Citic Pacific's Chairman And MD Face Securities Probe

Posted last year: David Webb's Time-Bomb Warning On Citic Pacific Should Not Be Dismiss

On today's Bloomberg, Citic Pacific’s Yung and Fan Face Securities Probe

• Jan. 2 (Bloomberg) -- Citic Pacific Ltd., predicting $2.4 billion of losses from currency derivatives, said the Securities and Futures Commission is investigating its chairman and managing director in relation to the bets.
  
  Chairman Larry Yung, 66, and Managing Director Henry Fan are among the 17 directors being probed, Citic Pacific said today in a statement to the Hong Kong stock exchange, without elaborating. The commission had announced the investigation on Oct. 22 without giving details.
  
  Chairman Yung, son of a former Chinese vice president, had to seek a bailout from parent Citic Group after wrong-way bets on the Australian currency, disclosed on Oct. 20. The board was criticized for a six-week delay in revealing the losses by lawmakers and shareholder activist David Webb.
  
  Citic Pacific rose 22 percent to HK$10.20 on the Hong Kong exchange today. The statement came after the market closed.
  
  The company, which makes steel and develops property, learnt of the currency agreements on Sept. 7. On Sept. 12 it issued a circular saying “directors are not aware of any material adverse change in the financial or trading position of the group since 31 December 2007,” when announcing a connected transaction.
  
  The company’s shares fell 42 percent between Sept. 7, when the board learned of the exposure, and Oct. 20. The city’s benchmark Hang Seng index dropped 23 percent in the same period.
  
  Unapproved
  
  Yung had said Financial Director Leslie Chang, 54, didn’t follow hedging policy and failed to seek his approval for the transactions. Chang and Financial Controller Chau Chi Yin were ousted for the trades.
  
  Should the September company circular contain a misleading statement, that would be an offence for which the company and directors could be prosecuted, Webb, a former independent director at the exchange, had said on his Web site. The maximum penalty is a fine of HK$10 million ($1.3 million) and 10 years jail, he said.
  
  Chairman Yung is the son of Rong Yiren, who had set up Citic Group in the 1970s as a state vehicle for foreign investment. Managing Director Fan, 60, stepped down from Hong Kong’s cabinet as well as taken a leave of absence from other government appointments after the loss disclosure.