Assets of former Gome chairman frozen

(China Daily)
Updated: 2009-09-09 07:11

HONG KONG: The Hong Kong High Court Tuesday extended an order to freeze $214 million in assets of Huang Guangyu, the former chairman of Gome Electrical Appliances Holdings, as he faces legal prosecution and investigation on the mainland.

The High Court last month gave a temporary approval to an application by the Securities and Futures Commission (SFC) to prevent Huang, his wife Du Juan and two holding companies from disposing of or trading in Gome's shares.

Huang wholly owns the two companies, Shinning Crown and Shine Group, which have about 779 million shares in Gome. The stocks are now held by the Hong Kong court.

The commission's lawyer, Simon Westbrook, said Tuesday that freezing the assets of Huang and Du will not have an impact on Gome's business, and that the commission can also protect the company's shareholders.

The SFC has been looking for a mechanism to secure the value of Gome's assets, as its share price will "go up or down daily," Westbrook told reporters in Hong Kong.

Huang, also known as Wong Kwong-yu in Hong Kong, has been detained by the Beijing Public Security Bureau since November last year on suspicion of committing "economic crimes."

Winston Poon, the lawyer for Shinning Crown and Shine Group, told the court Tuesday that both Huang and Du are still in detention on the mainland.

The couple is alleged to have organized a share repurchase by Gome in January and February 2008, so that Huang could use the proceeds of the stake sale to repay his $2.4-billion personal loan to a financial institution.

The commission Tuesday asked the High Court to give approval for topping up the share deposits, which will stabilize the price of the stock if the asset value of Gome drops during the frozen period. The court, however, rejected the request.

"It is undesirable for the court to have such discretion," Judge Susan Kwan said in Tuesday's chambers hearing.

Westbrook said the commission reserves the right to come back and ask for a top-up to maintain the proximate value of $214 million.

"If there's a substantial, sustained drop, then we'll probably come back," Westbrook added.

The SFC said the dealings have caused Gome and its shareholders to lose $206 million, while it is also seeking a ruling for the couple to pay damages to Gome and restore the financial positions of any parties involved.

Moving against the 2.14 percent of the benchmark Hang Seng Index, shares in Gome finished down 1.79 percent, or HK$0.04, at HK$2.19.

Fiona Wong, research analyst manager at Wing Fung Financial Group Limited, said Huang's custody will put pressure on Gome's share price, yet she expects the company to run better business in the second half.