Magnus Energy confirms former MD's lawsuit

Charles Madhavan's suing over wrongful termination; company yet to address other concerns raised by him

Almost a month after Magnus Energy parted ways with its newly appointed managing director and disclosed that the executive raised concerns about past transactions, the company has yet to tell shareholders what those concerns involved.

In an announcement on Monday, Magnus said Charles Madhavan had on June 22 served the company a writ of summons in relation to his claim for wrongful termination.

Mr Madhavan had raised questions about loans made by the company; a loan from chief executive Luke Ho; and a luxury car bought for a key management personnel.

Magnus announced on May 28 the cessation of Mr Madhavan in his executive role, citing "differences with management and board".

The Catalist-listed company, whose core business is in oilfield equipment supplies and services, also said at the time that Mr Madhavan had highlighted to the company's sponsor, Stamford Corporate Services, personal concerns about some of the company's past transactions. Magnus said at the time it was in the midst of reviewing those concerns and would be responding to the sponsor's queries.

On May 31, Magnus said it had received a letter of demand from Mr Madhavan claiming for wrongful termination.

Mr Madhavan, who spoke to BT on June 6, said he was concerned about money loaned to an Indonesian contractor that had not been collected.

In May 2015, Magnus gave PT Hanjugin, an Indonesian contractor, a S$5 million loan to develop a manganese mine and build houses on the island of Timor, according to filings on the Singapore Exchange. The interest on the redeemable convertible loan (RCL) was 9 per cent per annum. Magnus took a land plot as collateral.

In 2016, Magnus disbursed another S$5.9 million to PT Hanjugin to build three roads and a dam in Java. All four projects were cancelled later that year, but S$1.9 million of that sum has not been repaid.

On August 31, 2017, four months before the RCL was due to mature on Dec 31, PT Hanjugin told Magnus that it needed time to restructure the entire S$6.9 million outstanding principal debts owed to Magnus, as well as another S$0.5 million in unpaid interest on the RCL.

The land in Timor held as collateral is also subject to a dispute, Magnus learned last month.

Mr Madhavan questioned why the company, which is loss-making and has a market capitalisation of S$12.6 million, did not take steps to recover the monies from PT Hanjugin sooner.

He also took issue with a S$650,000 one-year loan that the company borrowed from Mr Ho and independent director Seet Chor Hoon, to spend on a Malaysia microalgae oil cultivation facility, filings show.

Although the company managed to repay S$100,000 of the loan, the due date for the outstanding S$550,000 amount has been extended to April 2019.

The loans by Mr Ho and Ms Seet carry a 10 per cent annual interest.

Mr Madhavan said he had suggested to the board that Magnus should liquidate a car held on the company's books with a net book value of S$276,563. The car, purchased in the 2016 financial year, was registered in the name of an unidentified key management personnel and "held in trust for the group", Magnus's latest annual report reveals.

Mr Ho declined to comment to BT with respect to the issues raised by Mr Madhavan.

When BT asked the board for more information about who runs PT Hanjugin, and what due diligence was done before Magnus entrusted it for various construction projects, non-independent non-executive director Nick Ong Sing Huat replied last Friday: "We went through the processes, this was internal."

He added: "The company is in the process of preparing for the EGM (extraordinary general meeting) and is working with its legal professionals. The company will be make the appropriate disclosures in due course."

Although Mr Madhavan's executive role has been terminated, a vote by shareholders at an EGM is required to remove him as a director of the company.

Mr Madhavan's questions have reached the company's sponsor, Stamford Corporate Services, and Magnus has promised to follow up with a public announcement after it has reviewed his concerns. Bernard Lui, sponsor for Magnus and partner at Morgan Lewis, declined to comment for this story earlier this month.

Mr Madhavan's concerns and allegations come more than four years after the Commercial Affairs Department sought information on Mr Ho in relation to the 2013 penny stock crash when he was then Magnus' CFO.

Mr Madhavan joined Magnus on April 2, after a share placement raised his stake in the company to 5.5 per cent.

Marissa Lee

26 June 2018