September 17, 2007

Shin Corp deal leaves behind fingerprints

On September 10, 2007, the Asset Examination Committee filed a suit against Thaksin Shinawatra and his wife Khunying Pojaman Shinawatra for alleged asset concealment.

The Thai laws prohibit the prime minister or ministers and their spouses from holding more than 5 per cent in a business and bar them from holding any stake at all in a business that has concession with the state agencies.

The AEC has asserted that it has come up with evidence to show that Thaksin and his wife still owned or controlled Shin Corp while Thaksin was serving as prime minister.

This has led to a series of a freeze on Thaksin's and Pojaman's assets amounting to Bt50 billion so far. The asset freeze is based on the charges that Thaksin, who still owned Shin Corp which had numerous concessions with the state agencies, initiated several policies -- revising the telecom concessions or handing out tax privileges to Shin Sat or altering concessinos with ITV -- to benefit or boost the stock prices of Shin Corp.  

The AEC's crucial investigation is a finding that Thaksin, while he was serving as prime minister, still owned or control Ample Rich Investments Ltd, an offshore company, up until 2005.

 It also has found that that apart from Ample Rich, Thaksin also allegedly held shares of Shin Corp through Win Mark Ltd, another offshore company which shares the same address with Ample Rich Investments on the tax-heaven British Virgins Island.

The address is PO Box 3151, Road Town, Tortola, British Virgin Islands.

Ample Rich held about 10 per cent or 326 million shares in Shin Corp, while the Shinawatra clans and Banaphot Damapong, the elder brother of Pojaman, held the remainging 39 per cent.

Thaksin had made it known that his family owned 49 per cent in Shin Corp, which was sold to Temasek Holdings of Singapore for Bt73.3 billion.

Thaksin gave an interview to TV host Sorrayuth Suthasanachinda on November 28, 2000, and admitted that he owned Ample Rich but denied any knowledge about Win Mark, which, as he suggested, was only a foreign company.

At the time, he was about to enter into a bitter legal battle to defend charges that he had concealed his assets through his household servants.

But he never revealed about the existence of Win Mark, which would return to haunt him.

Win Mark held about 1.8 per cent in Shin Corp. The disclosure of Win Mark fit the whole picture perfectly because it turned out that the Shinawatra family actually controlled 51 per cent in Shin Corp all along -- not 49 per cent.

 Who owned Ample Rich?

$$$$$$$$$

The document above showed that Thaksin established Ample Rich Investments in June 11, 1999. His Thai Rak Thai Party was formed a year earlier in 1998. About 10 per cent or more than 32 million shares (before share split) of Shin Corp shares were somehow moved from Thaksin's accounts in Bangkok to Ample Rich.

How he could transfer his 10 per cent holding in Shin Corp from Bangkok to Singapore remain a mystery.

The document, which is in fact a corporate certificate submitted to UBS AG of Singapore, read: "Any withdrawl is to be authorised by Dr T Shinawatra solely."

As appeared on page two of the corporate certificate, the directors of Ample Rich Investments were Thaksin, who served also as authority signatory, Mr Lau Hwee Tiang and Kanjanapa Honghern.

Kanjapapa is a personal secretary to Khunying Pojaman. Tiang is believed to be a Singaporean businessman.

UBS AG Singapore looked after the brokerage and custodian account of Ample Rich Investments.

In 2000, when at the height of Asset Concealment Episode I, Thaksin admitted that he owned Ample Rich Investments. He then said he set up the company and transferred the Shin Corp stocks there to facilitate Shin Corp's listing in NASDAQ.

But he never admitted about the existence of the other twin company Win Mark Ltd.

Like Ample Rich, Win Mark would be also face its complications. Kobsak Sabhavasu of the Democrat smelled fishy with Ample Rich. He tried to investigate the company's holding of Shin Corp stocks. He suspected -- correctly then -- that there must be another company, or a second Ample Rich, which could be holding the Shin Corp stocks on Thaksin's behalf.

But he did not know that it was Win Mark, which was the twin brother of Ample Rich.

The AEC's investigation has reached a breakthrough. All the findings were made public last week.

