Will Repco Low et al. finally be prosecuted?

TheStarBiz: The Securities Commission (SC) has filed a landmark civil suit against businessman Low Thiam Hock, also known as Repco Low, and nine others over the rigging of shares in Mesdaq-listed Iris Corp Bhd. The civil enforcement action was in relation to the manipulation, market rigging and fraud of Iris shares, the SC said in a statement yesterday. Iris was declared a designated counter on May 11, 2006.

Also named in the suit was Datuk Tan Mong Sing, a Malaysian who was then the representative of a foreign-registered fund, Acadian Worldwide Inc.

Low was then investment adviser to Acadian, which was also named in the suit. The SC was also taking action against other foreign funds, namely Aeneas Capital Management, LP; Priam Holdings Ltd; Aeneas Evolution Portfolio, Ltd and Aeneas Portfolio Co, LP. The other three individuals named in the suit were officials of Aeneas Capital – its managing partner, investment manager and portfolio manager Thomas R. Grossman; research analyst cum Malaysian investments trader Richard Benjamin Cohen; and principal and chief operating officer John Suglia.

Aeneas Capital is a hedge fund company run by Grossman, a former SAC Capital Advisors manager, who was under probe by regulators in Malaysia and the United States after bets on Malaysian stocks caused one of its funds, the Priam Fund, to lose 60% of its value. The Priam Fund invested only in Malaysian stocks.

The SC said: “The civil enforcement approach enables the SC to seek various relief from the High Court, including injunctions, compensation, restitution and declaratory orders.” The commission launched a formal investigation after Iris was declared a designated counter. From September 2005 to May 2006, Iris' share price rose 17 times from only eight sen to a high of RM1.36 on a trading volume averaging 200 million shares daily.

“The SC’s investigation found that the manipulation was carried out through a complex layering of the origination of the orders and transactions via foreign intermediaries in several jurisdictions,” it said. SC said the defendants had collectively used numerous trading accounts that contributed to the strong demand for Iris shares. “The foreign defendants and their representatives worked closely with the Malaysian defendants in creating an artificial demand for Iris shares.” The SC said its probe involved “painstaking and careful analysis of trading data of more than 100 trading accounts at 15 local and 16 foreign brokers, records of various communication modes between the perpetrators, including more than 200,000 e-mail messages, and recording of statements from witnesses locally and overseas”.

In relation to the manipulation of the Iris shares, the SC filed a civil suit on March 27 at the Kuala Lumpur High Court seeking:

·Declaration that all the defendants conspired to manipulate the market and the share price of Iris, and defrauded investors;
· Declaration that all profits earned by the defendants are held in constructive trust for the benefit of the affected investors;
·Orders that all the assets and properties of each of the defendants be traced and followed, and then paid to the SC for the purpose of compensating the affected investors;
·Permanent injunction to restrain each of the defendants from trading in Iris shares;
·Permanent injunction to restrain each of the defendants from trading in any counter on Bursa Malaysia or Mesdaq; and
·General and exemplary damages

The SC also worked closely with the US Securities and Exchange Commission, Hong Kong Securities and Futures Commission, the Monetary Authority Singapore, Financial Services Authority UK, BVI Financial Services Commission and Cayman Island Monetary Authority

MyTake: In the past, the SC has not been very successful in bringing individuals to court. Most of the cases are still pending and only a handful of cases are brought and prosecuted in court. If I am correct, there are many cases still pending involving individuals related to Suremax, Fountain View, General , Omega etc. However, I believe the SC has learned from its previous experiences and is better prepared this time.

For the records, Repco Low's case on manipulation of Repco Holdings shares (which was charged in 1999) was struck out without being asked to enter defence in Nov 2006. For information, Repco Holdings is still under the special administration of Pengurusan Danaharta Nasional and the company was said to have defaulted more than RM600 mil. SC is still very sore and disappointed about it and has appealed against the Session Court's decision. Repco Low and gang will definitely have a very tough time this round. The line has always been difficult to call for on speculation and manipulation. Most of the stocks "manipulated" have fundamentals and high market capitalisation, how can it be cornered....did the gang work with major shareholders too? Who was the mastermined? Any proof? It was different compared with the 90's second board craze, when most of those stocks that pushed the index from 100 points in 1995 to 600 points in mid 1996 are cheap and illiquid stocks and tightly held by major shareholders. In short, many players including funds have now became unwilling shareholders(losers) of the Iris due to greed and ignorance!

A bit about RL..market talk only....RL was said to be the no 1 stock operator and market maker in Malaysia. Made famous from his alledged dealings with Repco shares. (the share went up from RM5.00 in 1996 to RM140.50 in 1997) His subsidiary which "obtained" RM175 mil to finance share purchase was said to be one of the reason why sime bank collapsed. He is said to be linked to many syndicate plays on shares like the recent Iris, Mobif, SYF, Farmbes, Kosmo and many others. A publicity shy guy, he is well connected and is believed to live in Damansara Heights and is not known to visit brokerages but high end and fancy karaoke lounges with friends. Many remisiers were known to willingly do anything for RL to gain his businesses but are said to camp outside his house when big contra losses set in after some of the shares went limit down. Drives a Ferrari?