Peter Lim, former finance chief at China Aviation Oil Corp (Singapore), was sentenced to two years in prison for his part in a derivatives trading scandal that cost China's biggest aviation-fuel importer US$550 million.

 

Lim, who was fired in December, was found guilty of conspiring to cheat adviser Deutsche Bank AG by releasing false information, Judge Liew Thiam Leng found yesterday at the Subordinate Court of Singapore. Lim, who pleaded guilty, declined to comment on the sentence.

 

The city pledged stricter trading and disclosure rules to shore up its position as Asia's biggest oil-trading center after the derivatives loss Singapore's biggest since Nick Leeson cost Barings Plc US$1.4 billion in 1995. Former chief executive officer Chen Jiulin, due to stand trial next month, faces 13 charges, each carrying a maximum sentence of seven years. Leeson spent three-and-a-half years in prison.

 

"This sort of action is good for corporate governance in Singapore," said David Gerald, president of the Securities Investors Association of Singapore, which represents minority shareholders. Singapore does not "compromise on the enforcement of the rule of law."

 

Lim last week pleaded guilty to releasing financial statements for the six months ending June 30, 2004, even though he knew they were "false in certain particulars," according to the charge sheet. He also pleaded guilty to a charge of conspiracy to cheat Deutsche Bank, which arranged the sale of a 15 per cent stake in China Aviation Oil by its parent company one month before the losses were revealed in November 2004.

 

'High Standards'

 

Lim was fined US$92,000 for releasing false information, and sentenced to two years in prison for conspiring to cheat Deutsche Bank, Judge Liew said yesterday.

 

"The facts in the present case emphasize the importance of having honest, effective and good corporate governance," the judge said during sentencing. "This requires high standards of integrity and transparency."

 

Lim would serve an additional 12 months in prison if he fails to pay the US$150,000 fine. The judge granted Lim's request to have the prison sentence start in two weeks' time.

 

"It's a fair sentence," said Leong Hee Tean, from Wong Thomas & Leong, which represented Lim.

 

Chen, the company's former CEO, was charged in June with forgery and failure to disclose the losses. Thirteen of the 15 charges carry a maximum sentence of seven years in prison.

 

Jia Changbin, Gu Yanfei and Li Yongji are the other three non-executive directors who are also facing charges in Singapore, which include the failure to disclose information to the company's board and the stock exchange.

 

PricewaterhouseCoopers, which probed China Aviation Oil's losses on behalf of the city's stock exchange, said in June last year that managers at the company overrode risk controls and failed to follow correct accounting procedures. The same day, the fuel trader said it acknowledged the need to improve management and corporate governance within the company.

 

(China Daily February 22, 2006)