Home ›› 18 Apr 2023 ›› Front
The top management of Ring Shine Textiles Ltd (RSTL) has laundered nearly Tk 2,000 crore in the last 22 years utilising a myriad of financial anomalies, with the help of its now former managing director Sung Wey Min, an Indonesian citizen.
This staggering tale of gross irregularities came to light in a report, compiled by an inquiry committee and special auditor under the Bangladesh Securities and Exchange Commission (BSEC).
Documents show that between 1998 and 2020, RSTL’s management laundered $124 million or nearly Tk 1,242 crore through telegraphic transfers (TT), moving funds from corporate to overseas accounts of the then managing director, sponsor directors, and parties unknown.
Besides, utilising an illegal trick called over-invoicing, RSTL also laundered Tk 845 crore in the name of procuring property, plant and equipment, and raw materials over five years that ended in June 2020.
In addition to this, an unknown businessman – who was operating the RSTL’s both accounts in banks, laundered Tk 19.2 crore and Tk 20.0 crore between October and November 2019.
It should be noted that all sponsors of the debt-burdened company hail from Indonesia, Singapore, and Taiwan.
Commenting on the issue, former financial adviser to the caretaker government Dr ABM Mirza Azizul Islam said, “Such incidents kill confidence among investors. The regulatory bodies, auditor, and issue managers cannot avoid responsibility in this regard.”
Mirza, a former chairman of the BSEC, pointed out, “Action must be taken against those responsible for such financial irregularities, and their assets should be seized. This in turn will help prevent similar cases from occurring in the country’s stock market.”
The BSEC report was recently sent to the Financial Institutions Division secretary, Anti-Corruption Commission (ACC) chairman, and Bangladesh Financial Intelligence Unit (BFIU) chief, and The Business Post has obtained a copy.
A once promising venture
Ring Shine Textiles Ltd – founded back in 1997 – raised Tk 150 crore from the market through an initial public offering (IPO) in 2019 to purchase machinery and repay bank loans.
The company had declared a stock dividend of 15 per cent for the shareholders on the audited financial statements as of June 30, 2019 and disbursed bonus shares to the respective shareholders and raised its paid-up capital to Tk 500 crore.
In the second year of its listing, RSTL Savar plant in Dhaka’s Export Processing Zone announced a month-long closure in September 2020, citing a decrease in foreign buyers and a shortage in the import of raw materials due to the Covid-19 crisis.
This closing period was later extended three times. On January 27, 2021, the BSEC dissolved the company’s board of directors and tasked a new board with taking the necessary measures to restart the company.
In June 2021, the company declared it would resume production after almost nine months of closure. The company said it would resume production on June 13 at 25 per cent capacity.
The RSTL did not pay any dividends in FY21 and FY22, and the company’s loss per share stood at Tk 1.54 in the last FY. In a latest development, the Union Group of Companies had expressed its interest in acquiring Ring Shine Textiles Ltd in 2022.
What are the key findings?
Ring Shine Textiles had raised its paid-up capital through private and public offerings based on fabricated audited financial statements, states the BSEC report.
It also appears that neither the 11 sponsor directors of the company, nor most of the shareholders deposited any amount against allotments of the aforesaid shares to the company’s bank accounts. There are 33 external shareholders of the company.
The other funds deposited by a number of shareholders have also been laundered by the unknown businessman through several cash cheques. The RSTL management, led by Sung Wey Min, deposited corporate cash to a Dutch-Bangla Bank account and falsely disclosed the sum as share money deposits.
The company management, including the unknown businessman and his family, statutory auditors, issue managers and other related parties violated a number of securities laws, and money laundering prevention act, states the BSEC report.
As per the company’s IPO prospectus, Sung Wey Min, managing director of the company, who held a total of 18,591,650 shares of the RSTL, had his home city address at Leuwigajah, Cimahi, and Bandung in Indonesia.
The special auditor, Hoda Vasi Chowdhury & Co, received no substantive documents in order to ascertain whether machinery imports shown against the TTs were actually received by the company.
The special auditor of BSEC also found large discrepancies with respect to the carrying value of “property, plant, and equipment” as reported in the audited financial statements, and as per the books of accounts of RSTL.
The inquiry committee found that over the last five years, ending on June 30, 2020, Ring Shine Textiles reported that the company purchased raw materials worth Tk 3,311 crore. The VAT returns, however, showed that RSTL actually purchased raw materials worth Tk 2,466 crore.
The company’s management and directors thus laundered Tk 845 crore in the name of purchasing raw materials.
RSTL further reported loans and borrowings in foreign currencies from ten commercial banks, including three foreign banks operating in Bangladesh.
The committee further identifies the criminal role and negligence of audit firms, engagement partners, and their audit engagement with Ring Shine Textile in the audit of annual financial statements and corporate governance practices.
It identifies the criminal role of two issue management companies, namely AFC Capital Limited and CAPM Advisory Ltd, in the pre-IPO and IPO processes.
The special auditor reported that due to inadequate maintenance of books of accounts, vouchers, cash books, bank ledgers, and account opening mandates, the ultimate authority of the bank accounts, the source of the rest of the funds, and their purpose, and actual usage could not be identified.
‘Some financial irregularities took place’
Auniruddho Piaal, the company secretary of RSTL, confirmed that some financial irregularities had taken place in their company in the past.
“These irregularities were brought to the attention of the regulatory body, after which a new board of directors was appointed by BSEC to address those issues,” he added.
He however declined to comment on the irregularities committed by the former managing director.
The BSEC Chairman Prof Shibli Rubayat Ul Islam told The Business Post, “We have identified significant irregularities within the company and reported them to the Anti-Corruption Commission (ACC) chairman and the Bangladesh Financial Intelligence Unit (BFIU) chief.
“They will now take necessary action in this regard.”
He added, “A prominent industrial group in the country has expressed interest in acquiring RSTL. The conglomerate plans to introduce new machinery and increase production capacity, and investors will benefit from this venture.
“Additionally, the BSEC will take legal action against those who violated the securities laws.”
Shibli mentions that the BSEC has implemented measures to prevent the former managing director of RSTL from leaving Bangladesh.
