Dishonored Dealmaker

An inside look at the rise and fall of flamboyant tycoon James Ting

James Henry Ting--not long ago, that was a name to reckon with in the fast-paced business world of Hong Kong. Ting, like other ambitious young men who based their businesses in the former British colony, was a citizen of the world, an entrepreneur who constructed a universe of interrelated companies and finances from Toronto to Tokyo to New York.

Few, however, were as bold as Ting. Starting his career as a small-time electronics manufacturer in Canada in the 1980s, Ting built up a business under his holding company, Semi-Tech Group, which specialized in the rescue of well-known but tarnished brand names such as Singer Sewing Machine Co. of the U.S. and Sansui Electric Co., the Japanese consumer-electronics maker. He got substantial play in the press, including BusinessWeek. As his success grew, so did his hubris: He rode to one marketing meeting in Rome in a Ben Hur-style chariot. At its peak five years ago, Ting's empire was Roman in scope, employing 100,000 workers in more than 120 countries and racking up almost $5 billion in sales.

By the mid-1990s, Ting's group boasted listings in stock markets around the world, including not just New York, Tokyo, Frankfurt, and Hong Kong but also Bombay and Dhaka. The slight, bespectacled executive had plenty of admirers. "He was hardworking," says Stephen Goodman, who left Bankers Trust Corp. in Hong Kong to work with Ting as chief executive of Singer. "And he was remarkably successful at rebuilding companies that were not in great shape when he acquired them."

Then, in a chain of failures that stunned employees, stockholders, and creditors, Ting's web of businesses unraveled, culminating in the largest corporate collapse in Hong Kong history, when his main Hong Kong subsidiary, Akai Holdings Ltd., fell apart after recording a $1.75 billion loss in 1999. By early 2000, most of his companies had stopped doing business, slid into bankruptcy, or been absorbed by other companies.

This spectacular fall left lenders and bondholders with unpaid debts of some $2 billion. In Hong Kong alone, HSBC Bank has yet to recover some $200 million, potentially its largest loan loss in more than 135 years of operating in the enclave. And Ting? He sold his palatial $5 million Hong Kong compound in June, 2000, and hasn't been seen in the city since meeting with creditors later that year. Sources say he is probably in mainland China, the place of his birth. Repeated efforts to reach him through his representatives have been unsuccessful.

The story of Ting gradually faded from the public memory of Hong Kong. Yet liquidators, police, creditors, and lawyers in Hong Kong, Canada, and the U.S. kept combing through the wreckage, trying to figure out what happened. Now all these efforts are starting to reveal disturbing information about the goings-on in Ting's empire.

First and foremost, a report prepared for Hong Kong's Official Receiver's Office, which is charged with overseeing the liquidation of Akai Holdings, is raising questions about a series of deals. The authors of the report won't comment, but the report itself says plenty: "The liquidators have substantial concerns in relation to the governance of Akai." The liquidators point to half a dozen suspicious transactions involving $315 million in cash and assets that they feel merit further investigation. The city's Commercial Crimes Bureau, a department of the Hong Kong police, is investigating Ting for possible fraud and has set up a separate team to carry the probe forward. The police, though, are moving cautiously because of the complicated nature of the transactions. Also, some say regulators are worried about pursuing a case that may involve prominent people in Hong Kong--an assertion regulators vigorously deny.

Meanwhile, thousands of miles away in New York, a civil lawsuit launched in November, 2001, by Semi-Tech bondholders is gathering steam. The suit demands $578 million from Ting, from the directors of Semi-Tech, from Ting's investment bank, Bankers Trust, and from his auditor, Ernst & Young. Plaintiffs say that a series of transactions violated the terms under which the company issued $300 million in bonds in 1993. The suit charges that Semi-Tech directors, including Ting, "conspired to loot the assets of the debtors."

Plaintiffs in the suit also charge Ernst & Young and Bankers Trust with breach of fiduciary duty for failing to challenge suspicious dealings between Semi-Tech and affiliated companies between 1995 and 1999. Ernst & Young is accused of fraud, conspiracy to defraud, negligent misrepresentation, and accounting malpractice.

