Tuesday, 2 September 2014

Aircel-Maxis case: are the Malaysian authorities refusing to cooperate? (2)

Astro Malaysia Holdings Berhad announced today:

"Astro Malaysia Holdings Berhad (“AMH”) refers to the media statement issued by Astro All Asia Networks Limited ("AAANL") that the Central Bureau of Investigation, India (“CBI”) has on 29 August 2014 filed a charge-sheet in relation to, among other things, AAANL's acquisition of shares in Sun Direct TV Private Limited in 2007. The media statement states that AAANL has learnt from media reports in India that the charge-sheet names AAANL, Mr. T. Ananda Krishnan and Mr. Augustus Ralph Marshall, amongst others.

Mr. T. Ananda Krishnan has a deemed substantial indirect interest in both AMH and AAANL while Mr. Augustus Ralph Marshall is a non-executive director of AMH as well as a director of AAANL.

We wish to clarify that AAANL is a separate and distinct legal entity and is not a member of the AMH Group of Companies.

This charge does not implicate, nor impact AMH, the entity listed on Bursa Malaysia Securities Berhad."

Maxis Berhad announced today:

"Maxis Berhad refers to the announcement made on 10 October 2011.

Maxis Berhad refers to the press release issued by Maxis Communications Berhad (MCB) today pertaining to media reports that the Central Bureau of Investigation, India has on 29 August 2014 filed a charge-sheet in relation to, among other things, MCB’S acquisition of Aircel Limited from Siva Ventures Limited in 2006. The charge-sheet names, amongst others, MCB, Mr. Augustus Ralph Marshall (a non-executive director of Maxis Berhad and MCB)  and Mr. T. Ananda Krishnan (who has a deemed substantial indirect interest in both Maxis and MCB).
This development does not implicate and will not have any impact on Maxis Berhad, the entity listed on Bursa Malaysia Securities Berhad."

That is of course good news for the current shareholders of Astro Malaysia Holdings Berhad and Maxis Berhad.

But the case is still highly relevant for Astro All Asia Networks Limited  and Maxis Communications Berhad, both their Board of Directors and their shareholders, during the above mentioned acquisitions in 2006 and 2007. And thus also for the Malaysian authorities.

Interestingly, both companies were subsequent to the alleged events delisted, Maxis Communications Berhad in July 2007, Astro All Asia Networks Limited  in June 2010.

And both were relisted again, but under a different name and in a different corporate structure: Maxis Berhad in November 2009 and Astro Malaysia Holdings Berhad in September 2012.

And both in such a way that "this charge does not implicate, nor impact" them, according to the above two announcements.

Was that one of the reasons behind the delisting and subsequent relisting (in a different structure) of both companies?

More information at The Malay Mail:

"Maxis denies wrongdoing in Indian telco scandal, scrambles for investment treaty shields"

Sunday, 31 August 2014

Millions of empty packets transported throughout China

After four years managing a private delivery company in the Chinese city of Ningbo, Chen Qian has acquired a new skill: he can tell which packets are fake even before he picks them up. Some are hollow boxes, some rattle with a piece of candy or a keychain. Recently, he says, merchants sending fake deliveries have started putting toilet paper rolls to give some heft.

Mr Chen says these account for about a quarter of the 4,000 packages his company handles every day. The phenomenon is widespread throughout China; a consequence of the country’s booming e-commerce industry and, specifically, a practice known as shuaxiaoliang, or literally – “sales brushing”. Online sellers are recruiting their friends, relatives and even professional fraudsters to make fake orders because shipping more goods would give them better placement – and therefore a better chance to garner more real sales – on websites such as Alibaba-owned Taobao.

“We’ve only started brushing recently,” said one Taobao shop owner in Hangzhou which sells hats and traditional silk scarves, who asked not to be identified. “There is no other choice for us. A lot of the other shops have been doing this for years, and we realised that no matter how well we did in sales, we could not compete with those who brushed.

A rather weird and wasteful practice, as described by the Financial Times.

Every system that allows itself to be gamed, will be gamed, if some people gain from that. Everyone would be better of if nobody would do this anymore, but how to coordinate this?

The above delivery company in Ningbo handles about 1.5 million packets of which about 400,000 are fake. But that is just one delivery company in one city, the total amount of empty packages per year must be huge, at least in the millions, probably more.

Aircel-Maxis case: are the Malaysian authorities refusing to cooperate?

The CBI has chargesheeted former telecom minister Dayanidhi Maran for abusing his position to "constrict the business environment" forcing mobile operator Aircel to sell stake to Malaysian company Maxis in lieu for two sets of 'gratification' totaling rs 742 crore.

The chargesheet also figures the Maxis' owner T Ananda Krishnan besides Maran's brother and chairman of Sun Network Kalanithi Maran among others.

According to the chargesheet, the CBI is also looking into "the aspect of irregularity in grant of FIPB approval" in the stake sale. CBI said it was investigating the FIPB approval to Global Communication Services Holdings Ltd and the role of Indian partner, Sindya Securities and Investments Ltd, in holding 26% equity of Aircel.

Maran had approached the Supreme Court on Thursday saying CBI should be restrained from filing the chargesheet as the information from Malaysia was awaited and the investigation was incomplete. But CBI officials told ET that though Malaysia has refused to offer any information about the deal, the information received by the agency from UK and Mauritius was enough to file a chargesheet.

The above from an article in The Economic Times. Other articles about this matter can be found here, here and here, they contain the following sentences:

....the chargesheet would be based on evidence collected within the country as the Malaysian authorities were refusing to cooperate.

