(b)
(c)
e
35
whether other investigations have been conducted on the Allied Group; if so, what the results are and the amount spent on such investigations; and
how the Government has ensured that the inspection and other investigations have been conducted in a cost-effective manner?
Answer:
(a)
The actual expenditure incurred on the investigation of the affairs of a group of 27 companies including Allied Group Limited, following the appointment of an independent inspector appointed by the Financial Secretary in August 1992 under section 143(1)(c) of the Companies Ordinance, was $46,478,295.65.
The inspector submitted his report to the Financial Secretary in August 1993. The inspector revealed in his report extensive detail about the specific activities he was asked to investigate. The findings indicated abuse of the group corporate structure and securities market ethical requirements. The legal implications could range from breach of civil law duties and regulatory rules to possible criminal offences including securities and regulatory statutory offences, Theft Ordinance offences and conspiracy to defraud. A substantial part of the report was made public in September 1993. The full report was referred to the law enforcement and regulatory bodies, as well as the 27 companies involved in the inspection for them to decide what actions to take within their respective areas of authority and to pursue those actions accordingly. In this connection, the Stock Exchange has publicly censured a number of individuals in senior management positions in the Allied Group companies. In addition, the inspection has achieved three main results. First, it has resulted in a complete re-vamp of the management of the Allied Group companies. The chairman of the Group and others associated with him have stepped down from management positions. A number of independent directors have been appointed, and an Audit Committee has been established. Secondly, the report generated a higher level of public awareness regarding corporate governance. We believe that there has been a considerable increase in vigilance by auditors of listed companies since the publication of the report. Thirdly, the inspection underlined the Government's determination to expose facts behind any apparent malpractices in the financial market in order to maintain its integrity and to enable concerned parties to take appropriate action.