This is all very embarrassing for Ernst & Young. The firm continued to provide auditing and consulting services for Ting's Hong Kong companies for more than two years after its Toronto and New York offices dropped Semi-Tech as a client. According to the minutes of a Semi-Tech audit committee report quoted in the lawsuit, Ernst & Young dropped Semi-Tech because of a "breakdown in trust." Ernst & Young's involvement with Akai has also had unintended consequences: As part of their criminal probe, police in Hong Kong raided the accountancy's Hong Kong office in late June and seized Akai-related documents. Ernst & Young declines to comment, citing client privilege. Bankers Trust has filed a response to the complaint denying the allegations and declines to comment.

It's a world-class mess, all right. And it couldn't come at a worse possible time for Hong Kong. With the global markets in such a fragile state, Hong Kong authorities have to figure out the best way to maintain the city's image as a transparent, well-policed financial center. In this atmosphere, how the liquidation of Ting's companies and any possible prosecution are handled will prove "a barometer for corporate governance in Hong Kong," says a spokesman for a group of Ting's Hong Kong creditors.

As for Ting, he has yet to be charged with anything. And he remains invis-ible. His Hong Kong sometime-lawyer, Andrew Ng, answers with a terse "no comment" on the affair, even when asked if he still represents Ting. There are also plenty of questions about Ting's colorful career that remain to be answered.

Born Ting Wei in Shanghai in 1951, Ting moved with his family to Hong Kong in 1958. There, his father started a small garment business, but died when James was 13. After high school, Ting moved to Australia, married an Australian woman, then emigrated to Canada, where he studied engineering at the University of Toronto. In 1981, he started a computer assembly company, Toronto-based Semi-Tech Microelectronics. Semi-Tech went public on the Toronto exchange in 1986.

Ting commuted regularly between Toronto, Hong Kong, and the U.S., doing deals that would make him a millionaire while still in his 30s. A big break came early on, when he was introduced by a onetime Ernst & Young Hong Kong accountant, a fellow Canada resident named Christopher Ho, to Macau gambling magnate Stanley Ho (no relation). Stanley Ho even became chairman of Semi-Tech. Neither Stanley nor Christopher Ho were available for comment.

Another important player was the government of China. After deft salesmanship by Ting, the state-owned Shenzhen Electronics Group paid $5 million for a 10% stake in Ting's fledgling company in 1987. Around the same time, the Ministry of Electronics Industry inked a $270 million contract with Ting to manufacture computers in Canada and Shenzhen. The deal helped Ting land other mainland deals over the following seven years.

This was all a prelude to Ting's big act. In 1989, Semi-Tech made international news when it bought U.S.-based Singer Sewing Machine Co., the then 138-year old manufacturer that had also become a defense electronics company. The seller was leveraged buyout specialist Paul Bilzerian, who was at the time fighting stock fraud charges. After Singer's defense assets were sold off, Ting was able to buy Singer at a discount, for $289 million. Stanley Ho personally guaranteed $100 million of the loan.

The acquisition allowed Ting to put his new strategy into practice: stitch together a stable of brand-name companies acquired on the cheap and forge them into a big multinational. Ting aimed to transfer all manufacturing to China, where low labor costs and hands-on control would guarantee profits. It seemed a sound strategy. Singer's reported revenue grew 18% a year over the next four years, surpassing the billion-dollar mark in 1993. Singer also gave Ting a sales and distribution network that reached into 120 countries.

More important, the Singer purchase provided Ting with credibility. "It was a milestone," says one longtime Ting business associate. After that, "he was known for his ability to do deals." Ting took Singer public in a hot $1.2 billion initial public offering on the New York Stock Exchange in 1991 and raised more cash in a secondary offering the following year. Ting operated sewing machine and appliance plants in China, Brazil, India, and elsewhere, selling products to the developing world's emerging middle class. Over the next seven years, Ting's companies bought Sansui Electric of Japan, Kong Wah Holdings in China--one of Asia's largest TV manufacturers--and G.M. Pfaff, a German industrial-sewing-machine maker.

Ting's empire grew ever more labyrinthine. Akai Holdings alone consisted of more than 160 subsidiaries that ceaselessly shuffled assets and cash. As the Hong Kong liquidation investigation drily concludes, Akai's structure seemed "deliberately and unnecessarily complex."

