25/08/22

SINGAPORE: Authorities fine Noble $9m for one of Asia’s worst accounting scandals.

As published on splash247.com, Thursday 25 August, 2022.

Authorities in Singapore have concluded investigations and issued fines into one of the largest cases of accounting fraud recorded in Asia over the past decade.

The Monetary Authority of Singapore (MAS), Accounting and Corporate Regulatory Authority (ACRA), and Commercial Affairs Department (CAD) of the Singapore Police Force (SPF) yesterday fined commodity trader Noble Group S$12.6m ($9.03m) for releasing “misleading” information in its financial statements between 2012 and 2016.

The lengthy investigation found Noble had entered into long term marketing agreements with mine owners and coal producers to either assist them to build a brand name for their mines, or act as a salesperson for the commodities produced from the mines. Under these marketing agreements, Noble would not take delivery of the commodities produced but would earn fees based on a pre-determined percentage of the counterparty’s sales value.

The joint investigations revealed that Noble had applied an incorrect accounting treatment to these marketing agreements by classifying them as financial instruments instead of service contracts, and by recognising future fees from these agreements before rendering the services. This inflated Noble’s reported profits and net assets.

The decline and fall of Noble came about from a disgruntled ex-employee turned whistleblower, Arnaud Vagner, who almost singlehandedly brought down the multi-billion dollar empire of what used to be Asia’s largest commodities trader. Vagner formed Iceberg Research, which issued many devastating reports on Noble’s accounting practices, wiping billions of dollars off the company.

Assistant chief executive of ACRA, Kuldip Gill, said yesterday, “Quality financial information is crucial for a trusted and vibrant business environment in Singapore. ACRA expects financial statements to reflect a true and fair view of the financial position and performance of the company as market participants rely on the financial statements to obtain an accurate picture of the value the business generates, and the risks involved.”

Loo Siew Yee, assistant managing director at MAS, added, “Materially false or misleading statements by listed entities have no place in Singapore’s capital markets. If left unchecked, they will erode investors’ trust in the quality of information released by issuers, and have an adverse impact on the integrity of our capital markets. The present action demonstrates that MAS takes breaches of disclosure obligations seriously and will take firm action against persons found to have fallen short.”

Noble Resources Trading Holdings, which was formed four years ago in the UK as a part of Noble Group’s reorganisation and has since been under new ownership and management, welcomed the conclusion of the investigation, keen to put the matter behind it.

“We are looking forward to continuing to work with our suppliers and serve our customers, building on the strong start to 2022,” the company stated.

While fines were issued yesterday, and two ex-directors cautioned, Singaporean authorities decided not to prosecute any individuals, a decision which disappointed Iceberg Research after its lengthy battle with the company.