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  • Writer's pictureJulie O'Connor

Were Co. Funds Used to Pay 'Hush Money' and Cover-Up Allegations of Fraud Made Against a Director?

Cover-Up - "an attempt to prevent people discovering the truth about a serious mistake or crime"

Hush money is left, right and centre of the news right now, because of how former President Trump was alleged to have made a hush money payment to Stormy Daniels.

Hush money is nothing more than a tool available for the wealthy to pay their accusers off and hide their dirt. The majority of us folk don't have the funds needed to buy that 'stay out of court/jail card', so then the system of justice becomes inequitable.

Singapore's Prime Minister Lee Hsien Loong keeps promising us that Singapore doesn't allow cover-ups, so why would it be OK for well-connected Directors of SGX listed companies to offer hush money to cover up allegations of fraud made against them? Why are some companies disclosing writs to the market, whilst others are being allowed to keep their investors in the dark? Can it be blamed on that inequitable cronyism again!

A$3,500,000 was offered which would see a writ containing allegations of forgery and the misappropriation of shares which implicated a Director of SGX listed EZRA Holdings being retracted. Aside from the retraction of the writ, the conditions included that the four documents alleged to contain the forged signatures would have to be endorsed and /ratified, evidence would need to be handed over to the Director implicated, together with letters of retraction of complaints made to regulators, financial institutions, board members, audit committees etc.

Were investors unknowingly funding the 'hush money'?

The above payment was offered in early 2015 and in a series of five-articles published by NUS Professor Mak Yuen Teen, the Prof. highlighted a USD$3,500,000 undisclosed related party transaction. Coincidentally, this payment appears to have taken place around the same time of the 'hush money' being offered.

"An Undisclosed Related Party Transaction?

Note 12 in EOL’s 2016 annual report, under “Trade and other receivables” states: “These amounts are unsecured, interest-free and repayable in cash on demand. Included in other receivables is an amount of US$3,500,000 relating to a refundable deposit paid to a company related to a director of the parent company”.[10] The 2015 annual report did not disclose any such refundable deposit.

This would suggest that there was a related party transaction with the director during that year (or in previous years but not highlighted in “other receivables” in earlier years). However, a review of EOL’s annual reports dating back to 2010 showed no disclosure of any related party transaction that appears to be in the nature of a refundable deposit paid to a company related to a parent company director.

Who is this director of the parent company (i.e., Ezra) who was paid the refundable deposit that was unsecured and interest free? What was the purpose of this refundable deposit? When was it disclosed, if at all? Was it repaid to the company?"

  • Did the Board of EZRA Holdings agree to the payment of 'hush money', to keep investors in the dark about the writ and its retraction prior to the announcement of US$2 billion of proposed transactions which involved members of the group?

  • Did EY, who were the group's auditors, question the undisclosed related party transaction?

  • Did PwC, who were the appointed Judicial Managers, ensure that these funds were returned to the company?

"The three companies did lots of related party transactions together, and, on occasion “inadvertently” failed to disclose their involvement in at least two transactions where the Lee family were the personal beneficiaries of deals with the public companies they managed. Mak Yuen Teen, a corporate governance activist in Singapore, has dubbed the Ezra, Triyards and Emas Offshore as the “Tri-Tanic”.

Triyards was placed under judicial management in February 2020. All three companies have all met a similar fate to the doomed ocean liner.

The only mercy of Titanic compared to the Tri-Tanic is that the former sank faster, and less predictably.

Ezra and the Tri-tanic Part V: The Reckoning | Governance For Stakeholders

Where are Singapore's Watchmen Hiding? And with DBS and OCBC being the financial institutions which faced the largest financial exposure following the collapse of the EZRA Holdings Group, when did the EZRA Holdings board appraise DBS and OCBC of the writ, its contents and the background to its retraction?

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