(Adds S&P ratings cut in last paragraph.)
Feb. 14 (Bloomberg) -- Chaoda Modern Agriculture Holdings Ltd. Chairman Kwok Ho, a subject in a Hong Kong insider-trading probe, denied discussing an imminent share offering on conference calls with U.S.-based investors in 2009.
“Certainly, certainly not,” Kwok told Hong Kong’s Market Misconduct Tribunal yesterday in response to a question about whether he said on the calls that the Chinese vegetable supplier would “soon” do a placement. He also denied that he wanted to assess investor support for a share sale on the calls.
The tribunal is investigating whether material, non-public information was improperly disclosed on phone calls involving Kwok, Chaoda’s chief financial officer Andy Chan and U.S. institutional investors in 2009. George Stairs, then a portfolio manager at Fidelity Management & Research Co., took part in one of those calls and sold some of his Chaoda holdings ahead of the sale, according to Hong Kong’s government.
Stairs believed the share placement information he was given by Chaoda’s chairman and chief financial officer was public, according to a letter from Fidelity’s lawyers presented in evidence to the tribunal.
Stairs and Chan have denied any wrongdoing.
The tribunal was shown e-mails last week from then Merrill Lynch (Asia Pacific) Ltd. banker Rodney Tsang, who didn’t participate in the calls, to colleagues saying the estimated size and price of the share offering had been disclosed in the calls. Kwok, who is continuing his testimony today, denied yesterday that he discussed the proposed placement with Tsang in between the investor calls.
Stairs made a profit of HK$1.98 million ($255,313) for his funds by selling Chaoda shares ahead of the announcement and later buying more, at a lower price, in the share offering according to a government notice.
Chaoda abandoned a planned share placement in April 2009 and on the June conference call, Chaoda’s management showed an “apparent determination” to go through with their plans, according to a letter from Fidelity’s lawyers.
Kwok’s lawyer Warren Chan said yesterday that only one of six fund management firms, Janus Capital Management, said its employees were asked about their interest in taking part in a placement. Employees at Alliance Bernstein LP and Wellington Management Company LLP told regulators that management didn’t give details about a deal, Chan said citing transcripts.
Founded in 1994 by Kwok, Chaoda first sold shares to the public in Hong Kong in 2000. Kwok, 56, is a member of the Chinese People’s Political Consultative Conference, China’s top political advisory body, and has a 19.6 percent stake in the company, according to data compiled by Bloomberg.
The civil tribunal inquiring into the allegations has the power to disgorge profits made or losses avoided. It can also ban individuals from dealing in any securities, and from serving as a director or manager of a corporation.
Chaoda fell 27 percent on Sept. 26, when the misconduct proceedings were first reported and its shares were suspended. Next Magazine also alleged in a May 26 report that the company exaggerated its farmland holdings, which the company denied. Its shares fell 81 percent last year.
Standard & Poor’s last week downgraded the company two levels to CC, its third-lowest non-investment grade ranking, before withdrawing its rating, citing lack of access to Chaoda’s management.
--With assistance from Michelle Yun in Hong Kong. Editors: Douglas Wong, Joe Schneider
To contact the reporter on this story: Debra Mao in Hong Kong at firstname.lastname@example.org
To contact the editor responsible for this story: Douglas Wong at email@example.com