Public Prosecutor v Koh Soe Khoon

• Jurisdiction: Singapore
• Judge: Wong Keen Onn
• Judgment Date: 24 April 2006
• Neutral Citation: [2006] SGDC 84
• Court: District Court (Singapore)
• Published date: 28 January 2014
• Year: 2006
• Plaintiff Counsel: Hwong Meng Jet (Deputy Public Prosecutor)
• Defendant Counsel: Subhas Anandan and Lim Tse Haw (Harry Elias Partnership)
• Citation: [2006] SGDC 84

24 April 2006

District Judge Wong Keen Onn

Charges

1. The accused, Koe Soe Khoon, aged 58 years, faced a total of 125 charges, which comprised the following:

(a) 6 charges of insider trading under s 218(1)(a) punishable under s 222(1) Securities and Futures Act;

(b) 39 charges of directors failing to notify the company of change in interest under s 165(1)(b) of the Companies Act;

(c) 39 charges of directors failing to notify the Securities Exchange of change in interest under s 166(1) of the Companies Act;

(d) 39 charges of shareholders failing to notify the company of change in interest;

(e) 2 charges for secretion of document under s 204 of the Penal Code.

2. On 28 February 2006, he pleaded guilty before me to 13 charges. These comprise of:

(a) 3 charges of insider trading under s 218 (2)(a) punishable under s 222(1) Securities and Futures Act (SFA);

(b) 3 charges of failing to notify of the changes in his shareholdings to the Company while being a director under s 165(1)(b) punishable under s 165(9) of the Companies Act;

(c) 3 charges of failing to notify of the changes in his shareholdings to SGX while being a director under s 166(1) punishable under s 166(2) of the Companies Act and

(d) 3 charges of failing to notify of the changes in his shareholdings to the Company while being a substantial shareholder under s 83(1) punishable under s 89 of the Companies Act.

(e) 1 charge of secretion of document under s 204 of the Penal Code.

3. Upon his conviction on these thirteen charges, the accused consented to 112 charges to be taken into consideration for purposes of sentencing. These comprise, namely, 3 counts of insider trading under s 218(2)(a) punishable under s 222(1) Securities and Futures Act, 36 counts of failing to notify of the changes in his shareholding to the Company while being a director under s 165(1)(b) punishable under s 165(9) of the Companies Act, 36 charges of directors failing to notify the Securities Exchange of change in interest under s 166(1) of the Companies Act, 36 counts of failing to notify of the changes in his shareholdings to the Company while being a substantial shareholder under s 83(1) Companies Act and on 1 count of destruction of evidence under s 204 of the Penal Code.

Facts

4. In pleading guilty, the accused admitted to the amended Statement of Facts attached at Annex A to this judgment. The brief facts are as follows.

Insider trading charges (DAC 38314-38316/2005)

5. At the material time, the accused was the Managing Director and Executive Chairman of Brilliant Manufacturing Limited (“BML” or the “Company”) which was listed on the Mainboard of the Singapore Exchange Limited (“SGX”) on 6 April 1998. With respect to the three proceeded charges (the 4^th, 5^th and 6^th charge), it was not in dispute that between 18 November 2003 to 2 December 2003, the accused knew that he was in possession of positive price sensitive information, which was not generally available. The information was:

(a) its full year financial results for financial year 2003 (‘FY03’) (1 October 2002 to 30 September 2003) where its net profits increased by 203% from $7 million in financial year 2002 (‘FY02’) to $21.3 million in FY03; and

(b) a declaration of a higher dividend rate of 30% (2.4 cents) in FY03 compared to 20% (1.6 cents) in FY02.

6 The prosecution expert opined, and it was accepted by the defence, that these were positive price-sensitive information which, if it were generally available, might have a material effect on the price or value of the shares. It would lead to investors to form a bullish opinion on the profitability and survivability of the Company. Despite this, between 19 and 24 November 2003 (which was with in the black-out period from 31 Oct to 2 Dec 2003), the accused had on 3 occasions purchased 150,000, 100,000 and 100,000 BML shares in his son Koh Kai Jiang’s account maintained with DBS Vickers Securities (Singapore) Pte Ltd at an average price of $0.60333, $0.575 and $0.58 respectively. Upon release of the information, BML share price rose to $0.725 on 3 December 2003, an increase of 5.1 % from the previous day’s closing price of $0.69. The market volume traded also surged by 146 % from 11.46 million shares to 28.17 million shares on 3 December 2003. Based on the share prices difference before and after the company announcement on 2 Dec 2003, the estimated savings (or “paper gains”) he had obtained through the purchases was $47,800 for these 3 proceeded charges. For the charges that were taken into consideration, the estimated savings or “paper gains” at that time was $37,950. By dealing in the shares of BML whilst in possession of price-sensitive information that was not generally available, the accused had contravened section 218(2)(a) of the Securities and Futures Act.