The AEC  has found out that since 1999, Thaksin allegedly concealed 55 million Shin Corp shares in the account of Win Mark, which deposited the shares with Vickers Ballas. These stocks amounting to about 1.8 per cent of Shin Corp were later transferred to UBS AG of Singapore, which looked after Thaksin's wealth in Singapore.

Kaewsan Atipho, a member of the AEC, said the AEC found evidence which showed that the dividends from Shin Corp before being sold to Temasek, which were paid to Panthongtae and Pinthongta as well as his sister Yingluck, all went to Pojaman's accounts.

"This proves that the owners of Ample Rich and Win Mark are Thaksin and Pojaman,'' Kaewsan said.

The AEC also learnt that before Shin Corp sale to Temasek, Win Mark committed insider trading by using insider information and bought 58 million shares from small shareholders at Bt39 each and sold 74 million shares to Temasek in a tender offer at Bt49.25 per share.

This means the company made Bt500 million from insider information, Kaewsan said.

This damaging evidence is earth-shattering. If it is true, it means that Thaksin allegedly committed a serious criminal offence.

Kaewsan then whacked the Stock Exchange of Thailand for doing nothing in its own snail-like, half-hearted investigation.

"The Securities and Exchange Commission must take responsibility for failure to find out about the offence after investigation,'' he said.

Of the Bt3.5 billion that Win Mark gained from the Shin Corp share sale, Bt500 million was illegally earned through insider trading and was deposited abroad, Kaewsan said.

This would be unthinkable that the prime minister of Thailand was alleged of hoarding the dollar abroad.

The two children came aboard in 2005 

The second document or corporate certificate submitted to UBS AG of Singapore showed that the ownership of Ample Rich Investments was changed.

Replacing Thaksin, Tiang and Kanajanpa as directors of the offshore company were Panthongtae Shinawatra and Pingtonta Shinawatra, the two children of Thaksin.

But critical of this document is that the trasfer date of ownership took place on June 29, 2005 -- not on December 1, 2000 as claimed by Thaksin.

The AEC concluded that Thaksin, who was serving as prime minister between 2001 and 2006, still owned or controled Ample Rich Investments with conflict of interest up until June 28, 2005 at least.

With this document, the AEC is confident that it is justified to freeze his assets worth Bt50 billion and that it can grill Thaksin in court over asset concealment. If Thaksin loses the case, his assets could be confiscated by the state.

Episode I and Episode II of Asset Concealment

These two documents show alleged attempt by Thaksin to use nominees to hold assets on his behalf. The documents are simply shareholders' lists that anyone can obtain from the Stock Exchange of Thailand.

In Asset Concealment Episode I, prime minister Thaksin defended himself in the Constitution Court in 2001 that he committed an honest mistake by transferring his shares to his household servants.

 He had failed, as required by the Constitution, to report to the National Counter Corruption Commission all his assets holdings. So that case went to the Constitution Court, with the NCCC as the plaintiff and Thaksin as the sole defendant.

 If he were found guilty, he would be barred from politics for five years.

Then the national sentiment went for Thaksin. Thailand was still suffering from the hangover of the economic crisis. The Chuan government left office without any applause, although it helped to push Thailand back from the brink of falling off the cliff from the financial crisis.

The Thais were fed up with the Chuan government and would like to have a fresh leadership. Thaksin came along as a white knight. He promised quick recovery and prosperity.

The Constitution Court let Thaksin off the hook by a narrow margin. It found him not guilty of concealing his assets. With this ruling, the 1997 Constitution lost its efficacy as the people's constitution.

Thaksin, with tears brimming in his eyes, vowed that he had left all his business interests behind and thatt he had had no intention of concealing his wealth. He would continue to serve Thailand so that all the Thai people would achieve happiness and prosperity.

The characters, who served as Thaksin's nominees, in Episode I of Asset Concealment were his household servants such as Duangta Wongphakdi, Chairat Chiangphruek, and Boonchu Riengpradap.

In Episode II of Asset Concealment, the AEC believes that Thaksin no longer had confidence in outsiders. His and his wife's shares in Shin Corp were transferred to nominees who were within the family circle.

So the cast of characters shifted to the children and closest relatives.

