Citibank rejects Oei’s negligence claim

Citibank rejects Oei’s negligence claim
Tycoon had $10b worth of contracts and knew the risks, bank says
By Lee Su Shyan, Assistant Money Editor

Let the evidence unfold

‘It is not unexpected that Citibank has denied Mr Oei’s claims. What we need to do is to let the case come to court and let the evidence unfold.’

Lawyer Quek Mong Hua of Lee & Lee, who is representing Mr Oei Hong Leong (left)

BUSINESSMAN Oei Hong Leong had investment contracts totalling US$6.9 billion (S$10 billion) with banking giant Citigroup in February last year, the bank has revealed.
One of Singapore’s wealthiest men and a Citigroup client of three decades, he claims he lost $1 billion through the bank’s negligence and is suing the bank.

But, in defence documents filed at the High Court late on Thursday, the bank said he is an experienced, sophisticated investor who knew the risks of trading.

It denied that it was negligent in its dealings with him or that it gave inaccurate or misleading information.

Mr Oei has alleged misrepresentation and inaccurate information from the private banking arm of Citibank. This led him to have to close his trading positions at the height of the market volatility late last year, putting him badly into the red.

Citigroup’s defence is the latest step in what some lawyers say could be a test case of the scope of private banks’ responsibilities to clients.

One key element of the case involves the events leading up to massive foreign exchange losses that Mr Oei suffered.

In Mr Oei’s dealings with the bank, he was provided with ‘margin shortfall’ figures. This is the sum he would need to top up, given a souring of investments.

According to Mr Oei, on Oct 22 last year, his margin shortfall was US$80 million. On Oct 27, it had jumped to US$90 million, and was more than US$200 million on Oct 28, but was down to US$28 million on Oct 29. He was later told that on Oct 27, the margin shortfall could have been as much as US$348 million.

Mr Oei claims the figures did not reflect the true market movements. He alleges the bank temporarily suffered a ‘meltdown’ in the accounting systems which tracked such shortfalls.

Relying totally on these shortfall figures supplied by Citibank to manage his portfolio, he grew concerned over their accuracy. However, as the losses spiralled he felt he had no choice but to close his positions, leading to losses of about US$518 million.

The bank calls such claims by Mr Oei ‘contrived afterthoughts’. It said his claims over the faulty accounting systems have not been substantiated.

It said ‘the market was entering into free-fall’ and that Mr Oei had already adopted the strategy of trimming his outstanding forex positions as he was uncomfortable with the market volatility.

Another element involves a $71.1 million bank deposit held by a Singapore-listed firm controlled 97.5 per cent by Mr Oei. Citibank went ahead to give Mr Oei more credit based on this amount, thus inducing him to take out more trading positions, Mr Oei claims, even though he had not asked for the credit.

Citibank has denied this.

A third key issue is the purchase of US Treasury bonds. Mr Oei had alleged that Citibank repeatedly breached its duty to him by failing to execute several orders that he had placed with the bank.

At that time, Mr Oei was concerned about a possible assassination of newly elected President Barack Obama and believed that bond prices would rise. He placed orders to cover the positions taken on the US$600 million of options he had written relating to the bonds.

But as these orders were not effected, Mr Oei had to buy the bonds at higher prices, and so incurred substantial losses.

Citibank’s defence is that the prices given by Mr Oei were consistently below the indicative market prices so the orders were not filled.

Mr Oei who has paid up his losses, says that he is suing Citibank on a point of principle. He is asking the court to assess damages.

Mr Oei was ranked 27th in the list compiled by Forbes magazine of Singapore’s 40 richest people last year, with an estimated fortune of US$210 million.

His lawyer Quek Mong Hua of Lee & Lee said: ‘It is not unexpected that Citibank has denied Mr Oei’s claims. What we need to do is to let the case come to court and let the evidence unfold.’

‘As stated previously, we intend to defend the action vigorously,’ Citigroup in Singapore said yesterday.

Vigorous defence
‘As stated previously, we intend to defend the action vigorously.’

Citigroup in Singapore

About the case
BUSINESSMAN Oei Hong Leong is suing Citigroup’s private banking arm in the High Court alleging negligence and misrepresentation.

He claims that the bank repeatedly gave him an inaccurate picture of his trading exposure, which initially caused him to take on more positions than he would have otherwise done.

But when he knew the full extent of his exposure, he felt he had no choice but to close his positions - at an extremely volatile time last October - thus suffering massive losses.

Citibank denies that it supplied misleading or inaccurate information, adding that Mr Oei is a sophisticated investor with very significant investment experience.

