Oil firm chief in Singapore free on bail
By Cao Desheng (China Daily)
Updated: 2004-12-09 00:42

Scandal-hit Chen Jiuling, the suspended chief of Singapore-based China Aviation Oil (CAO) was questioned by local police for a second straight day yesterday as the investigation continued into the loss of US$550 million on derivatives trading.

No charges have been filed against Chen, who has been released on bail and "is assisting the Commercial Affairs Department in the investigation", said Bian Hui, spokesman of the China Aviation Oil Holding Company (CAOHC), CAO's parent company in Beijing.

Chen's case has been described by local media as the city state's biggest trading scandal in nearly a decade.

Chen, 43, left Singapore for China last week after his company announced it had lost US$550 million on derivatives trading, forcing it to seek court protection from creditors.

Singapore's white-collar crime unit arrested and questioned him for the first time upon his return to the city state on Wednesday.

A four-member Special Task Force led by the CAOHC's investment department director Gu Yanfei has arrived in Singapore to handle the affair, Bian told China Daily.

They, together with the company's financial and legal advisers, have been meeting with several of the company's creditors to explain the company's financial situation and to garner support for the company's proposed Scheme of Arrangement, he said.

The support for the restructuring exercise by CAOHC has been reassuring for the creditors, said Bian.

"The creditors that the company have met so far expressed support to give it a reasonable time to restructure itself," Bian said.

The CAOHC, which supplies most of the jet fuel used in China, has taken steps to set up a new subsidiary company wholly owned by its Singapore unit to ensure the normal operation of the jet fuel procurement business, he said.

Since the losses were disclosed, debtors have stormed the company.

Among them is Satya Capital Limited, which has commenced a lawsuit against CAO and its parent company CAOHC.

Satya is claiming a breach in a Share Purchase Agreement dated August 18, 2004, in which CAO agreed to acquire 88 million shares in the Singapore Petroleum Company Ltd.

The claim against CAOHC alleges a conspiracy to break the agreement.

The amount of the lawsuits is US$47.16 million and damages, according to an announcement issued by the CAO on its official website.

CAO filed an application in the High Court of Singapore on December 7 for a 6-week extension to file a restructuring plan and to convene a creditors' meeting within 6 months.

The crisis will not have impact on the fuel oil supplies to the domestic airlines, CAOHC's deputy general manager Hai Liancheng told Xinhua News Agency.

While handling the trading losses, CAOHC has made arrangements to ensure the normal operation of businesses in the company, Hai said.

China's State-owned Assets Supervision and Administration -- the supervisor of the parent company CAOHC is carefully following developments, said Zhang Qiyue, a spokeswoman for the Ministry of Foreign Affairs, during a news briefing yesterday.

Singaporean Prime Minister Lee Hsien Loong is also keeping an eye on the issue. He said authorities will investigate the trading losses and make the truth clear to creditors, reported the local Lianhe Zaobao.

Late today, CAOHC will hold a press conference to disclose the latest developments of the issue in Beijing, company sources said.

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