Mainboard-listed engineering group Tee International is appointing an external third-party independent investigator to look into unauthorised transactions totalling $6.55 million made by its subsidiaries to related parties.
The transactions, which took place from July last year to May this year, were allegedly made under the instruction of group chief executive and managing director Phua Chian Kin, said Tee International.
Transactions from certain related parties to the subsidiaries had also taken place during that period. The board and executive committee were reportedly similarly unaware of these remittances.
Tee International has clarified that monies under the remittances have been fully repaid by and to the group as of Aug 29.
The unauthorised remittances were discovered by the group during preparations for its financials for the full year ended May 31, 2019. Remittances amounting to $3 million were recorded as “other receivables”, and external auditor Deloitte raised a red flag when it was unable to verify the nature of these remittances.
Overall, the unauthorised transactions included $3.75 million paid by two subsidiaries to Mr Phua and Oscar Investment, an investment holding company wholly and beneficially owned by Mr Phua and incorporated in the British Virgin Islands. The money was paid over four transactions on Feb 12, March 1, March 4 and March 8, 2019.
The subsidiaries in question were Tee International’s wholly owned units PBT Engineering and Trans Equatorial. PBT Engineering provides turnkey solutions for commercial, industrial and institutional buildings, while Trans Equatorial is involved in addition, alteration and upgrading of existing buildings, as well as mechanical and electrical engineering services.
In response to queries from the Singapore Exchange (SGX), Tee International said yesterday that Mr Phua claimed the money was used to pay for certain expenses to secure a relevant engineering project for the group. But no supporting documents have been provided by Mr Phua to support the nature of these remittances, state what the money was paid for, and to whom it was paid to, said Tee International.
Pending completion of the review, Mr Phua Chian Kin has been relieved of his current role and duties as group CEO and managing director, the group said last Friday. Taking over his positions in the interim is Mr Phua Boon Kin, the deputy group managing director. Mr Phua Chian Kin will remain an employee of the company.
Separately, on July 19, $2.8 million was paid by Oscar Investment to PBT Engineering. Mr Phua claimed that the funds were placed in a fixed deposit account to activate a banking credit line granted to PBT Engineering. Repayment was made on July 24.
Mr Phua has since been removed as an authorised signatory for all payments. Meanwhile, internal auditor Protiviti and the business control and risk department of the group have widened the scope of review on key internal controls in selected areas, including the authorisation of payments made from the company’s subsidiaries. The review commenced last Monday.
Pending completion of the review, Mr Phua has been relieved of his current role and duties as group CEO and managing director, the group said last Friday. Taking over his positions in the interim is Mr Phua Boon Kin, the deputy group managing director. Mr Phua Chian Kin will remain an employee of the company.
Deloitte, in a letter to the company last Friday, said it is unable to ascertain the nature and purpose of the remittances and the benefits of them to the group. It requested certain information from Tee International, including whether there were other similar payments made by any entity in the group to or for the benefit of Mr Phua Chian Kin and/or his family members. These include payments made to entities in which Mr Phua has an interest in 20 per cent or more of the total voting power therein, like Oscar Investment.
Asked by SGX whether there have been similar remittances that were undisclosed, the company said the board is currently not in a position to determine this.
In view of the inconclusive outcome of Deloitte’s review, the board is in the process of engaging an external investigator to carry out further checks. This would include special reviews to cover the financial year ended May 31, 2018, and up to Aug 31, 2019.
Shares of Tee International closed at 4.6 cents last Friday, up 2.2 per cent or 0.1 cent.