Mr Oei is known for his takeover attempt of Natsteel in 2002.

More recently, he has been in the news for donations to charity.

Source : Straits Times - 20 June 2009

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Top teams to pull out of F1 races

Top teams to pull out of F1 races

By Leonard Lim

F1 WITHOUT THE STARS? Without the top teams and stars like McLaren’s Lewis Hamilton (left) and current championship leader Jenson Button of Brawn GP, Singapore and the 16 other venues on the F1 circuit will be looking at a second-tier championship next year.
THE crown jewel of Singapore’s tourism calendar is in the balance, after eight top Formula One teams announced sensationally that they are taking steps to start a rival championship from next year.

They dropped the bombshell late on Thursday amid a worsening row between the F1 Teams Association (Fota) and world motorsport boss Max Mosley, who wants to limit the amount teams spend.

With marquee names like McLaren and Ferrari threatening to pull out, this is the worst crisis to engulf the sport in its 60-year history.

The sport’s governing body responded swiftly yesterday, saying it would take legal action against champions Ferrari and the other teams.

The International Automobile Federation (FIA), which Mr Mosley heads, said their actions breached legal obligations, among other things. It also said it was delaying announcing the 2010 line-up, which had been due today.

The absence of stars like McLaren’s Lewis Hamilton, Ferrari’s Felipe Massa and current championship leader Jenson Button of Brawn GP will result in an entirely different F1 series.

Unless the two sides compromise, Singapore and the 16 other venues on the F1 circuit will be looking at a second-tier championship next year.

That prospect is worrying both tourism industry players and fans alike, less than a year since the successful inaugural Singapore Grand Prix last September.

A race minus big names would hit the bottom line hard, predicted Park Royal Hotel general manager Ian Ekers. ‘If they break away, a lot of the crowd will follow,’ he said.

SIM University chancellor Cham Tao Soon, a Ferrari fan who has followed the sport for about 30 years, said: ‘If Singapore is obliged to carry on for three more years with Mickey Mouse teams, it will be very disappointing. I’ll probably switch to the other championship.’

At the Singapore Sports Awards last night, Deputy Prime Minister Teo Chee Hean said: ‘This is something the teams and the F1 management have to sort out. We hope that they will be able to come to some agreement for the good of motorsport as a whole.’

The current chaos had been building up over several months, ever since Mr Mosley proposed a voluntary budget cap on teams’ spending for the next season. Teams that do not comply would face technical restrictions.

The Fota teams - Ferrari, McLaren, Renault, Toyota, BMW, Brawn GP, Red Bull Racing and Toro Rosso - rejected the idea, saying F1 is based on technical excellence and constant innovation.

They said they would take part next year only if the rules were revised.

But the FIA refused to budge, arguing that the teams’ hefty spending of up to US$300 million (S$436 million) annually is not sustainable, not least in these difficult economic times.

Yesterday, Fota said it had no choice but to start preparing for ‘a new championship which reflects the values of its participants and partners’.

Carrying out that threat, however, will be fraught with obstacles. Deals must be struck with television companies and host venues.

Mr Bernie Ecclestone, 78, the sport’s commercial rights holder, said yesterday that the eight teams could do what they want. ‘I’m not here to tell them what to do,’ he said.

For Singapore, this year’s night race on Sept 27 is safe.

Last year, it drew 40,000 visitors who brought in about $168 million in tourism receipts over a weekend.

Singapore has a five-year deal to stage the F1, with an option for a five-year extension after 2012.

Singapore GP chairman Teo Hock Seng did not want to comment on the prospect of a future with two rival F1 races.

But Mr Andrew Ing of nightspot group St James Holdings said: ‘We’ll miss the party mood if we don’t get the full teams. It would be a shame.’

HOW IT GOT TO THIS
IN MARCH, the International Automobile Federation (FIA) proposed a budget cap of £30 million (S$72 million) per team. The motorsports governing body was concerned that given the economic environment, teams’ ballooning spending would be unsustainable.

Lower spending would also attract new teams which have been daunted by astronomical budgets of up to £180 million a year.

But most of the 10 Formula One teams said no, arguing that F1 is about cutting-edge technology and constant innovation. The teams were also angry that the FIA had not consulted them before making the proposal.

As negotiations between both sides dragged on, the FIA raised the proposed budget cap to £40 million.

Things came to a head as yesterday’s deadline for teams to submit entries to the 2010 series drew near. Then, on Thursday night, the Formula One Teams Association (Fota) dropped a bombshell, saying it was taking steps to prepare for a breakaway championship.

