Sonu S D27

Dony Joseph C52

Harsha Tandure C55
Shiva Charan Reddy A57
Vivek Atmakuri C23
Ajay Nalawade C37

Synopsis

The Carrian Case is the longest criminal case in Hong Kong

judiciary history spanning over 17 years at a cost of HK$210
million and with over 4 million pages of exhibit

Rise and Fall of Carrian

Group
1972

An engineer from Singapore arrives in Hong Kong to work as a project manager for a land developer.

The engineer starts his own company to engage initially in the pest-control business and later establishes
1977 the Carrian Group
He purchases land in the New Territories and begins his foray into the property market; he sets up more
companies to engage in a variety of businesses under the umbrella of Carrian Holdings Ltd. (Carrian
1978 Group/Carrian), with himself as the group chairman (Carrian chairman).
A Carrian subsidiary acquires a listed company at a price of HK$6 per share. The company is later renamed

1979 Carrian Investments Ltd. for trade on the Hong Kong Stock Exchange.
Jan

Another Carrian subsidiary purchases Gammon House for around HK$1 billion. By October, it announces
the sale of Gammon House for over HK$1.6 billion.

Nov

The Carrian Group expands rapidly. Its share price skyrockets to a record high of HK$17.90 per share.

1980

1980

The property market in Hong Kong slumps and property prices drop sharply. The Carrian Group is also hit

Oct and announces a cash-flow problem. Its share price tumbles and bank creditors apply for the company's
1982 liquidation.
Jan The Stock Exchange suspends trading in Carrian shares.
1983

The Police discover that fraud was probably committed in the acquisition and sale of the Gammon House.
Several prosecutions are made. However, all the accused are acquitted due to duplication of charges and
Sept insufficient evidence.

20

1983

Oct Carrian is liquidated resulting in the biggest corporate collapse in Hong Kong.
1983

The Carrian & Bumiputra

Affair

Bank Bumiputra Malaysia Berhad (BBMB) was originally set up by the

Malaysian government to provide banking services and professional business
advice to Malaysian farmers of various ethnic groups. Soon it extended its business
to overseas markets. Banking regulations in Hong Kong, however, did not permit
BBMB to set up a branch in the territory.
BBMB therefore set up a subsidiary company, Bumiputra Malaysia Finance
Limited (BMFL), which was to be managed and operated in Hong Kong by several
of
its
senior
executives.
As a new lending house, BMFL had to be aggressive in building up a strong
clientele. Carrian meanwhile badly needed money to finance its many business
expansion programmes. The two companies were a perfect fit. In mid-1979,
BMFL released its first HK$5 million loan to Carrian. The Carrian chairman
initially dealt only with the general manager of BMFL, but contacts were later
established with other BMFL senior executives including its chairman, director
and alternate director.
As revealed in the investigations, although the credits Carrian obtained from BMFL
were all substantial, most were approved without adequate guarantees or
supporting documentation, nor was there evidence to suggest that the
loans had been subjected to the prescribed credit procedures.

The Banker who knew too much..

Jalil
Ibrahim
As early as 1982, BBMB headquarters was suspicious about its Hong Kong subsidiary's
credit-approval procedures. The bank therefore dispatched an internal auditor from its Kuala
Lumpur headquarters to act as assistant general manager supervising BMFL accounting
and credit matters, and with an unspoken task to examine BMFL's books from the inside. At
the same time, BBMB also issued an order to BMFL halting any further loans to the Carrian
Group of companies without prior headquarters' approval.
On 18 July 1983, the internal auditor was reported missing. Two days later he was found
dead inside a banana grove in Tai Po, New Territories

Hall of Shame

Bumiputera
Malaysia
Finance (BMF)

George Tan Soon- gin,

(Then Chairman)

Lorrain EsmeOsman
(Former Chairman)

Mak Fook Than

The costs that resulted..

Observations & Leanings from the

Scandal

Proper credit analysis should have been carried out before issuing such substantial
funds
There was no proper monitoring of such a rapidly growing company until it went
bust; shows the shortcomings in proper governance of companies and stock market
regulation.
Supporting documentation & Guarantee requirements were not sought for,
procedures skipped, by the loan issuing party.
Lack of proper communication and poor monitoring of the subsidiary in Hong Kong ,
probably in haste of pursuing overseas expansion.
There was neither compliance nor transparency in the operations of Carrian Group.
Senior management, who are supposed to set the example, persistently resorted to
corruption and deception.
Financials were tampered with to present a rosy picture to the investors. Again, a
lack of proper regulation.
The Hong Kong economy, stock market, Judiciary, investors , and all the stakeholders
were made to pay dearly for the above, and a promising life lost. This example pretty
much explains the need for proper ethical behaviour and corporate governance.