Midas finds evidence of round-tripping by China subsidiary

Midas Holdings' Jilin facility. The troubled railway parts maker said that besides engaging in round-tripping, its Chinese subsidiary, Shanxi Wanshida Engineering Plastics, has previously undisclosed, unauthorised bank accounts.
Midas Holdings' Jilin facility. The troubled railway parts maker said that besides engaging in round-tripping, its Chinese subsidiary, Shanxi Wanshida Engineering Plastics, has previously undisclosed, unauthorised bank accounts.PHOTO: MIDAS HOLDINGS

Troubled railway parts maker Midas Holdings has found that its Chinese subsidiary, Shanxi Wanshida Engineering Plastics, has been engaged in round-tripping and has previously undisclosed, unauthorised bank accounts.

In a regulatory filing on Thursday, Midas said that on June 7, the board obtained bank statements for Wanshida's account with the Industrial and Commercial Bank of China's (ICBC) branch in Ruicheng. These showed evidence of round-tripping, made to create the impression of a 60.6 million yuan (S$12.7 million) loan by Wanshida to Luoyang Midas Aluminium Industries.

Separately, another apparent set of round-tripping transactions was found between Wanshida and Jilin Midas Aluminium Industries. As Jilin Midas is under judicial management, the board has no access to its bank statements and said it will verify if round-tripping has also taken place there at a later date.

The board further discovered that Wanshida has bank accounts with ICBC's Yuncheng branch and Shanxi Rural Credit Cooperatives that were not disclosed to the company and its auditors.

The board also noted a loan agreement entered into by Wanshida's legal representative Ma Ming Zhang on March 28 this year with Shanxi Rural Credit Cooperatives for 14 million yuan. The loan's purpose was stated as the purchase of raw materials, and it was secured by the pledge of lands and properties worth 14 million yuan.

However, the loan proceeds "were transferred out on the same day the loan was disbursed" and the board "has no knowledge about what the loan proceeds were used for", said Midas.

"The board will issue further announcements as appropriate, as and when there are any material developments in the matter. In the meantime, the board is taking steps to replace the board at Wanshida with representatives from Midas Holdings Ltd," said Midas.

SUBSIDIARY'S BOARD TO GO

The board will issue further announcements as appropriate, as and when there are any material developments in the matter. In the meantime, the board is taking steps to replace the board at Wanshida with representatives from Midas Holdings Ltd.

MIDAS HOLDINGS

A version of this article appeared in the print edition of The Straits Times on June 16, 2018, with the headline 'Midas finds evidence of round-tripping by China subsidiary'. Print Edition | Subscribe