HCMC bourse leaders complicit in real estate tycoon’s $144 mln fraud: prosecutors

Former Ho Chi Minh Stock Exchange (HoSE) chairman Tran Dac Sinh and subordinates enabled former FLC Group chairman Trinh Van Quyet misappropriate VND3.6 trillion ($144.3 million) from investors, prosecutors said Tuesday.

They did so by helping FLC Group list on the bourse, they said in an indictment issued against Quyet and 49 others

The stock manipulation and asset appropriation case involves FLC Group, BOS Securities JSC, FLC Faros Construction JSC, related companies in the FLC ecosystem, the HoSE, the State Securities Commission's (SSC) Public Company Supervision Department, and the SSC’s Vietnam Securities Depository (VSD).

In August 2012, Quyet directed his subordinates Doan Van Phuong, CEO of FLC Group; Le Dinh Vinh, vice chairman of FLC Group; Tran The Anh, an official of FLC Group's legal division; and Tran Xuan Huy, CEO of FLC Travel & Events to acquire Green Belt Company with a registered charter capital of VND1.5 billion ($60,100). The company was renamed Vinh Ha and then Faros.

To create capital sources for the company’s operations with Faros having insufficient capital or assets as collateral, Quyet directed the group’s members to carry out procedures to increase the company's charter capital. From April 2014 to March 2016, Quyet and his subordinates made false capital contribution documents five times to raise Faros’s charter capital from VND1.5 billion to VND4.3 trillion ($180.32 million).

In particular, the investigative agency of the Ministry of Public Security concluded that the actual capital contributed by Faros was about VND1.2 trillion and the falsely declared capital was over VND3.1 trillion.

Faros then requested the registration of a stock listing of 430 million ROS shares of Faros on the HoSE to sell to investors. In this process, Quyet was aided by the HoSE officials.

Faros’s financial statements did not meet all the conditions for acceptance, but independent auditors signed independent audit reports accepting all the documents.

According to the indictment, on April 20, 2016, Doan Van Phuong, chairman of Faros, signed a document proposing that the State Securities Commission consider and approve the company’s registration. The application was evaluated by the SSC’s Public Company Supervision Department. During the appraisal process, the department discovered that the audit reports failed to comply with legal regulations.

Realizing that the financial statements and audit reports still had many contradictions, on May 17, 2016, Le Thi Thu Hang, deputy director of the Public Company Supervision Department; and Hoang Thi Nhi Ha and Nguyen Van Hanh, experts with the department, worked with Hanoi Company Profession of Auditing & Accounting Company Limited (CPA Hanoi), with the participation of Ha Thi Ngoc Ha, vice president of the Vietnam Association of Certified Public Accountants (VACPA).

The meeting’s minutes determined that the audit procedures and audit evidence were not sufficient to give full approval for Faros’s financial statements, and the audit confirmations were not appropriate. Therefore, CPA Hanoi was requested to perform the audit and reissue the audit reports. However, CPA Hanoi did not re-audit; instead auditor Le Van Tuan, and CEO Nguyen Ngoc Tinh signed and issued audit reports featuring full approval of Foros’s financial statements.

Even though he spotted multiple problems, Le Cong Dien, head of the Public Company Supervision Department created conditions for Faros to qualify as a public company to be listed on the HoSE.

After being approved by the State Securities Commission as a public company, on July 6, 2016, Faros chairman Doan Van Phuong signed a request for stock registration and an official dispatch to the Vietnam Securities Depository (VSD) asking for securities depository registration and another proposing the VSD to grant a code to the Faros stock (ROS).

Although they knew that Faros’s application did not have enough basis for securities registration, Duong Van Thanh, general director of the VSD, and Pham Trung Minh, head of the VSD’s securities registration division, still gave the nod for registering ROS shares at the VSD.

In the process of completing the HoSE listing documents, Faros received great help from former bourse leaders, including chairman Tran Dac Sinh; Le Hai Tra, board member and deputy general director; Tram Tuan Vu, deputy general director; and Le Thi Tuyet Hang, head of the Listing Appraisal Department.

The Supreme People’s Procuracy said Sinh, as HoSE chairman, had acknowledged that the company was not eligible for listing as the audit reports of its 2014 and 2015 financial situations noted that "there is not enough basis to determine the actual amount of contributed capital".

However, due to his personal relationships with the fellow accused, Sinh responded to repeated requests for help from Quyet and Doan Van Phuong, former CEO of FLC Group, by helping them list Faros. He repeatedly directed his subordinates Tra, Vu and Hang to create favorable conditions for Faros’s listing as soon as possible.

In August 2016, Faros was accepted by the Vietnam Securities Depository Center to register 430 million ROS shares with par value VND10,000 ($0.4) each. A month later, ROS officially listed on the HoSE with a reference price of VND10,500 per share.

The indictment states that all the accused committed violations to create full legal conditions for Faros to list 430 million ROS shares on the HoSE.

These violations helped Quyet and his accomplices fraudulently sell shares to 30,403 investors for more than VND3.6 trillion ($144.3 million).

The former HoSE officials are indicted for "abusing positions and power while performing duties", while those at the SSC and the VSD are charged with "intentionally publishing false information or concealing information in securities activities".