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Screenshot of a breaking news alert e-mail from Q2 2017
The Hong Kong Securities and Futures Commission (SFC) has obtained an order in the High Court to disqualify Mr Fan Di, former chairman, president and executive director of Pearl Oriental Oil Ltd (Pearl Oriental) for defalcation, misfeasance and other misconduct towards the company.
The Honourable Mr Justice Godfrey Lam granted the order to disqualify Fan from being a director of or being concerned or involved in the management of any listed or unlisted company in Hong Kong including Pearl Oriental or any of its subsidiaries and affiliates, without the leave of the court, for six years.
The SFC’s investigation found that from April 2003 to June 2005, Fan caused Pearl Oriental to invest RMB60 million via an investment company on the Mainland, which would lend the money to companies connected to Fan. In July 2005, Pearl Oriental’s auditor queried the recoverability of the investment, which was itself objectionable because no written approval had been obtained from the board of Pearl Oriental. Upon demand from Pearl Oriental in August 2005, RMB 64.8 million (purportedly as principal plus interest) was repaid to Pearl Oriental.
Immediately upon the repayment, Fan caused Pearl Oriental to pay out RMB64.5 million, again without the board’s approval, as an advance for an acquisition of a Mainland logistics business. In obtaining retrospective board approval for the acquisition, Fan failed to disclose important unfavourable findings emerged in the due diligence on the logistic business and to present accurate information about its valuation. As a result, the board approved the payment without taking any reasonable steps to verify the information presented by Fan.
However, the RMB64.5 million was actually transferred to Mainland companies connected to Fan. The acquisition of the logistics business did not proceed in the end and Pearl Oriental incurred a substantial loss of the RMB64.5 million.