Gradually, Ting and his companies grew dangerously overextended. Then the region's 1997-98 financial crisis hit Semi-Tech, Singer, and Akai like a hurricane. Sales of consumer electronics and appliances in Asia plunged. In 1999, Singer filed for bankruptcy protection in New York, but creditors say it was more than the drop in sales that pushed it over the edge. The New York bankruptcy court uncovered a curious set of transactions between Singer and its related companies. In one, Singer paid $157.5 million to Akai, Ting's Hong Kong flagship, for shares in G.M. Pfaff--twice the value of Pfaff's publically traded shares. Pfaff then became a chronic money-loser, dragging down Singer. Singer also put down a $50 million deposit to buy an antiquated Russian sewing machine factory. The deal never closed, but Akai, according to court documents, kept $44 million of the money. These transactions came after Akai had already taken $1.1 billion out of Singer through stock and bond issues. The bankruptcy court found that the deals fatally weakened Singer.

Singer's slide was just a prelude to the final debacle--the collapse of Akai in late 1999 and the disappearance of its assets. At the start of 1999, audited statements showed Akai with $2.3 billion in assets and $262 million in cash. But by yearend, the company had taken a write-off of $1.75 billion. The company has yet to provide an explanation; it never even issued an annual report for the fiscal year ended Jan. 31, 2000.

Stranger still, when court-appointed liquidators arrived on the scene a few months later, they found that Ting's "companies had no businesses, staff, or premises"; the company's records had huge gaps in them; and most of the directors and officers of Akai had left Hong Kong. The liquidators have professed themselves frustrated at the "complete lack of cooperation" by Ting and his associates.

As the liquidators combed through the scattered records, they uncovered what they consider a pattern of suspicious transactions in which Ting's companies purportedly purchased assets--only to see their value written off shortly thereafter. In November, 1998, for example, Ting personally signed papers and wrote checks to buy 50% of a U.S. computer company named MicroMain Corp. At yearend, the Akai annual report duly noted the investment. But one year later, in unaudited results for the year 2000, Akai took a loss for the entire $38.5 million it invested. Later, MicroMain's managing director--who had been a director at another one of Ting's companies--claimed that no investment was ever made and that he and his wife remained the sole shareholders in the company.

What happened to the $38.5 million? The liquidators reach no definite conclusions, but they list several options--including the possibility that the investment was never made, and that the money was instead diverted for some other purpose.

Not surprisingly, MicroMain Corp. is one of $315 million in Akai deals that look funny to the liquidators--and to the police. Many involve similar outlays of cash and subsequent write-offs. The deals are so confusing and opaque that, investigators say, they could easily cover up a grab for money by insiders. The suspicion by creditors is that much of the money was siphoned off to overseas bank accounts.

What happened may be made clearer by the recent arrival of new evidence. Liquidators just got their hands on 2,500 boxes of documents related to Ting's companies. In September, 2000, these papers were spirited across the border to the warehouses of Chinese TV manufacturer Zhongshan Tomei Electronic Factory, a one-time Ting subsidiary. It has taken until now to recover them.

Officers at one company may know how Ting's empire fell: Grande Holdings Ltd., founded by none other than Ting's old associates, billionaire Stanley Ho and Christopher Ho. In November, 1999, control of many of Akai's remaining assets mysteriously shifted to Grande--and without any notification to the Hong Kong Stock Exchange, creditors, the courts, or other regulatory authorities. The deal was done through a simple, seemingly hastily prepared four-page management agreement. Creditors say they only learned of the change in corporate ownership in September, 2000, when Grande presented 54 boxes of Akai records to liquidators. Grande Holdings executive director Samuel K. Yuen denied in a brief telephone interview that Grande had taken over Akai, saying that the management agreement had been "misunderstood." Whatever the case, Grande now does control key Akai assets, including the Zhongshan Tomei TV factory. In fact, Ting, in conversations two years ago, asserted that Grande was in control of his former empire.

The Ting case certainly raises uncomfortable questions for Hong Kong regulators. Neither the stock exchange, nor the Hong Kong's Securities & Futures Commission, nor the city's Financial Services and Treasury Bureau, appear to have seriously probed the scandal. Andrew Sheng, Hong Kong's top securities cop, says that his office has looked into the Akai collapse, but "the matter is [now] in the hands of the police. We are providing all the assistance we can to both the police and the liquidators." The CCB, the police agency handling the criminal case, said in a faxed statement that "the investigation is proceeding" and is being handled by the special fraud team.

There may be a plausible explanation for what caused Hong Kong's biggest bankruptcy. But until the truth is laid bare, the case of James Ting will cast a shadow over Hong Kong's financial community. That's not good. These days it is light, not shadows, that a financial center needs.

By Matthew Miller and Mark L. Clifford in Hong Kong, with Susan Zegel in New York

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