Citic Pacific Didn’t Know Implications of 2008 Currency Bets, Court Told
Citic Pacific Ltd. (267)’s officers didn’t know the implications of the company’s currency exposure when they failed to disclose potential losses, a lawyer for the steelmaker and property developer told a Hong Kong court.
“In contracts of this complexity, how can you decide within two days that you’re going to sustain huge losses that would require a report to the stock exchange,” said Collingwood Thompson at a hearing yesterday where Citic Pacific is fighting a ruling that police should have access to some of its documents.
Hong Kong’s Department of Justice said in March it suspects Citic Pacific defrauded four banks before Oct. 20, 2008, when it sought financing without disclosing losses on currency bets. The company had said in a stock exchange filing on Sept. 12 that year that its directors weren’t aware of any material adverse change in the group’s financial position.
Court of Appeal judges Michael Hartmann, Susan Kwan and Jonathan Harris today denied a Department of Justice request to provide evidence from the banks that they were misled about Citic Pacific’s finances.
In an Oct. 20 filing in 2008, the company said its bet the Australian dollar would fall against its U.S. counterpart could result in losses of as much as HK$15.5 billion ($2 billion). The company learned of the exposure on Sept. 7, it said. The Sept. 12 filing cited information current until Sept. 9.
Thompson was responding to a question from Hartmann on the information directors received on Sept. 7.
“Was it a doomsday announcement that was irrevocable or an indication of troubled times ahead, implications of which were not completely understood?” Hartmann asked yesterday.
Justice Department lawyer Charlotte Draycott said today that any responsible director would have been monitoring the relevant exchange rates on a daily basis.
“It’s completely unrealistic to say the people in charge of this company, the board of directors, were not fully aware of what was happening,” she told the court.
The High Court ruled in March that records of legal advice the company received before it disclosed the bets should be available to the justice department for potential criminal prosecution. Thompson said yesterday that the fraud case presented wasn’t strong enough to justify turning over the privileged documents.
The case is Citic Pacific Ltd. and Secretary of Justice, Commissioner of Police, CACV60/2011 in Hong Kong’s Court of Appeal.
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