Fota comprises Brawn GP, Ferrari, McLaren, Renault, Toyota, BMW Sauber, Red Bull Racing and Toro Rosso.

The FIA, which said yesterday it will not be held to ransom, is set to announce the 2010 line-up today.

WHAT IF THERE’S NO COMPROMISE?

FROM the current F1 line-up, only Force India and Williams have said they will participate unconditionally next year.

With star names like McLaren’s Lewis Hamilton and Ferrari’s Felipe Massa missing, TV broadcasters, fans and host cities are staring at what might be a second-tier F1.

Source : Straits Times - 20 June 2009

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Severe haze likely to hit Singapore

Severe haze likely to hit Singapore

El Nino set to return this year, bringing hotter and drier weather

By Amresh Gunasingham

SMOKE haze from Indonesia could make an unwanted comeback this year as an El Nino weather phenomenon develops, bringing hotter and drier weather, Minister for the Environment & Water Resources Yaacob Ibrahim said yesterday.

Though slight now, the haze could worsen in the coming months, and peak in September, deep into the dry season.

Yesterday, 32 hot spots were detected in Sumatra, and 50 in Borneo. Meteorologists are watching as an early-stage El Nino develops over the Pacific Ocean.

‘It is cause for concern because it means the haze situation could worsen,’ said Dr Yaacob. ‘We are already seeing some signs of it.’

In fact, all it would take now for haze to blow by is for the wind to change, said experts. It has already blanketed parts of neighbouring Malaysia.

The pollution standards index (PSI) peaked at an unhealthy 136 in areas such as Port Klang, Shah Alam and Cheras last week, as visibility and air quality deteriorated rapidly.

In Singapore the PSI is in the good range for now.

But similar hot and dry weather in 1997 and 2006 fuelled fires in Indonesia, and south-westerly winds sent the smoke onwards.

The haze lasted three months in 1997, with the PSI reaching an all time high of 226 in September. People stayed indoors, health-care costs soared and tourism was disrupted.

According to a World Wide Fund for Nature (WWF) report published in 1998, Singapore, Indonesia and Malaysia suffered losses of more than $2.1 billion in the toll to their economies.

A bad haze year would also have a worrying impact on the prize event in the tourism calendar, the F1 Grand Prix race held in September, the minister said yesterday.

‘These are things we should be concerned about and we have informed Indonesia that they need to do something about it,’ he said.

Singapore will continue to work with Indonesia by providing it with the latest up-to-date information of where hot spots are, so that it can do its part, said Dr Yaacob.

He was speaking to reporters at the launch of a new $9 million satellite ground station, which will assist Indonesia in the haze fight by providing more razor-sharp satellite imaging of hot spot areas.

Indonesia has managed to reduce the number of hot spots but has yet to meet its target of 50 per cent this year, he said.

At a meeting in April for the Asean Ministerial Steering Committee (MSC) on Transboundary Haze Pollution, it assured its neighbours it would step up efforts to meet the target.

Dr Yaacob said officials from the National Environment Agency (NEA) and his ministry are due to travel to Jambi province next week and would impress upon government officials there of ‘the need to do more’.

The next ministerial committee meeting, set for October, may also have to be brought forward to before September, he said.

‘Let’s plan for the worst and hope for the best.’

But Dr Yaacob also paid tribute to a collaboration between Singapore and Jambi province as evidence of progress on Indonesia’s part in tackling the problem.

Singapore has committed $1 million to help the provincial government implement various programmes designed to prevent or mitigate the incidence of fires.

Air quality monitoring stations set up in the province now feed information about what is going on there. The hope is for such a network of monitoring stations to be extended throughout Indonesia.

NEA’s Meteorological Services Division said a ‘marked warming in this part of the Pacific Ocean in recent months points to the early stage of a potential El Nino’. Warming conditions need to be sustained over the coming months for a full-fledged El Nino to develop.

Associate Professor Matthias Roth, from the department of geography at the National University of Singapore (NUS), said the odds for haze in Singapore are high, as the south-west monsoon season, which has just begun and lasts till end-October, would blow any smoke this way.

Source : Straits Times - 20 June 2009

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Stanchart rings up mobile banking

Stanchart rings up mobile banking

By WINSTON CHAI

STANDARD Chartered Bank has become the second financial institution in Singapore to extend the convenience of Internet banking beyond the computer to the mobile handset.

Following on the heels of OCBC Bank, Standchart yesterday launched a new mobile service to allow customers access to its entire spectrum of Net banking offerings on the go.

