Dec. 7 (Bloomberg) -- Citic Pacific Ltd.’s officers didn’t know the implications of the company’s currency exposure when they failed to disclose potential losses, a lawyer for the steelmaker and property developer told a Hong Kong court.
“In contracts of this complexity, how can you decide within two days that you’re going to sustain huge losses that would require a report to the stock exchange,” said Collingwood Thompson at a hearing yesterday where Citic Pacific is fighting a ruling that police should have access to some of its documents.
Hong Kong’s Department of Justice said in March it suspects that Citic Pacific defrauded four banks before Oct. 20, 2008, when it sought financing without disclosing losses on currency bets. The company had said in a stock exchange filing on Sept. 12 that year that its directors weren’t aware of any material adverse change in the group’s financial position.
In an Oct. 20 filing in 2008, the company said its bet the Australian dollar would fall against its U.S. counterpart could result in losses of as much as HK$15.5 billion ($2 billion). The company learned of the exposure on Sept. 7, it said. The Sept. 12 filing cited information current until Sept. 9.
Thompson was responding to a question from Court of Appeal Judge Michael Hartmann on the information directors received on Sept. 7.
“Was it a doomsday announcement that was irrevocable or an indication of troubled times ahead, implications of which were not completely understood?” Hartmann asked.
The High Court ruled in March that the police should have access to records of legal advice the company received before it disclosed the wrong-way bets.
Thompson said yesterday that the fraud case presented wasn’t strong enough to justify turning over the privileged documents.
Citic Pacific’s bets on the Australian dollar prompted a bailout from its parent Citic Group, which is backed by China’s cabinet, and the resignation of its chairman Larry Yung.
The case is Citic Pacific Ltd. and Secretary of Justice, Commissioner of Police, CACV60/2011 in Hong Kong’s Court of Appeal.
--Editors: Douglas Wong, Chua Kong Ho
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