Hong Kong's Independent Commission Against Corruption (ICAC) has arrested the chairmen of three related listed companies amid allegations of doctoring financial statements to meet stock exchange listing rules.

They are among 19 people arrested in relation to alleged scams involving bogus business transactions and overstated turnover claims at the three companies.

Sleeping dragon

The companies under investigation are electronics company Yue Fung International Group Holding, Fu Cheong International Holdings and Gold Wo International Holdings. Yue Fung holds shares in the other two companies.

In the operation, code-named Sleeping Dragon, the ICAC arrested a certified public accountant, a senior manager in an accountancy firm and a financial consultant as well as several directors and employees of the three companies. Four of those arrested were released on bail while the rest remained in detention.

Doctored documents

"Bulks of documents were seized," according to an ICAC statement. It says it acted on information alleging that a financial consultant had accepted substantial amounts of bribes from a number of company chairmen for assisting their applications for public listing on the Stock Exchange.

It was alleged that with the help of the financial consultant and the certified public accountant, the directors of the listed companies involved had corruptly conspired together to overstate their total net profits to meet a listing criterion, which requires a minimum cumulative net profit of HK$50 million for the three years preceding listing.

Suspended

The listed companies were also alleged to have used letters of credit and false sales invoices to support bogus business transactions to overstate their business turnovers.

Trading in the shares of the three companies was suspended and will remain suspended until the three can issue a public statement to clarify their status, the stock exchange said.

This article represents the views of the author and not necessarily those of the ICC or any of the other partners in DC-PRO.