SINGAPORE - Trial proceedings began on Tuesday on defamation claims brought by Scorpio East Holdings former executive director Hady Hartanto against three independent directors (IDs) over the contents of a Singapore Exchange (SGX) announcement that alleged, among various things, his involvement in "roundtripping" transactions.
The Sept 7, 2011 announcement, which included a summary of a report by special auditors Stone Forest Corporate Advisory, alleged irregularities in the way Mr Hartanto dealt with accounting transactions related to contracts for several Chinese movies as well as concerts by Taiwanese performer Jay Chou and K-pop group Honey, now known as SKarf.
Suresh Nair of Straits Law Practice LLC, representing Mr Hartanto, in opening statements filed on Tuesday, said the defendants made "baseless allegations and failed to disclose facts known to them that would correct falsehoods or false impressions" created by the summary. To make matters worse, they "gratuitously made a six-page announcement in which they adopted the summary and added allegations of their own", he said.
But independent directors Yee Kit Hong, Chia Hoo Khun Valery Kelvin and Ko Chuan Aun defended their actions, saying they were "under an obligation to inform the company's shareholders".
Represented by Senior Counsel Ang Cheng Hock of Allen & Gledhill LLP, the defendants, in opening statements, confirmed that they had approved the publication of the SGX announcement and the summary "for the purpose of discharging their obligations as directors of the company, and not for any other reasons".
The Stone Forest report said the company had terminated several contracts valued at about $12 million, but failed to disclose this as required under Catalist rules. The company had also deposited $5.1 million with producers as part of a deal to distribute seven movies and two concerts by Jay Chou. The deposits formed about 30 per cent of Scorpio East's net asset value.
According to Mr Hartanto, the Scorpio contracts were terminated between December 2010 and January 2011 by John Ho Ah Huat, Scorpio East's former CEO, after a due diligence report found that these contracts were likely to be loss-making. Some 85 per cent of the deposits under the movie contracts were to be refunded by the producers to the company, while the deposits under the Jay Chou concerts were to be refunded in full.