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 The
High Court ruled Philip Tose unfit to run a company. - SING TAO
One-time super-rich and flamboyant financier Philip Tose, 57, has been banned
from holding any company directorships in Hong Kong for four years.
The ban, imposed on Friday by the High Court, was the culmination of six years
of investigation in the wake of the 1998 collapse of Hong Kong's largest
private investment bank, Peregrine Investments, which had been backed by the
likes of tycoons Li Ka-shing, Sir Gordon Wu and Larry Yung.
Former fellow Peregrine manager Peter Wong was also disqualified from
directorships for four years.
Justice Susan Kwan said: ``I am firmly of the view that incompetence or
negligence of a marked degree is proved against each of them as to warrant a
finding of unfitness.''
She was acting on a request for disqualification from the official receiver, but
increased the receiver's recommendation of a three-year ban for Tose by one
year. Kwan said of Tose and Wong: ``There is little to distinguish between them
in the gravity of their conduct.''
The official receiver sharply criticised both Tose and Wong for a series of
management failures.
Chief among mistakes, Tose, chairman and a co-founder of Peregrine, had invested
about 35 per cent of the company's capital base funds - US$350 million (HK$2.73
billion) - with little security in an Indonesian transport company immediately
prior to the Asian financial crisis.
Ironically, the Indonesian company was called Steady Safe.
Justice Kwan noted that Tose had entered into the deal without consulting or
even informing Peregrine's head of credit risk.
The government inspector who investigated Peregrine's sudden collapse, Richard
Farrant, reported that the Indonesian venture had been ``hazardous and
foolhardy''. Farrant's report said that although the Asian financial crisis led
to Peregrine's collapse ``the major underlying cause was inadequate
infrastructure of good reporting and accounting procedures, risk management and
internal audit''.
A total of 29 allegations of management failure were laid against Tose and Wong
by the official receiver.
Justice Kwan said the allegations amounted to ``gross incompetence''.
They include taking significant credit risks, cursory independent credit
monitoring, lack of proper valuation policy and procedure, and serious failings
in relation to a 1996 internal audit and annual report which had proposed
``immediate corrective action''.
Peregrine Investments Holdings and Peregrine Fixed Income were both listed on
the Hong Kong stock exchange until they went into liquidation in January 1998.
Shareholders received no pay-out from the liquidation.
Both Tose and Wong admitted the allegations and accepted the terms of
disqualification in return for a fast-track legal process including a
``discount'' on the disqualification period. But Justice Kwan refused to take
into account their submission that they had in effect undergone
``self-imposed'' disqualification since the collapse of the group.
Tose co-founded Peregrine with Francis Leung Pak-to and, with backing from
shareholders Li Ka-shing of Cheung Kong, Sir Gordon Wu of Hopewell Holdings and
Citic's Larry Yung, built the business into Hong Kong's top home-grown
investment bank in less than 10 years with annual turnover of US$20 billion.
Tose chose the name Peregrine after one of the most ferocious birds of prey.
He liked to invest in countries which he said had strong government, such as
Indonesia, Burma and Vietnam.
In the 1990s he claimed that ``strong government, some would call it
dictatorship'' delivered much better economic growth. He once described
Australia as a basket-case country.
Born into a wealthy British family he was always a big risk-taker. As a young
man he drove racing cars until he was forced to retire after a serious
accident.
When he changed careers, he worked his way up from the mail room to the
boardroom.
At one point his wealth was estimated at US$1 billion with homes and Bentley
cars in Hong Kong and London.
He became close to local tycoons such as Li Ka-shing - and today he is still
part of their circle. He's a consultant to Li's Hutchison Whampoa.
daniel.hilken@globalchina.com
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