A creditor of collapsed jet fuel trader China Aviation Oil (CAO) (Singapore) Ltd is suing the firm, its suspended chief and its Beijing state-owned parent for fraud and wrongful conspiracy, court documents showed on Wednesday. The move may scuttle a recently unveiled scheme to rescue the heavily indebted company at the centre of Singapore's biggest trading scandal since the 1995 fall of Barings Bank.
Sumitomo Mitsui Banking Corp (Singapore), a unit of Japan's Sumitomo Mitsui Financial Group (SMFG), is suing the three parties for damages related to a default on debt totalling $26.4 million, according to the documents obtained by Reuters.
CAO Singapore sought protection from creditors on November 29 after losing $550 million in derivatives deals. The company has liabilities totalling $648 million.
In a suit filed in Singapore's High Court on January 28, Sumitomo Mitsui said the parent company, state-owned China Aviation Oil Holding Co (CAOHC), deliberately concealed the trading losses of its 60 percent-owned Singapore unit to help it obtain credit from the Japanese bank on or about November 8.
Sumitomo Mitsui is seeking to recover $26.4 million plus damages and legal costs from the three parties.
The writ also named CAO Singapore's suspended Chief Executive Chen Jiulin as a defendant, alleging that he helped the firm to obtain the credit by fraudulent misrepresentations.
Singapore's white-collar crime unit arrested Chen in December. The 43 year-old from rural China remains on bail and under investigation.
CAO and its parent are also fighting a lawsuit filed by Satya Capital Ltd, a consortium of Indonesian investors. Satya is seeking damages of S$47 million ($29 million) from the two for reneging on a deal to buy a 20.6 percent stake in Singapore Petroleum Co (SPC) from Satya.
The lawsuit could jeopardise CAO Singapore's rehabilitation, since it is the first to directly accuse the parent of wrongdoing, sources close to the matter said.
"This will definitely throw a spanner in the works. The parent could withdraw support from CAO Singapore and from the rescue plan," one of the sources said.
CAOHC has insisted in the past that it would not be liable for debts of its Singapore unit. The rescue plan unveiled in January involves a lifeline cash injection of up to $100 million from CAOHC and another investor.
The co-operation of Beijing is also vital for CAO Singapore to continue to enjoy a monopoly on jet fuel supplies to China.
On Friday, China's Assets Supervision and Administration Commission ruled out bailing out the Singapore-listed firm.
Lawyers acting for Sumitomo Mitsui have so far only served notice of the suit on CAO Singapore, with notices pending for Chen and the Beijing firm, sources close to the matter said.
Chen, who was voted one of 40 "New Asian Leaders" by The World Economic Forum in 2004, when he was Singapore's fourth best paid CEO, said in an affidavit filed in November that the Beijing parent sold a 15 percent stake in CAO Singapore, through an October 20 placement arranged by Deutsche Bank AG, to cover the Singapore unit's losses.
Deutsche Bank, Germany's biggest bank, has said that the sale was done in accordance with normal market practice and that it would respond to questions from regulators.
A CAO spokesman said he could not comment on the case, given ongoing legal proceedings.
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