Businessman Patrick Wong, embroiled in a takeover bid for Solomon Islands’ largest and richest cocoa and coconut plantations in Central and Guadalcanal provinces, may be wishing he did not stake his claim for debt repayment from shareholders of Russell Islands Plantation Estates Ltd [Ltd].
The businessman, formerly of Malaysia, now an Australian, is claiming US$6 million [SBD47.5 million] from shareholders, saying the money came from an offshore loan.
The claim was conveyed to shareholders in a notice of demand issued by Wong’s lawyer on September 26 last year.
Shareholders were given a month from the date of the notice to pay up or a 15 percent interest would accrue until the full amount was settled. That deadline lapsed on October 26, 2008.
Wong has gone silent on the claim after revelation he was under investigation by the Central Bank of Solomon Islands [CBSI] for failing to obtain prior clearance for the loan.
The Solomon Islands Government holds 20 percent in RIPEL. Once described as the country’s jewel of the crown, RIPEL today boasts a 1800-hectare holding of cocoa, coconut and prime land valued at about SB$1.5 billion [about USD189 million].
According to the notice of demand, the loan was obtained from Cross Pacific Trading Ltd [CPT], one of Wong’s offshore companies, to meet financial requests by RIPEL between July 10, 2000 and December 31, 2007.
The documents also showed that the loan agreement and deed of company charge were executed on 12 December 2002.
CPT is based in the Cook Islands and at one point was said to be an unregistered entity.
Questions are being asked as to where the alleged loan money was used in the three years to December 31, 2007, given that RIPEL stopped trading in 2003. The board of directors has never met during that period.
RIPEL went into liquidation in 2002 and stopped trading a year later.
Wong’s attempt to call a shareholders’ meeting last December, in line with a High Court ruling, never got off the ground. The December 9 meeting was blocked after Wong tried unsuccessfully to shut out a Solomon Islands Government representative. He argued the Solomon Islands Government was never a shareholder.
In a legal battle that ensued that day, the government sought and received a High Court injunction over the proposed and further RIPEL meetings.
Instead, the High Court ordered that the meeting proposed for December 9, 2008 “be postponed indefinitely until further orders of the Court”.
Further attempts that day by Wong to call a directors’ meeting also failed. The meeting did not have a quorum because of a boycott by the government, Lavukal Landowners and the Solomon Islands National Union of Workers [SINUW].
Now it has emerged that Wong had far more to worry about than just getting the alleged loan money repaid.
The businessman’s alleged USD6 million offshore loan has attracted the attention of the Central Bank and is under its microscope.
Sources close to the bank have confirmed the matter is under investigation for possible breaches of the bank’s Foreign Exchange Control regulations.
According to one source, Wong has never sought prior clearance for the loan, a statutory requirement under the bank’s Foreign Exchange Control regulations.
 “Now he is trying to retrospectively deal with it. There’s no provision for that under CBSI’s regulations,” the source said.
According to the bank’s brochures on Foreign Exchange Control Policy, approval is required for a permanent resident of Solomon Islands and the Solomon Islands branch of an overseas incorporated company or firm and individuals to:
• Borrow funds from a non-resident, including the branch’s overseas head office;
• Pay interest to the non-resident lender; and
• Repay the loan to the non-resident lender.
The Exchange Control Policy also requires, among other things, offshore borrowings to satisfy a number of considerations including:
• The lender possesses a proven credible record and international financial standing with a double-A+ rating;
• The borrower’s ability to repay the loan; and
• The terms and conditions of the borrowing are reasonable to the Central Bank of Solomon Islands and finance being sought cannot be met from local sources
On assessment, the CBSI also requires that:
• The overall cost payable to overseas lender [including interest, front-end fees, commissions, commitment fees etc] is not excessive in relation to currently prevailing interest rates and charges applied in the market in which the currency is to be borrowed;
• The debt/equity ratio of the borrower should not exceed prudent levels required by the Central Bank of Solomon Islands;
• The foreign currency must, on draw-down be immediately transferred to any of the authorized dealers in Solomon Islands, unless otherwise, approved by the Central Bank to retain part of whole with an overseas bank; and
• Offshore borrowing is to finance productive investment projects or finance existing projects that will generate sufficient foreign reserves to service the loan
In repayment of offshore loans, CBSI Exchange Control Policy requires that:
• Repayment of the principle sum and interests, of all external loans [private sector loans approved by Central Bank under Exchange Control Policy] should seek Exchange Control approval before the actual transaction can take place with the authorised dealers.
ISLANDS BUSINESS was unable to establish the penalties for breaches of the foreign exchange control regulations.
But falling foul of the law with the Central Bank may just be a tip of the iceberg for the wounded businessman and his associates. Apart from his takeover bid which now appears doomed, his claim for the repayment of the US$6 million offshore loan is under question mark.
A senior government minister has told ISLANDS BUSINESS that records have shown that Wong’s bid to takeover the Russell Islands Plantation Estates Ltd [RIPEL] was not even approved by the Foreign Investment Board (FIB), a prerequisite for foreigners wanting to establish and conduct business activities in Solomon Islands.
 “There’s no record of FIB approval for his business activities,” Fisheries and Marine Resources Minister, Nollen Leni, said.
Leni, a respected Guadalcanal MP, was singled out for building an executive house on RIPEL land at Lungga on the city’s outskirts on Guadalcanal. Wong won a bitter legal battle that saw Leni evicted from the land.
The minister said this would all come out in a commission of inquiry which would have begun its hearing by the time this article is published.
Retired High Court Judge, Frank Kabui, heads the three-man commission.
The inquiry was set up by the Coalition for National Unity and Rural Advancement [CNURA] government following a public outcry over the High Court-approved scheme arrangement for RIPEL.
Share arrangement under the Shareholders Agreement signed in Honiara on 27 February 2003, shows:
Russell Islanders/Landowners—24.9
percent
Provincial Government—20.0 percent
Workers and Staff Scheme—20.0 percent
Solomon Islands Government—20.0 percent
International Comtrade & Shipping Limited
or nominee—15.1 percent
Numerically, and in conventional business practices, it is the Russell Islanders/Landowners who should hold a controlling interest in the company. But they are not.
Instead, it is Wong’s Vanuatu-based International Comtrade & Shipping Ltd [ICSL] or its nominee that has the controlling interest.
Its nominee in this case is Pacific Management Services [SI] Ltd [PMSL]. ICSL has entered into an agreement with PMSL for the latter to oversee the operations of the new company which succeeded RIPEL.
Under the arrangement, PMSL has a 10-year agreement to provide management and consultancy services to the new outfit. PMSL has the option to renew for a further 10 years.
The fee?
Well, just a cool 10 percent of RIPEL’s export sales. Trading stocks listed in the agreement include, copra, coconut oil, coconuts, cocoa, meat products, livestock, copra meal and other commodities.
The export value of 10 percent in dollar terms of all these commodities over a 10-year period is nothing short of mind boggling.
These are just part of the “dirty linens” expected to be aired during the commission of inquiry.
Although Wong’s group had just 15.1 percent stake in RIPEL, he held the controlling interest including the power of veto under the Shareholders Agreement.
Details of serious allegations made against senior Cabinet Ministers, including the Minister for Environment, Gordon Darcy Lillo, were expected to be heard.
The minister was alleged to have asked for $3 million in return for fixing the RIPEL issue for Wong.
The minister has vehemently denied the allegations.
There’s also published allegation that Wong discussed with others a contract for a hit man to get rid of the head of the Solomon Islands National Union of Workers.