Unlike most competing products, Standchart’s mobile banking service will not require consumers to download additional software to their phones. Instead, users simply fire up their handset’s Internet browser to check their bank statements or transfer funds via a Wi-Fi or cellular connection.

This browser-based approach also ensures the service will work across all handsets from Apple’s iPhone to HTC’s Windows-based handsets and Nokia’s Symbian phones. The mobile banking homepage will automatically be adjusted and rendered according to the user’s phone, the bank said.

Standchart’s latest mobile foray is fuelled by the strong take-up for its existing Internet banking services.

‘The popularity and wider acceptance of online banking is also reflected in the 33 per cent year-on-year increase we see in our customer base who signed up for online banking,’ said Dennis Khoo, Standchart’s general manager of retail banking products.

‘At the same time, the number of online banking transactions doubled year-on-year and accounts for over 70 per cent of all Standard Chartered self-service channels as at May 2009,’ he added.

With the number of smart phone-toting Singaporeans growing by the day, the bank says the time is now ripe to ring up the mobile banking platform.

Although the downturn has crimped spending on some tech gadgets, mobile phone sales continue to buck the general market decline. According to research firm GfK Asia, handset revenue in Singapore grew 15.6 per cent year-on-year to $183 million in the first quarter of 2009, driven by a combination of high-end smart phones and low-priced handsets.

Source : Business Times - 20 June 2009

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Re-inventing Ascott as a real estate firm

Re-inventing Ascott as a real estate firm

KNOWN largely as an owner-operator of serviced residences, CapitaLand unit The Ascott Group will increase its focus on buying, investing in and trading serviced residence assets.

‘One of the things I want to do is to re-invent Ascott to be a real estate company with a hospitality arm,’ CapitaLand group president and CEO Liew Mun Leong said yesterday. CapitaLand took Ascott private last year. According to Mr Liew, the bulk of Ascott’s earnings already come from trading real estate. Hospitality operations make up a small portion of the bottom line and are a ‘laborious’ way to profits, he said.

Ascott will pay greater attention to deals involving serviced residences but will not be interested in hotels, said Mr Liew. And even with the shift in focus, hospitality operations will remain an ‘important value-add’ to the business.

Ascott has some 25,000 serviced residence units in the Asia-Pacific, Europe and the Middle East through its three brands - Ascott, Somerset and Citadines.

Mr Liew said prospects are bright for the serviced residence industry in China, Europe and Australia.

Source : Business Times - 20 June 2009

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Oei’s Obama assassination fears

Oei’s Obama assassination fears

Court papers give an insight into tycoon’s dealings, show how he lost millions in the past year

By CHEW XIANG

COURT papers filed in an ongoing suit lodged by tycoon Oei Hong Leong against Citibank’s private banking arm shine a rare spotlight on the way the famed investor has handled some of his finances - and lost hundreds of millions over the last year.

For instance, last November, as Barack Obama was elected US president, Mr Oei believed that bond yields would fall sharply, implying a jump in bond prices, ‘especially if his fears that President-elect Obama might be assassinated were realised’.

Although Mr Obama wasn’t shot, bond prices still jumped sharply through the month, causing Mr Oei undisclosed losses. He had an uncovered exposure to US$600 million of put and call options on 30-year US Treasury bonds and wanted to buy US$600 million from Citi to cover the positions.

One part of the dispute with Citi centres on Mr Oei’s claims that his orders to do this at a lower price were repeatedly not carried out by the Citi banking team, causing him considerable losses when he had to meet his obligations later at a less favourable price.

The court papers also show that Mr Oei dealt heavily in forex trades. Between Sept 16 and Oct 6 last year, he sold 13 options in various currencies including the sterling, US dollar, euro and the yen - entering in total over US$1 billion in trades over that three-week period.

And according to the documents, Mr Oei lost US$518.3 million when liquidating 23 further forex contracts at the end of October. The contracts involve a range of straight cash deals, options, forex hedges, strips, bonds, and one targeted accrual redemption note.

To cover margin shortfalls due to the losses, Mr Oei apparently offered to pledge C$250 million (S$322 million) in Canadian properties as well as valuable antiques to avoid further liquidations at a loss.

In one instance of his market savviness, Mr Oei claimed in the documents that he foresaw the downturn as early as 2007, and so decided to trim his trading positions with Citi, then valued at about US$7 billion. He also decided to routinely maintain a margin surplus of at least US$100 million above that required by the bank.

