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Lawsuit against CITIC, 5 former directors in HK
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HONG Kong’s securities regulator is suing Chinese conglomerate CITIC Ltd and five former directors, seeking HK$1.9 billion (US$245 million) in compensation for investors over alleged misconduct linked to losses on the Australian dollar in 2008.
It’s the latest headache for state-backed CITIC over a troublesome investment in an Australian iron ore mine. For more than a year, CITIC has been fighting lawsuits launched by Australian billionaire politician Clive Palmer over royalties owed on the project and control of its export port.
The Securities and Futures Commission said it wanted to compensate up to 4,500 investors who it says lost money as a result of wrong-way bets CITIC made on the Australian dollar at a time it was investing heavily in the US$9.6 billion Sino Iron project in Western Australia.
CITIC said in a statement it was seeking legal advice in the wake of the SFC suit, which was filed on the eve of the expiry of the statute of limitations in Hong Kong for any civil action six years after an event.
The company’s shares fell more than 4 percent yesterday, lagging a 0.3 percent drop for the Hang Seng Index. The stock lost about two-thirds of its value after it flagged the foreign exchange losses of nearly US$2 billion in 2008, although the stock has nearly doubled since then.
“Investors are concerned in case the listed company has to pay the compensation eventually,” said Patrick Yiu, a director at CASH Asset Management in Hong Kong. “If the five (former) directors take responsibility at the end of the day, there will be no impact at all on the listed company.”
On Thursday, the regulator alleged that CITIC issued a circular on September 12, 2008, that contained a false or misleading statement about its financial position.
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