it was lodging a complaint against Wee with the Commercial Affairs Department (CAD).
In February 2008, SembMarine announced that it had reached full and final settlements with nine of the 11 banks, for just US$9.1 million.
That left it fighting a US$50.7 million claim by BNP, while trying to recover another US$198.9 million that it had paid to SocGen.
BNP had threatened to wind up Jurong Shipyard, but lost that court battle; it settled the claim for US$30 million in December 2008. During that hearing, Wee's unsigned affidavit was produced in court; in it, Wee claimed that BNP executives had pressured him to take up some "very aggressive instruments" to cover up his initial losses. He suggested that they had played on his fears and convinced him of the need to enter into "more and more exotic and complex transactions" as his losses deepened, despite his angry e-mails to them to stop.
In his affidavit, Wee claimed Jurong Shipyard's management had no idea he was involved in such risky trades until mid-October 2007. But his lawyers argued that their client's acts and foreign exchange transactions were at all material times authorised and mandated by the board of Jurong Shipyard.
In September 2010, SembMarine and SocGen agreed to settle the claim for US$40 million, without any admission of liability by either side.
In July 2011, Jurong Shipyard filed a notice of arbitration against its former auditor Ernst & Young (EY) for claims over these disputed unauthorised foreign exchange transactions. It did not give any details other than the statement that it believes "it has a valid claim" against EY. In January last year, SembMarine announced that it had reached an agreement with EY, for a "full and final amicable settlement" over the case.
SembMarine is a global marine and offshore engineering group, specialising in integrated solutions in ship repair, shipbuilding, ship conversion, rig building and offshore engineering and construction.
Jurong Shipyard is a one-stop total shipyard offering ship repair, shipbuilding, ship conversion, rig building and offshore engineering.
Both companies have said in their annual reports that their foreign exchange trading was only for hedging purposes to protect their foreign currency denominated receivables and payables.
SembMarine shares closed at $4.18, down two cents, on Friday.