Citic Pacific chairman resigns following police raid

09 April 2009

Chairman and founder Larry Yung and managing director Henry Fan of Hong Kong's diverdified business conglomerate Citic Pacific, controlled by China's biggest state-owned investment company Citic, have resigned after Hong Kong police raided their office in search of evidence for fraud and false statements.

Last October, Citic Pacific said that it could lose nearly $2 billion from badly-timed currency bets after entering into currency hedges to buy the Australian dollar and the euro, which were intended to minimise its currency exposure to an iron ore mining project in Western Australia. (See: Citic's HK arm loses $2 billion in ill-timed currency bets)

The Commercial Crimes Bureau of Hong Kong issued a search warrant on 3 April and raided the company's headquarters overlooking Hong Kong's Victoria Harbour, where Citic Pacific and its directors were asked to provide information regarding currency contracts, false statements made by company directors and / or conspiracy to defraud under the common law.

Trading in the Hong Kong-listed shares of CITIC Pacific has been suspended since last Friday, 3 April, following the police raid.

The news of losses triggered protests from shareholders since the company did not disclose these losses for six weeks before informing the market, which led to separate investigations from the Hong Kong securities regulators and police.

Larry Yung had said at that time that ''These contracts were done without proper authorisation and the potential maximum exposure under these contracts was not evaluated correctly,'' and the blame was put on Leslie Chang, group finance director, and Chau Chi-yin, financial controller, who then resigned.