Failure to disclose change in interest – Section 165, 166 & 83 CA (DAC 38332-38340/2005)

7. At the material time, the accused, being a director of BML, also held more than 5 per cent of shares of BML and was therefore a substantial shareholder of BML. Between 7 and 22 September 2000, the accused had on 3 occasions sold the 200,000 shares of BML on each occasion using the trading account of his friend and business partner, Tan Seng @ Tan Hun Seng which was held with GK Goh Stockbrokers Pte Ltd (account number 17/B1/0041159). The accused had interest in all the shares in this account. The accused, as a director and substantial holder of BML, did not disclose these sale transactions to the Company and SGX within two days time frame from the date of the event giving rise to the charge and he had therefore committed 3 offences each under sections 165, 166 and 83 of the Companies Act.

Secretion of Document under Section 204 Penal Code (DAC 38435/2005)

8. For this charge, the accused, was on 15 July 2004, served an order under section 58 of the Criminal Procedure Code (Chapter 68) (“CPC”) by CAD officers to produce documents relating to his share trading activities in 2003. Although the accused was told by the investigation officers that one of items for seizure was the accused’s 2003 diary, the accused, while the search was on-going in his office, tore a page from the said 2003 diary. This page contained his handwritten notes on share investments. He then attempted to conceal the page by putting the page in the side pocket of his trousers.

Mitigation

9. The accused is first offender and had pleaded guilty at the earliest opportunity. Counsel urged the Court to take into account that the accused’s plea of guilt had averted a potentially lengthy trial. As for his personal mitigating factors, counsel informed that the accused had resigned as Chairman and Managing Director of BML on 21 January 2006. The accused will also be giving an undertaking that he will not hold any directorship in any public listed company for a period of 5 years from the date of these proceedings. Notwithstanding this, defence conceded that, as of today, the accused is still the major shareholder of BML and both his wife Mdm Tan Poh Eng and his two brothers are directors of BML. The accused’s wife was appointed a board director on 15 Nov 2005, which was after the accused was first charged in court on 6 September 2005. Counsel urged the Court to take into account the accused’s contributions and sacrifices that the accused had made in building up BML into one of the most successful public companies in the world today[note: i] with a market capitalization of about $150 million, employing about 2800 people worldwide. According to accused, he epitomized the spirit of entrepreneurship, in rising from an ‘A’ Level holder to form and manage a Forbes Asia’s world top 200 public companies. The accused also tendered to the Court a copy of the chapter on his success story in the book “Grit Success- Stories of Millionaires in Our Neighborhood” and the newspaper cutting on BML being awarded the Enterprise 50 award. Counsel also submitted that in one instance in 1998, accused had made personal financial sacrifice to protect the financial well being of BML in executing a personal indemnity when BML decided to invest in equity shares of US corporations. That had resulted in him paying from his own pocket a sum of S$5.119 million to indemnify BML for its investment loss.[note: ii] A testimonial on the accused describing him as a man of integrity and one with a passion in managing BML was also tendered.

10. With regard to the circumstances leading to the commission of the SFA offences, counsel informed that the accused had, in August 2003, done a placement and sale of a block of 3 million shares from his son’s account to DMG & Partners Securities Pte Ltd. Counsel claimed that the accused had bought the shares at the material times because he was eager to replenish the BML shares in his son’s account. This was part of the progressive share purchases that he made since 2 Oct 2003. Counsel conceded that the accused himself decided on the timing of his share purchases. The accused had thought it was all right for him to purchase the shares on his son’s behalf as some research analysts had been generally briefed of the performance of the company BML and these reports would be disseminated to those who are regular investors. Counsel tried to suggest that the information was not so material by tendering in various reports by research analysts and stockbroking houses suggesting profit guidance of BML’s year end results and net profit forecasts of $20.6 million[note: iii], $20.8 million[note: iv], $20.9 million[note: v] and $21 million[note: vi], which Counsel submitted was available to the investors, were in line with and not materially different from the actual results of $21.3 million released on 2 December 2003. Counsel urged the Court to take into account these three mitigating factors namely: one, that there was minimal influence or impact of such price sensitive information on persons who commonly invest in securities in deciding whether or not...