Documents forged on a “massive scale” at Hin Leong to hide losses

The bulk of the overstatement consists of US$2.23 billion in accounts receivables which have no prospect of recovery and another US$0.8 billion in inventory shortfalls.

“Documents that have been forged or are at least of dubious authenticity include bank remittance advices, bank statements, bills of lading, sales contracts, sales invoices, swap trade confirmations, swap trade tickets, deal settlement slips and inter-tank transfer certificates,” says PWC in its report.

“The scale and regularity of the fabrication suggests that the practice was routine and pervasive,” PWC adds.

Hin Leong filed for bankruptcy protection in April, owing more than a dozen banks and business partners some US$3.5 billion.

In contrast, accounting for overstatement of inventory and other items, PWC found that Hin Leong only has assets of about US$257 million.

PWC believes that Hin Leong on its own has no reasonable prospect of being restructured or rehabilitated. “However, there may be some prospect of restructuring if the company is put together with other companies in the Hin Leong Group with the support and cooperation of the Lim Family,” says PWC.

PWC’s recommendation is that Hin Leong, the shipping unit, Ocean Tankers Pte Ltd, and the Universal Terminal storage facility be bundled together as integrated petroleum trading platform, for any viable restructuring or rehabilitation to be carried out for the benefit of the creditors.

PWC raised several other flags in the report. For example, despite the losses for the past few years, privately-held Hing Leong paid out dividends of US$60 million and US$30 million for FY2018 and FY2017 respectively.

PWC also found out that there have been numerous occasions where the same inventory, carried onboard the massive storage tankers, has been sold to at least two buyers.

When Hin Leong repurchased from one of the buyers, it was then able to obtain letter of credit facilities amounting to tens of millions.

PwC also found traders purportedly with access to the company’s futures trading systems, not listed as Hin Leong employees.

PWC laid out a series of difficulties preparing the report. First, given how pervasive the forgery of documents had been, the IJMs therefore couldn’t take any of the documents in the Hin Leong’s possession at their face value. “Instead, every document had to be scrutinised in order to check and verify whether it was genuine.”

Hin Leong’s accounts had been manipulated through various convoluted accounting entries and therefore, not likely to reflect the true nature and substance of transactions.

“In general, the company’s accounting and operational records were not properly maintained. The documents which the company was expected to retain in the ordinary course of business in order to explain its transactions were not completely available,” says PWC.

Records kept by Hin Leong, such as that for inventories, appear “highly questionable”; the employees, when interviewed, gave conflicting and inconsistent answers, says PWC.

PWC tried to interview OK Lim, but was told by his lawyers he is not medically able to go through the process. A written response to questions posed by PWC was agreed but none so far has been made as of yet.

See also:

• Oil trader Hin Leong set to hand over management from founding family to PwC
• Singapore oil trader Hin Leong failed to declare losses of US$800 mil
• Potential reprieve for Hin Leong as Sinopec eyes oil terminal
• Hin Leong bankruptcy may cause local NPLs to rise
• Banks freeze credit to Singapore oil trader after price crash
• Standard Chartered hit by bad loans including Hin Leong
• MPA awards two new bunkering licenses to fill void left by Hin Leong
• DBS, OCBC, UOB likely to record impairments owing to Hin Leong Trading bankruptcy: Phillip Securities