That year, Mr Oei also began selling out of a number of other assets - according to reports, he gained S$14 million in just ten months from the sale of a 55,000 square foot plot of land in Pasir Panjang, and also netted millions through offloading stakes in SC Global and Centillion Environment and Recycling.

The lawsuit, filed last month and set for a first pre-trial conference in July, alleges that Citibank gave him inaccurate information on his trading positions on a number of occasions, causing him millions of dollars in losses. Mr Oei also alleges that Citi failed to carry out its duty to execute market orders, causing him losses.

Source : Business Times - 20 June 2009

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F1 in crisis as 8 teams move to start rival

F1 in crisis as 8 teams move to start rival

(Silverstone, England)

FORMULA One plunged into its biggest crisis in 60 years yesterday with eight of the 10 teams announcing plans to set up their own championship.

The teams association FOTA said that BMW-Sauber, Brawn, Ferrari, McLaren, Red Bull, Renault, Toro Rosso and Toyota were united in a decision that would split the sport in two if carried through.

Responding to the threat, Formula One’s governing body, FIA, said in a statement that it will sue FOTA over what ‘amount to serious violations of law including wilful interference with contractual relations, direct breaches of Ferrari’s legal obligations and a grave violation of competition law’.

The FIA statement read: ‘The FIA’s lawyers have now examined the FOTA threat to begin a breakaway series.

‘The FIA will be issuing legal proceedings without delay. Preparations for the 2010 FIA Formula One World Championship continue but publication of the final 2010 entry list will be put on hold while the FIA asserts its legal rights.’

 
The eight teams accounted for 47 per cent of Formula One’s total revenue generation in 2008 through sponsorship, supplier deals and team owner contributions, according to industry monitor Formula Money.

The teams will take more than US$2 billion of annual investment with them if they leave the FIA Formula One championship and set up their own series, Formula Money said.

‘The teams cannot continue to compromise on the fundamental values of the sport, and have declined to alter their original conditional entries to the 2010 world championship,’ said a statement.

‘These teams therefore have no alternative other than to commence the preparation for a new championship which reflects the values of its participants and partners.’

The governing International Automobile Federation (FIA) had set a deadline yesterday for teams to make their entries unconditional or risk exclusion in favour of would-be new competitors.

The eight FOTA teams had submitted entries conditional on the 2010 rules, which include a controversial budget cap, being rewritten and the signing of a new commercial agreement governing the sport.

Attempts by both sides to reach a compromise failed, with the FIA accusing teams earlier in the week of wanting to take over the sport.

FOTA said that their new series would encourage more entrants, listen to the wishes of fans and have transparent governance.

The teams, which are due to race in the British Grand Prix tomorrow, also promised ‘lower prices for spectators worldwide, partners and other important stakeholders’.

‘The major drivers, stars, brands, sponsors, promoters and companies historically associated with the highest level of motorsport will all feature in this new series,’ it added.

Two-times drivers world champion Spaniard Fernando Alonso said yesterday that Formula One is ‘finished’ if the split materialises.

The 27-year-old Renault driver said that he would leave and join the new series after weeks of discussions and negotiations failed to deliver a compromise agreement.

He added: ‘There is no solution so it is sad news, but that is the way it is. So I think that Formula One is finished. It will be standard engines for everyone, small teams and no drivers - for me, this is not the Formula One that the people want.

‘The new series will be very attractive, with the biggest teams and the best drivers so everything stays the same, just maybe not name. This will be the new F1.’

Alonso’s comments were among a series of different reactions in the paddock as many close observers of the sport talked about the split created by the FIA’s proposals for a £40 million (S$95.3 million) budget cap.

Former three-time champion Jackie Stewart, a long-time adversary of FIA president Max Mosley, said that he felt that Mr Mosley had ‘gone too far this time’.

He said: ‘Max’s way of ruling is bully-boy tactics - that’s why the teams have got fed up. Someone will stand up to a bully eventually and stop it. That’s the way it works.’

As he spoke, the eight rebel teams were locked in crisis talks inside the Ferrari motor home.

Mr Stewart said that he believed that it was necessary, if not imperative, for Mr Mosley to step down and leave if the two sides were to reach a compromise agreement and save Formula One from a damaging schism.

He said: ‘The teams have made a decision that they cannot continue with the governance in its present form - I think they do want Max to go because, frankly, some of his decisions over the years have been questionable.

‘For example, there was the US$100 million fine on McLaren for something that was never proven. Never in the history of sport has such an amount of money been levied by a sporting authority - and that was something that he drove.’ — Reuters, AP, AFP

Source : Business Times - 20 June 2009

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