From the ST archives: Citiraya probe - Was waste meant to be destroyed traded?

This article was first published in The Straits print edition on May 20, 2005.

The police probes into troubled Citiraya Industries centre on whether the firm or its employees was involved in trading in electronic waste that was meant to be destroyed, sources close to the firm have revealed.

The mainboard-listed firm’s business was recycling valuable e-waste such as old or broken PC components, printers, laptops, disk drives and mobile phones, and extracting valuable components and precious metals from them.

But angry corporate customers of Citiraya, who sold it their obsolete models on the understanding they would be destroyed, claimed to have found the devices re-surfacing in the market, locally or abroad.

The customers had wanted their devices destroyed so that these older products would not ‘cannibalise’ the market for the latest models.

Selling the items on instead - if this was proved to be the case - could represent not just a breach of contract, but also have wider implications.

The Straits Times has obtained a set of powerpoint slides allegedly showing how e-waste at Citiraya was channelled for illegal trading.

The slides show uncrushed e-waste being privately traded, instead of going through the recycling process.
It is believed that the information on those slides was gathered through feedback from former Citiraya customers and employees.

Corporate clients could have been so irate that they tipped off local law enforcement agencies, said a source, who did not want to be named.

Citiraya is being investigated by the Commercial Affairs Department and the Corrupt Practices Investigation Bureau for possible fraud. The probes started five months ago.

Talk began to swirl in the market then that illegal trading of e-waste parts was going on at the firm.

Citiraya has not responded to the allegations of the existence of illegal trading.

The company’s spokesman said yesterday: ‘The advisers of the company are currently carrying out their investigation with the view to preparing a report relating to the matter, which they will issue to the board when the report is finalised. The company will then make the appropriate announcement. The company is not in a position to make any statement at the moment.’

Shares of Citiraya have been suspended from trading since January. As well as police probes, it faces legal suits from creditors and a dwindling cash reserve. Indeed, it appears to have had high operating and overhead costs.

According to its most recent financial statement, the firm had total expenses amounting to $10.9 million in the nine-month period ended Sept 30 last year.

This could also be due to its practice of paying ‘premium prices’ to secure e-waste supply from its customers.

It is believed that Citiraya could have paid between $2,000 and $3,000 for every tonne of e-waste collected, regardless of its recycling value.

Market observers reckoned that this practice had enabled Citiraya to dominate the e-waste market, pushing other competitors to the sidelines.

But sources wondered if, in order to cover its high business costs, Citiraya could have traded the bulk of its e-waste collected, instead of crushing and recycling it.

In fact, trading e-waste is far more profitable than recycling it, they said.

For instance, a barrel of uncrushed cellphone chips could be worth $1 million, whereas a barrel of crushed ones might only be worth $10,000, they added.

That is because there is a demand for these uncrushed chips in markets such as China, where older handsets are still being used.

And this could boost Citiraya’s turnover, if this is true.

In the nine months ended Sept 30, the firm reported total revenue of about $111 million.

The strong performance was largely due to the spectacular growth in its trading activities, which rose by 77 per cent to $36.7 million from the previous nine-month period.

Adding to Citiraya’s woes of late was a failed rescue plan by white knights Koh Boon Hwee and Low Check Kian.

And its competitors, such as SembCorp Environmental Management, are aggressively snapping up its customers.

Further complicating matters is the disappearance of former chief executive Ng Teck Lee, who has been uncontactable up to now.