Convoy scandal continues as Hong Kong firm seeks damages from Ernst & Young for 2013 audit

Eric Ng

Convoy Global Holdings, the centre of one of Hong Kong’s biggest financial scandals of the past decade, is suing its former auditor, Ernst & Young, for alleged breach of duty or negligence during its audit and advisory work six years ago.

The financial services group and three other related entities filed a writ of summons at the Court of First Instance on Monday, according to a filing by its solicitors, Lipman Karas.

The four parties are seeking unspecified losses and damages for alleged breaches related to the financial audit and certification work performed by the accounting firm in calendar year 2013. It did not elaborate on the allegations.

No one at the law firm responded to two phone calls after office hours. The firm did not immediately reply to an email seeking comment on the court filing.

An Ernst & Young spokesperson in Hong Kong has yet to provide a response. The company was contacted on phone and email by the South China Morning Post late on Tuesday. The firm resigned as Convoy’s auditor in February 2018, citing a disagreement on audit fees.

Explainer: Who’s who in the tangled web of the Convoy scandal

The Convoy scandal involved the movements of HK$4.043 billion (US$520 million) of funds related to a private placement of securities in 2015. The stock was suspended in December 2017 after the Independent Commission Against Corruption (ICAC) and the Securities and Futures Commission launched an investigation, raided Convoy’s office and arrested several of the group executives.

Convoy was once Hong Kong’s largest independent financial advisory group, with more than 100,000 customers that included insurance and pension funds. The case ranks among the biggest in the city’s history, including those at Sino-Forest Corporation, China Metal Recycling and the Carrian Group.

Roy Cho Kwai-chee, a former executive director, was charged by the Independent Commission Against Corruption in May on alleged conspiracy to defraud Convoy over asset purchases and investments. The same charges were levied against former chief financial officer Christie Chan Lai-yee and a former executive Byron Tan Ye-kai.

Cho, the India-born doctor and alleged mastermind, and the two executives, pleaded not guilty at the most-recent court hearing held in mid-September. No other details were disclosed and the trio remains to be out on bail. The trial will resume on May 4, 2020. If convicted, the District Court can impose jail sentences of up to seven years on each of them.

Under a new team of senior managers led by chairman Johnny Chen Chi-wang, Convoy has since filed a number of lawsuits, including one claiming HK$715 million (US$92 million) in compensation from Cho and 12 others over a series of transactions that inflict losses on the group.

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