Noble probe launched - 3 years after alarms first raised

Barely a week to the expected listing of a new Noble Group that will be born out of a massive debt revamp on the Singapore Exchange (SGX), Singapore authorities have stunned the market with news that they are finally probing the commodities group for potential breaches of securities rules and company law.

The move - more than three years after the first reports of accounting irregularities surfaced at the Hong Kong-based company founded by Richard Elman - will likely throw a spanner in the works for the targeted listing on Nov 27, market watchers say.

It also threw up questions over the timing of the probe, with the regulators explaining they found a basis to start investigations after recent disclosures by the group.

On Tuesday, Singapore's white-collar crime buster, the Commercial Affairs Department (CAD) of the Singapore Police Force (SPF), together with the Monetary Authority of Singapore (MAS) and the Accounting and Corporate Regulatory Authority (ACRA), said they were jointly investigating Noble for suspected false and misleading statements and breaches of disclosure requirements under the Securities and Futures Act.

Noble's wholly-owned subsidiary, Noble Resources International Pte Ltd (NRI), is also being investigated for potential non-compliance with accounting standards under Section 201 of the Companies Act. ACRA has notified NRI's board of directors that it has found suspected breaches of the Act and has required the directors to furnish further information as part of the ongoing investigation.

"This follows an extensive review of the financial statements of NRI for the financial years ended 31 December 2012 to 31 December 2016," ACRA said.

CAD and MAS have directed Noble and NRI to produce documents relating to the preparation of Noble Group's financial statements, following a thorough review of other relevant information, including information referred to the authorities by the Singapore Exchange Regulation Pte Ltd (SGX RegCo) and other third parties.

SGX RegCo's spokesman said RegCo would be reviewing whether the investigations impact the pro-forma financial statements contained in the circular the group issued for its proposed restructuring.

"Trading can only start after restructuring has been completed and this is in turn dependent on our review. SGX RegCo has been engaging the relevant regulatory agencies on this matter and will continue to do so. As investigations are ongoing, we are unable to comment further," the spokesman said. Market observers say this is a strong indication that the planned listing may now be held back.

The joint announcement came a day after the shares in Noble, once Asia's top commodity trader, were suspended from trading from Monday as it sought to transform into an Asia-focused coal-trading business following a US$3.5 billion debt restructuring deal.

Just last month, Noble announced a deal with creditors to halve its senior debt and give them 70 per cent of the company, while existing equity holders would see their stake diluted to 20 per cent. This follows three troubled years which saw Noble cut hundreds of jobs, sell billions of dollars of assets, take hefty write-downs and change CEOs and chairman.

Noble made a record net loss of US$4.9 billion in 2017, compared to a restated US$8.7 million net profit in 2016. Despite Noble's repeated denials of any missteps, investor confidence plummeted and its market valuation shrank to a mere S$107.5 million.

The timing of the latest enforcement announcement just before the proposed listing of new Noble puzzled many, including Iceberg Research's Arnaud Vagner - the once mystery man who triggered the US$10 billion collapse in Noble shares after his report questioned its accounting practices in 2015 and compared it to the Enron fraud scandal.

"Why now while they could have done that much earlier? It is happening when Noble is most vulnerable. New Noble is supposed to be listed end-November," said Mr Vagner, a former senior credit analyst at Noble.

He said he had identified himself to SGX in the middle of 2015 and had several phone calls and email exchanges with officials. SGX has previously said it couldn't act on the Iceberg research report because it was issued anonymously.

Mr Vagner, who is being sued by Noble, added: "It's like a policeman getting on a crime scene three years after being called. This action should have been done before and we are holding back any expectations (on outcome)."

Corporate governance advocate Prof Mak Yuen Teen of NUS Business School said he hoped this signalled that regulators are truly stepping up.

"As someone who's been lamenting the lack of regulatory enforcement, I welcome this. I hope that other cases where there are apparent serious breaches will similarly be thoroughly investigated," Prof Mak said.

A former senior managing director of Temasek Holdings, Michael Dee, who has also been pushing for regulatory and legal actions against Noble, commented: "For over three years, there have been only two lonely voices yelling in the wilderness for this investigation of Noble's finances."

"Tens of billions of wealth were destroyed by Noble...This investigation is the first step in ensuring that investors are provided justice and restitution," added Mr Dee, who was also formerly the CEO of Morgan Stanley South-east Asia.

David Gerald, who heads the Securities Investors' Association Singapore (Sias), said: "We are seriously concerned and we are confident that the rule of law will prevail."

Responding to The Business Times on the timing of the probe, CAD, MAS and ACRA jointly said they have been working together since 2015 to carefully review the allegations raised by various parties against Noble Group, and following up on information and leads provided. "Notwithstanding the clean audit opinions issued by Noble Group's statutory auditors for financial years ended 31 December 2014, 2015 and 2016, the authorities continued to gather and review information to establish a basis to probe deeper into the case.

"This included information relating to the substantial write-downs that were announced by Noble Group in late 2017 and early 2018. The review of this and other information provided the basis for authorities to commence overt investigations into potential breaches of our law," they said.

This article was first published in The BusinessTimes. Permission required for reproduction.