SINGAPORE — A complex web of fictitious transactions spun to mislead investors has landed in jail two former executives of a Singapore plastics firm. A third is awaiting sentencing, and an associate still faces charges.
Industry experts say that Cam International Holdings' problems are symptomatic of cutthroat competition among local plastics molders and processors striving in a weak electronics market.
The promise of quick cash from the stock market also has attracted many home-grown firms with dubious track records to seek listings.
On Aug. 27, a local district court sentenced Ng Chee Tiong, Cam International Holdings' former chief financial officer, and William Lim Teong Kuan, managing director of trading partner Toho International Pte. Ltd., to six months in jail for fraud and forgery.
The two defendants, who pleaded guilty, received lighter sentences than they might have otherwise, by testifying against Raymond Chew Chuan Seng, Cam founder and former chairman. Chew was convicted of 12 charges of forgery and falsification, and one of misappropriating close to $1 million.
Chew, who was freed on bail, is to be sentenced in coming weeks. A former co-auditor, Cheong Khee San, 57, also has been charged with conspiring with Chew, 39, to cheat co-auditor Ernst & Young.
The scheme came to light late last year when Ernst & Young auditors noticed interest-free debts with unusually long maturity amounting to more than $7.7 million in the accounts of Cam's Malaysian mold-making subsidiary Cam Precision Engineering (Johor) Sdn. Bhd. The debts related to the purported sale of molds to a mysterious Hong Kong firm.
In 1995, about $9.3 million — more than 90 percent of CEJ's sales — came from the unidentified Hong Kong company.
In a 100-page report lodged with Singapore's Ministry of Finance, Ernst & Young concluded: ``We are of the opinion that the above set-up does not appear to be a genuine trade transaction, but rather more in the nature of a money-laundering operation.''
Ernst & Young also reported that CEJ's profit margin was substantially lower than that of similar mold makers.
For example, CEJ's gross profit margin in 1996 was just 3.4 percent, vs. 17.5 percent reported by a local rival.
According to the prosecutor, Cam generated fictitious sales to affiliated companies to artificially boost the parent company's gross profit since 1994. The group reported net profit of $2.3 million for the year ended Sept. 30, down 60 percent from the previous period.