Ex-managing director jailed for misappropriating S$7 million from his company to buy its shares

CNA

10 hours ago

SINGAPORE: A managing director who misappropriated S$7 million (US$5.4 million) from his investment holding firm was jailed for three-and-a-half years on Tuesday (Jun 24).
Lee Boon Teck, 58, used the sum stolen from Catalist-listed KLW Holdings to buy himself shares in the company, where he was also executive chairman. The firm is now known as HS Optimus Holdings.
He pleaded guilty in May to one count each of criminal breach of trust and falsifying accounts. Ten similar charges were taken into consideration for sentencing.
Lee admitted to carrying out the offences in 2014 with his co-accused Chan Ewe Teik, now known as Michael ET Chan. Chan's case is pending before the courts.
Chan was the sole director and shareholder of Straitsworld Advisory, a consultancy firm.
The duo met in 2010 or 2011, when Chan offered Lee his consultancy services after reading an article about a company in the KLW group facing business problems.
Chan started introducing business opportunities to KLW through Lee. In 2013, Chan floated two projects in China involving the acquisition of a state-owned hotel in Zhangye, Gansu and the development of the surrounding land.
The plan was for Straitsworld to acquire the assets for the projects with the help of a third company, White Group, then sell them to KLW, which would develop the projects.
The three companies entered into an agreement with the Zhangye government in April 2014.
Lee did not inform KLW's board of directors about the projects, despite knowing that any corporate decisions he made for the group required the board's approval.
In May 2014, Lee arranged for a company in the KLW group to make a first payment of S$7 million in commitment fees to Straitsworld.
In June 2014, he misappropriated a second payment of S$7 million in commitment fees from KLW to Straitsworld. Lee had agreed with Chan that he would use the money to buy KLW shares.
However, by August or September 2014, discussions over the Zhangye projects had broken down. KLW's board expected a refund of the commitment fees.
Lee met up with Chan on several occasions to recover the fees, which totalled S$14 million, but Chan told him that Straitsworld did not have sufficient funds.
They agreed for Lee to repay S$7 million first on Chan's behalf, and Lee made the payment to KLW.
Lee and Chan then agreed to redirect the remaining S$7 million owed to another potential property development project in which Straitsworld was involved.
This redirection was approved by KLW's board. Chan also provided a guarantee that he would be personally liable for the repayment of the remaining S$7 million if the project fell through.
When the project failed to materialise, KLW took legal action against Chan. He was only able to repay S$5.75 million of the S$7 million, and was made a bankrupt in 2018.
The remaining sum of S$1.25 million has not been repaid.
Lee also admitted to directing KLW's group financial controller and a finance and human resource manager to make false entries in the company's financial statements.
This was to cover up the commitment fees paid to Straitsworld, a S$2.2 million commitment fee Lee made KLW pay for another potential property development project in Bali, and a S$1.95 million "personal loan" he took from KLW.
These transactions, totalling S$18.15 million, were made without the knowledge or consent of KLW's board of directors, and Lee wanted to conceal them to prevent inquiries.
In sentencing, District Judge Koo Zhi Xuan said that Lee abused his corporate authority by acting against the very company he was supposed to steward.
Lee's actions deceived the listed company's board as well as the public at large, and deterrence was the primary consideration for his sentence, added the judge.
The jail term also reflected the significant restitution that Lee had made, said Judge Koo.
Lee could have been jailed for up to seven years, fined or received both penalties for criminal breach of trust. For instigating the falsification of accounts, he could have been jailed for up to 10 years, fined or both.