The CBI said it had completed the investigations without receiving a reply from Malaysia as responses from the UK and Mauritius helped them establish the charges.

The agency had told the apex court that overseas probe was being delayed due to the influence of the firm's owner in Malaysia who is "powerful politically".

The agency had also sought information from the Malaysian authorities through Letters Rogatory (LRs) but it did not get satisfactory response, after which the judicial requests were sent again. The reply to second LR is pending.

The Malaysian authorities should come forward and provide details regarding the above allegations of not cooperating. This case is already 8 years old and should be expedited, especially with two listed companies (Maxis and Astro) and several Malaysian persons being involved.

Saturday, 30 August 2014

Three articles

Three interesting, but not very positive articles, for the full text please click on the links.

Pump and Dump: How to Rig the Entire IPO Market with just $20 Million

How much does it cost to manipulate an entire market? Not much. And it’s getting cheaper!

It was leaked on Tuesday by “people with knowledge of that matter,” according to the Wall Street Journal, that VC firm Kleiner Perkins Caufield & Byers had decided in May to plow up to $20 million into message-app maker Snapchat, for a tiny portion of ownership. An undisclosed investor also committed some funds. The deal, which apparently hasn’t closed yet, would give Snapchat a valuation of $10 billion.

By strategically deploying less than $30 million, KPCB, and DST Global before it, have ratcheted up Snapchat’s valuation from $2 billion to $10 billion. With the stroke of a pen, in a deal negotiated behind closed doors, they have created an additional $8 billion in “wealth” that is now percolating through the minds of employees with stock options and through the books of the early investment funds.

Inflating Snapchat’s valuation by $8 billion with a few million dollars rigs the entire IPO market that depends on buzz and hype and folly to rationalize these blue-sky valuations. Unnamed people “knowledgeable in the matter” who leak these valuations to the Wall Street Journal are an integral part of the hype machine: It balloons the valuations of other startups. And it creates that “healthy” IPO market where money doesn’t matter, where revenues and profits are replaced by custom-fabricated metrics.

The Lawsuit That Could Legalize Pay-To-Play For Pension Fund Investments

Here’s a scenario to chew on:

An investment firm makes a campaign contribution to a city mayor. Later, the mayor appoints members to the city’s pension board. The pension board decides to hire the aforementioned investment firm to handle the pension fund’s investments.

Does something seem fishy about that situation?

The SEC says yes, and they have rules in place to prevent those “pay-to-play” scenarios.

But a recent lawsuit says no: investment managers should be able to donate money to whichever politicians they choose, even if those donations could present a conflict of interest down the line.

Detecting fraud a risk in China

It can be very risky to do things in China that are taken for granted in other countries.
Kun Huang, a Chinese-born Canadian citizen, is back in Vancouver after spending two years in a Chinese jail. His crime was contributing to research that led his employer to recommend short sales of Silvercorp Metals, a silver producer that is based in Canada but does its mining in China.

Mr Huang, now 37, returned to his native China in 2006 after graduating from the University of British Columbia with a degree in commerce. His parents immigrated to Vancouver in 1997, when he was 20 years old, and he became a Canadian citizen in 2002.

His job was to research Chinese companies, which were beginning to list on stock markets in the United States and Canada. He had been hired by Eos, a hedge fund run by Jon Carnes, a Canadian money manager, to “go through all the financial records in Chinese, talk to management and customers and suppliers,” he said in an interview.

At first, Eos looked for good stocks to buy, but Mr Carnes eventually gained a reputation for spotting Chinese frauds, which he publicised online under the name Alfred Little.

Mr Huang had worked on some of those reports but had no run-ins with the Chinese authorities until 2011. In June of that year, he was asked to look into Silvercorp. He said he found that some Silvercorp reports to the Chinese government showed its mines were not doing as well as they were in reports that the company issued in Canada.

He sent associates to the Ying Mine, Silvercorp’s largest operation, in Henan Province, about 500 miles southwest of Beijing. They filmed trucks leaving the mine with ore and picked up samples of the ore that fell off trucks.

In September, an Arthur Little report questioned whether Silvercorp had exaggerated the mine’s production. It said the samples it had picked up had substantially less silver in each ton of rock than the company claimed and that the volume of truck traffic was too light to account for all the ore Silvercorp said it had mined.

The company responded indignantly and demanded investigations into those who had attacked it.

Mr Huang was arrested on December 28 when he tried to fly to Hong Kong from Beijing. A police officer from Luoyang, the city closest to the mine, warned him that if he did not cooperate he could spend four or five years in jail. The officers questioning him took frequent calls – Mr Huang says he believes they were from Silvercorp officials – and then demanded such information as “the password to the Eos mail server”.

Within a few days, Mr Huang was released on bail, prohibited from leaving China. But that status ended abruptly in July 2012 after a column I [Floyd Norris] wrote for The New York Times appeared, quoting Mr Carnes as saying the Luoyang police “arrested, terrorised and forbid my researchers from communicating with me or performing any further research on Chinese companies”.

Mr Huang was rearrested, he told me, with police officers making clear that action was “directly in retaliation” for the column. He spent the next two years in the Luoyang detention centre, in a 300-square-foot cell that held as many as 34 other prisoners, according to a lawsuit Mr Huang filed this month against Silvercorp in Vancouver.

The previous articles about Silvercorp in The New York Times can be found here and here. A website by supporters of Mr Huang can be found here.