These nominees were Panthongtae, the elder son, Pinthongta, the second child, Banaphot Damaphong, an elder brother of Khunying Pojaman, Yingluck Shinawatra, Thaksin's younger sister, Ample Rich Investments and Win Mark.

The AEC is trying to prove that Thaksin and Pojaman still owned and controlled Shin Corp through nominees within the family circle, while Thaksin remained in political power.

Form 246-2 as Filed by UBS of Singapore  

Page Two of the Filing  

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In August 24, 2001, UBS AG of Singapore filed a Form 246-2 to the Thai Securities and Exchange Commission. This document is critical because it covers rules on disclosures.

Most important, it also establishes the beneficial owner of Ample Rich and Win Mark.

According to the SEC law, any parties having built up their stocks up to 5 per cent in a listed company must disclose their identities. The next threshold of disclosure is 10 per cent, 15 per cent, 20 per cent. Once the state reaches 25, that party must tender a takeover.

These disclosure rules would help the minority shareholders a fair idea of who the buyers are so that they can make their investment decisions according to their best judgements.

On page 1 of the UBS's Form 246-2 document, UBS reported its holding of the Shin Corp stocks of 10 million on behalf of Ample Rich Investments. This represented 3.40 per cent of Shin Corp's share capital.

Then it also reported holdings of another 5.4 million Shin Corp shares, amounting to 1.84 per cent of the share capital.

UBS made a mark that the 10 million shares were acquired at the highest price of Bt179 a share.

This brought the total holdings of its client to 15.40 million Shin Corp shares or 5.24 per cent. As the 5.24 per cent stake breached the SEC's threshold, UBS was obliged to disclose the information to the public.

The UBS person who filed this report on behalf of the client was Teo Lay Sie, the executive director of the firm. UBS's address is 5 Temasek Boulevard, #18-00 Suntec Tower Five, Singapore 038985.

Who was the client then?

The shareholder list of Shin Corp as of November 29, 2001 showed the secret code of Win Mark, who emerged in the shadow as another key overseas shareholder of Shin Corp and as belonging to the same owner of Ample Rich.

In list No. 12, UBS AG Singapore Branch -- Pledge A/C 121751 appears as a shareholder of 53.64 million shares of Shin Corp, or about 1.83 per cent.

The 121751 was the code number of Win Mark.

In list No. 3, Ample Rich Investments held 7.80 per cent or 229.20 million shares. In list No. 5 UBS Ag Singapore Branch -- Fixed Income SAF was a shareholder of 100.48 million sahres or 3.42 per cent. The combined stake was 11.22 per cent.

This showed that Ample Rich Investments, contrary to the Thaksin's people claim that it was a passive shareholder, was trading the Shin Corp stocks all along. 

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On February 21, 2006, after Thaksin's sale of Shin Corp to Temasek Holdings of Singapore for Bt73.3 billion, there were doubts about Ample Rich Investment's holdings of Shin Corp.

UBS wrote a letter to Vanida Thaneepanichskul, who headed the Corporate Governance Department of the SEC, to clarify the issue.

This followed Vanida's request sent out on Feburary 16, 2006 for UBS to clarify its 246-2 form submitted to the SEC in 2001.

Were the owners of the 10 million shares and 5.4 million shares of Shin Corp the same person?

UBS AG Singapore did not address the question directly. It simply stated that it acquired the 10 million Shin Corp shares from Vickers Ballas Securities Co through a custodian to custodian service and through the scripless system of the Thailand Securities Depository Co Ltd.

There was no payment involved. UBS would take care as custodian for Ample Rich's holding of 10 million Shin Corp shares.

"The transaction was not a purchase on the Stock Exchange of Thailand at Bt179 per share as was inadverntently and incorrectly indciated by UBS AG Singapore Branch on Form 246-2," UBS said.

Jeremy Grant, the executive director of UBS, and Sheila Shanmugam, another executive director of UBS, co-signed this important document.

How come that a global investment banking and stock broking firm like UBS made a sloppy filing like this!

Yet this admittance of error in ticking on the part of UBS is not an important point.

The key point is that UBS, in the letter, did not deny that the owner of the 10 million shares and 5.4 million shares of Shin Corp was not the same person.

UBS spoke the truth, but not the whole truth.

