Hyflux ex-CEO Olivia Lum starts 57-day trial over alleged omissions to SGX over Tuaspring project

Hyflux's former chief executive officer (CEO) Olivia Lum, former chief financial officer Cho Wee Peng, and four independent directors began their trial on Aug. 11.

Hyflux was a global environmental solutions company founded in 1989 by Lum, a Singaporean businesswoman.

It wound up in 2021, three years after it filed for bankruptcy protection, according to Nikkei Asia.

CNA reported that prosecutors laid out their case regarding the company's alleged failure to disclose information about the Tuaspring integrated water and power project.

Key points of the trial

Lum faces two charges over alleged omissions in communicating information to investors, while the ex-CFO faces one charge and the other four former directors face two charges each.

Omission of information

According to CNA, the prosecution's main case is that Hyflux left out key facts about the Tuaspring project in two communications it made, one on Mar. 7, 2011 for an announcement that PUB had named it the preferred bidder for the Tuaspring project, and the other, an Apr. 13, 2011 communication that Hyflux was raising funds for the project.

On both communications, the prosecution said the only lines mentioning electricity were:

"Hyflux will also be constructing a 411MW combined cycle gas turbine power plant to supply electricity to the desalination plant. Excess power will be sold to the power grid."

More details were allegedly added in earlier drafts, but were removed following input from Lum and Cho.

If convicted of consenting to Hylfux's intentional failure to disclose information to the securities exchanges on the electricity sale, Lum can be jailed for up to seven years, fined up to S$250,000, or both.

She can be jailed up to two years, fined S$150,000, or both, for making an offer of securities to the public with omissions about the electricity sales.

Witnesses

According to The Business Times, the prosecution witnesses for the 57-day trial, include former Hyflux staff, bank representatives, and an SGX representative.

The prosecution's first witness was lead investigating officer Wei Maojun from the Commercial Affairs Department (CAD)

Senior Counsel Davinder Singh, who is Lum's defence counsel, said he would take "at least" the rest of the day to cross-examine Wei.

Lawyers for former CFO Cho and the four directors would then cross-examine her if they wished to.

During his cross-examination, Singh asked Wei when did she get an expert opinion as part of the investigation.

After Wei said she could not remember, Singh showed evidence that the terms of reference had been given to the expert on December 2023, while noting Lum was charged in November 2022.

CNA reported that Singh then told Wei that when Lum was charged, she did not "even have" the expert view on the "implications of the omission of information".

Wei disagreed and said she had sought the expert's view before investigation commenced.

She later agreed with Singh that she was the one who had come up with the list of information that should have been disclosed.

Hyflux at its peak

In 2010, Hyflux was worth around S$2.1 billion.

In 2018, they experienced a near S$2 billion decrease in value to a market value of S$165 million.

Though once an up-and-coming startup, thanks to its proprietary water-recycling technology, it underwent a severe downturn in its fortunes due to changes in Singapore's energy market.

On top of that, Hyflux had invested heavily in the Tuaspring desalination plant, which ultimately failed to meet its ambitious goals.

2023 charges

Lum was charged in court on May 5, 2023 with an additional three offences under the Companies Act.

The charges were for failing to exercise reasonable diligence in the discharge of her duties as a director, for approving the release of unaudited financial statements on three instances between 2017 and 2018, according to a statement by the Singapore Police Force (SPF) on May 5, 2023.

These statements omitted to disclose that certain bank deposits were restricted bank balances that Hyflux had undertaken not to withdraw.

2022 charges

Lum's November 2022 charges comprise two disclosure-related charges and one for failing to ensure Hyflux's compliance with accounting standards.

One other independent director of Hyflux, Lee Joo Hai, was also charged over his negligence in connection with Hyflux's intentional failure to disclose information relating to the Tuaspring Integrated Water and Power Project.

Disclosure of the information was required under the Singapore Exchange Listing Rules, said SPF.

The charges were filed over a year after Hyflux had been approved to be wound up.

The closure of the company saw significant losses, including to the around 34,000 investors, who were owed a total of S$900 million.

Top photos via Ernst & Young website & Matthias Ang