Deloitte sued over alleged role in Singapore trader’s $4.5b collapse

The oil trading firm began to unravel last year following wrong-way energy bets that eventually led to one of the biggest collapses ever in the Asian city-state. The trading losses triggered demands for loan repayments by more than 20 banks, including London-based HSBC Holdings and Singapore’s DBS Group Holdings. The case also prompted several big banks to review their exposure to commodities trading.

According to the suit, Deloitte audited and issued “unqualified opinions” for Hin Leong’s financial statements for each of the fiscal years from 2014 to 2019. The firm had in fact been insolvent since at least 2012, and the assets were overstated, the suit claims.

“The material misstatements in the plaintiff’s audited financial statements led to various banks and financial institutions being grossly misled as to the financial health and state of affairs,” Hin Leong claimed in the suit.

“Deloitte knew or ought to have known that these banks and financial institutions were intended users of the plaintiff’s audited financial statements and would have relied on the same to extend financing.”

The New York-based auditing firm signed off on Hin Leong’s 2019 financial statements, which reported a 69 per cent profit increase from the previous year, to $US78.2 million. The report dated March 12 last year, showed assets of $US4.6 billion. A month later, Hin Leong was placed in interim judicial management, claiming liabilities of $US3.5 billion and assets of just $US257 million, according to the suit.

“Had Deloitte carried out the audits of the plaintiff’s financial statements properly, Deloitte would have detected the material misstatements” and would not have issued unqualified audit opinions, the lawsuit alleges. As a result, “the fraudulent trading and unlawful actions by the directors and former managing director” of Hin Leong would have been discovered much earlier.

Mr Lim, 79, has been charged with forgery. Assets, which include bank accounts, properties and club memberships – and those of his two children – have been frozen by the court. Mr Lim has denied the forgery claim.

Hin Leong was run by court-appointed managers Goh Thien Phong and Chan Kheng Tek since April last year, and was put into liquidation in March this year.

The suit adds to a spate of woes for global accounting firms following scandals. Deloitte paid $US80 million to Malaysia this month in a settlement over the firm’s audit of the state-owned 1MDB fund. The firm said in 2018 that it was co-operating with Malaysian authorities and stood by its work.

Ernst & Young allegedly failed to detect a missing 1.9 billion euros at collapsed German payments provider Wirecard. An EY partner said his firm fell victim to “criminals” at Wirecard, rejecting allegations they didn’t do enough to uncover wrongdoing at the now defunct payment processor.