The UBS letter must be written under the watchful eyes of its lawyers.

(Later on Shin Corp share split led these shares to multiply to 100 million and 54 million respectively).

On February 23, 2006, the SEC issued a statement to clarify the UBS's letter. It confirmed that the 10 million shares transferred from Vickers Ballas to UBS as appeared in the 246-2 form was simply a handover of a custodian service.

There was no transaction involved and that UBS made an error in its filing by saying that the stocks were acquired at Bt179 a piece.

The SEC simly parrotted the information it got directly from UBS. Again, it spoke the truth, but not the whole truth.

Then the Democrats were doing a digging into the Ample Rich affair. Korn Chatikavanij, the deputy secretary-general of the Democrat, was suspicious that there could be more than one companies other than Ample Rich, which was also holding the Shin Corp stocks for the same owner.

 What was the role of Win Mark? he was asking. Korn was frustrating that Thirachai Phuvanatnaranubala, the secretary-general of the SEC, was not doing his job adequately.

 Thirachai had been busy catching small flies rather than going after the big fish.

Most important, the SEC document did not deny that the combination of the 10 million and 5.4 million Shin Corp stocks belonged to the same owner.

It simply addressed another aspect of the UBS's report of how it acquired the stocks instead of asking who owned the stocks. 

 The secret Da Vinci Code of Win Mark

Vikers Ballas's letter dated September 6, 2001 holds the key to identifying the account of Win Mark Ltd, who was the shareholder of Shin Corp stocks.

 In that letter, Valerie Tan, the authorised signatory of Vickers Ballas of Singapore wrote to Morakot Limtrakul and Chatchpol of Vickers Ballas Securities (Thailand) Co Ltd. She told the Bangkok office to transfer 104,887 shares of Shin Corp to Citibank NA Bangkok.

 The end receiver was A/C UBS AG Singapore Branch, favouring Win Mark Ltd.

The account Number of Win Mark Ltd was 121751.

Win Mark's Account No 121751 matched the shareholder list No 12 UBS AG Singapore Branch - Pledge A/C 121751, which held 53.64 million shares of Shin Corp in as of September 21, 2001. (See the shareholder's list above). 

All the jigsaws have been pieced together.

Win Mark has already caused trouble for Thaksin. On June 19, the Department of Special Investigations indicted Thaksin, Pojaman and Busaba Damapong, the wife of Banaphot, on concealment charges in a case linking Win Mark with SC Asset, another real-estate company owned by the Shinawatras.

In 2000, Thaksin said he sold shares in three property companies - OAI Property, PT and SCK Asset - to Win Mark for a total of Bt906 million. He said Win Mark was a foreign company and denied that it belonged to him.

Later it was discovered that Win Mark also held shares in two other companies: SC Office Park and Worth Supplies. The total investment in the five firms was Bt1.5 billion.

In Thaksin's 2000 statement, the former prime minister said Win Mark had bought the shares on the expectation of reaping profits when the firms went public.

However, Win Mark sold its shares in OAI Property to the Value Asset Fund of Malaysia (VAF) in 2003, and three weeks later VAF sold the shares to the Overseas Globe Fund and Offshore Dynamic Fund Inc.

The three funds share the same address in Malaysia. Remarkably, the sale took place before OAI Property, later renamed SC Asset, was about to list on the SET in November 2003.

VAF also transferred the right to buy 70 million new shares of OAI at Bt10 par value to Thaksin's daughters Pinthongta and Paetongtarn. Based on the initial public offering of Bt15 a share, the two automatically netted a total profit of Bt350 million.

Now the Department of Special Investigations and the AEC are pursuing criminal cases against Thaksin, involving extradition efforts.

After the Win Mark/SC asset case, the SEC has been caught off guard again by the revelation of Win Mark. It expressed a surprise with the AEC's finding that Win Mark was a twin company of Ample Rich and allegedly traded Shin Corp stocks on insider information ahead of the Shin Corp transactions with Temasek.

The SEC has said it is seeking additional information from the AEC to probe the case further.

In Thai abbreviation, the SEC stands for kor lor tor. Kaewsan equipped that kor lor tor stands for ku luem tam (I forgot to follow up).