Procomp Informatics Ltd, a listed company, has filed a restructuring plan with the local district court as a result of the company's defaulting on its corporate bond payments. The financial repercussions of this action have reverberated for several days. The case is fraught with suspicions of wrongdoings, and a preliminary look at the case reveals similarities to the Enron scandal in the US.
Enron was once the seventh biggest corporation in the US. Established in 1987, it was called the "most innovative company" and the "company with biggest growth potential" by Fortune Magazine for several years in a row. After its share price reached a high of US$81 per share in 2001, fraudulent accounting practices caused prices to fall to US$0.26. In December that year, the company filed for bankruptcy and restructuring. Legal handling of the Enron scandal is continuing to this day, and it is having a political and economic impact in both the US and internationally.
Enron's highest annual return exceeded US$100 billion. The following three factors are generally considered to be the reasons why the company ended with bankruptcy and delisting from the stock market: Untruthful accounting that did not match facts, in particular false reporting of profits and debt; systemic shortcomings, ineffective internal controls and nominal external auditing; and reliance on untruthful performance reports to attract funds, hurting investors.
The Procomp Informatics case, which already has been out in the open for several days, still awaits clarification. Although the company's founder has provided a public explanation, the situation is still mired in doubt, which shows that there are major problems. Most fundamental are the problems of Procomp itself, including questions concerning whether funds have been temporarily appropriated for private use or taken out of the company, the abnormal trading in the company's shares before and after the restructuring announcement, the transfers on the day restructuring took place, and even whether financial reports are deceptive or false.
This is not only reflects on the founder's honesty and credibility, but it also highlights major shortcomings in the company's corporate governance. The suspected false financial reports also bring up the issue of dividing responsibility between Procomp and its certified accountants.
In addition, Procomp planned to issue global depository receipts to make up for financial deficits, but a conflict over insider trading arose between the company and the underwriting bank, CitiBank. Company funds deposited overseas also involved questions regarding whether the bank had provided false information. It still remains to be seen whether any illegalities have occurred.
Because Procomp is a listed company that finds its funding among the general public, the concerned authorities should ascertain that the company's corporate governance procedures are in place and provide the public with details.
The Procomp case reflects problems with the securities markets' early warning mechanisms, and also that there are several shortcomings in related commercial accounting and banking operations. Systemic, legislative and administrative steps must be taken to prevent such matters from occurring again.
Thus, sound and comprehensive systems and laws must be put in place. These systems and laws must be used to block and eliminate situations conducive to greed or fraud and provide effective warning and supervision when problems in financial markets first appear.
Lu Shih-xiang leads the Foundation for the Advancement of Media Excellence.
Translated by Perry Svensson
Recently, China launched another diplomatic offensive against Taiwan, improperly linking its “one China principle” with UN General Assembly Resolution 2758 to constrain Taiwan’s diplomatic space. After Taiwan’s presidential election on Jan. 13, China persuaded Nauru to sever diplomatic ties with Taiwan. Nauru cited Resolution 2758 in its declaration of the diplomatic break. Subsequently, during the WHO Executive Board meeting that month, Beijing rallied countries including Venezuela, Zimbabwe, Belarus, Egypt, Nicaragua, Sri Lanka, Laos, Russia, Syria and Pakistan to reiterate the “one China principle” in their statements, and assert that “Resolution 2758 has settled the status of Taiwan” to hinder Taiwan’s
Can US dialogue and cooperation with the communist dictatorship in Beijing help avert a Taiwan Strait crisis? Or is US President Joe Biden playing into Chinese President Xi Jinping’s (習近平) hands? With America preoccupied with the wars in Europe and the Middle East, Biden is seeking better relations with Xi’s regime. The goal is to responsibly manage US-China competition and prevent unintended conflict, thereby hoping to create greater space for the two countries to work together in areas where their interests align. The existing wars have already stretched US military resources thin, and the last thing Biden wants is yet another war.
As Maldivian President Mohamed Muizzu’s party won by a landslide in Sunday’s parliamentary election, it is a good time to take another look at recent developments in the Maldivian foreign policy. While Muizzu has been promoting his “Maldives First” policy, the agenda seems to have lost sight of a number of factors. Contemporary Maldivian policy serves as a stark illustration of how a blend of missteps in public posturing, populist agendas and inattentive leadership can lead to diplomatic setbacks and damage a country’s long-term foreign policy priorities. Over the past few months, Maldivian foreign policy has entangled itself in playing
A group of Chinese Nationalist Party (KMT) lawmakers led by the party’s legislative caucus whip Fu Kun-chi (?) are to visit Beijing for four days this week, but some have questioned the timing and purpose of the visit, which demonstrates the KMT caucus’ increasing arrogance. Fu on Wednesday last week confirmed that following an invitation by Beijing, he would lead a group of lawmakers to China from Thursday to Sunday to discuss tourism and agricultural exports, but he refused to say whether they would meet with Chinese officials. That the visit is taking place during the legislative session and in the aftermath