The Thai Investors Association says it will support shareholder lawsuits against responsible parties involved in the massive fraud case at the car importer SEC Auto Sales and Service (SECC).
|Wichai Poolworaluk (left), chairman of the Thai Investors Association, criticises the embattled auto importer SEC Auto Sales and Services for lax internal controls that allowed massive fraud to destroy the company’s share value. TAWEECHAI TAWATPAKORN|
Wichai Poolworaluk, the TIA chairman, said the association would assist affected shareholders in pressing claims for losses incurred.
SECC on Dec 8 reported to the Stock Exchange of Thailand that it estimated initial losses of 1.36 billion baht resulting from a massive fraud allegedly perpetrated by company chairman Sompong Witthayaraksan.
It said it found that 476 cars were missing from its warehouse, reportedly SECC assets that were transferred to personal creditors of Mr Sompong.
Rumours of massive losses at SECC resulted in the company's stock dropping over 90% over the past month. The stock, now suspended from trade by the SET, last traded at 0.22 baht per share.
Mr Wichai said that SECC had committed several violations of both the law and principles of good governance, including lending funds to outside parties and allowing its cars to go missing.
The company is also alleged to have issued fake share certificates as well as false vehicle registrations.
Securities regulators now are moving to investigate the parties involved, including company executives, creditors, customers, directors, auditors and investors.
The TIA will gather names of affected shareholders to join in legal action with the Securities and Exchange Commission against the company next month.
"This would be the first case under the new SEC Act. There most likely are a number of guilty parties involved, from executive directors to internal auditors. Even if they have already resigned from the company, that doesn't absolve their responsibility," Mr Wichai said.
"This is also a case of a clear failure in ethics and governance. It's more serious than any other case before."
SECC's audit committee chairman, Chaiyawut Chitthiwong, and committee member Somboon Ahunai, both tendered their resignations from the company earlier this month. Company secretary Athikhom Surasunthorn tendered his resignation this week.
Signs of problems at SECC emerged in the third quarter, when its auditors raised questions about a loan of 245 million baht to a subsidiary. The company was later found to have faked registrations for 276 cars, while Mr Somboon allegedly fled the country.
According to the SET, SECC subsidiary SECC Holding lent 240 million baht to four parties: Nattawut Ampornpisit, Thanapong Pongwattana, Take It Builder Co and Supab Ritvijit. The loans were secured with land as collateral and due for repayment earlier this month.
Mr Wichai said the scandal had a clear impact on the image of the Thai capital market.
The SEC, meanwhile, rebutted allegations that it had been slow to react.
Shares of SECC were suspended from trade on Dec 4 after the SEC directed the company to undergo a special independent audit of its assets, liabilities and auto inventory. The SEC ordered the company to disclose the results of the audit by Dec 30.
SEC secretary-general Thirachai Phuvanatnaranubala said the audit had made "significant progress", and that the results would be announced soon.
Criminal prosecutions of responsible parties would also be taken, he said.
He added that the company's directors and audit committee members also had a fiduciary duty to protect the interests of the company and its stakeholders.
"On Dec 15, the SEC submitted a letter to all SECC directors and audit committee members stressing the importance of having to comply with the SEC's directives," Mr Thirachai said, adding that failure to do so was a criminal offence under the SEC Act.
Allegations that fake SECC share certificates were used to cheat investors are also being reviewed.
Mr Thirachai said the law did not require listed companies to use a scripless system for registering share ownership, and that fake shares could only be discovered when investors tried to register the shares with the Thailand Securities Depository.
"The SEC and the TSD are considering ways of addressing the problem, including possibly requiring shares of listed companies to enter the scripless system," Mr Thirachai said.
The SEC has asked parties with information about the SECC case to contact the commission at 0-2263-6000 or to e-mail