Midas board finds 334m yuan cash shortfall in China unit's account; police report filed

The board of directors of railway parts maker Midas Holdings has filed a police report against Midas subsidiary Jilin Midas Light Alloy (JMLA) in China after checks on its cash balances threw up alarming discrepancies.

The board said on Monday that based on statements obtained over the counter at the Changchun branch of China Merchants Bank, JMLA had just 11,485.40 yuan (S$2,400) in its cash balance at the end of December.

This is a shortfall of more than 334 million yuan from the sum that it had originally reported.

Earlier, Midas's auditors had received a "bank confirmation" that JMLA had unaudited cash balances of 334.4 million yuan at its primary accounts at the end of December.

The discrepancies in JMLA's accounts uncovered by the board date as far back as Dec 31, 2016, when the shortfall between the statements obtained and the earlier "bank confirmation" amounted to more than 352 million yuan.

"In view of the discrepancies, the board had made a police report in China. However, the police could not acknowledge receipt of the report," the Midas board said in an exchange filing on Monday. It did not explain why the police could not acknowledge receipt.

From the statements its obtained, the board also noted that 23 million yuan was transferred to Chongqing Huicheng Aluminium which is unrelated to Midas.

Chongqing Huicheng Aluminium is controlled by LakeForest Capital (previously known as Lesen Capital), whose sole shareholder is Chen Chen, the nephew of Chen Wei Ping, the former executive chairman of Midas.

The purported reason for the disbursement was loan repayment. However, no such loan is recorded in the group's accounts, the board noted.

The board also noted that JMLA also had a previously undisclosed bank account with the Bank of Jilin. This bank account was opened by Chen Wei Ping, the then legal representative of JMLA, on Sept 9, 2016.

The account was used for money transfers with a previously undisclosed lender, Jilin Provincial Micro Refinancing Corp, the board said.

Meanwhile, the Midas board still intends to validate the cash balances at the primary accounts of two more subsidiaries - Jilin Midas Aluminium Industries and Jilin Midas Investments.

These two subsidiaries are under judicial management, so the board is arranging with the judicial manager to procure information.

Midas itself is under investigation by Singapore authorities, and its shares remains suspended.

Marissa Lee

16 April 2018