BANGKOK, March 5 (UPI) -- When the great corporate governance scandals of the U.S. stock market bubble burst
, the news made headlines around the world for months. The latest scandal involving Thai companies only rates a few paragraphs in the local business pages.
Part of the difference has to do with size: the Thai company concerned is a local, family-controlled Internet service provider called Roynet. It wasn't even traded on the main stock exchange but on the "Market for Alternative Investments," a second-tier market which so far covers only seven companies.
When the stock was suspended in mid-January, the Roynet market capitalization was less than $2 million.
The first sign of something wrong came when auditors questioned some of the company's accounting practices. And after the market closed on Jan. 9, the company restated its 2002 third-quarter results, from a net profit of about $250,000 to a net loss of $300,000.
The net swing was not enormous -- except in comparison with the stock's market capitalization, of which it was about one third. Additionally, the Stock Exchange of Thailand has called for a restatement of the 2002 first- and second-quarter statements, which are still outstanding.
The next worry for shareholders was news that the controlling family -- wasn't. From a holding of 60 percent a year earlier, the Yaoprukse family had run its holding down to -- zero. This had been done unannounced, despite a SET ruling that any change of ownership of more than 5 percent must be reported promptly.
When it emerged that the holding had apparently been sold off after the auditors had raised concerns, the list of potential charges against the family as owner-managers expanded.
The possibilities include insider dealing
, which isn't always illegal in Thailand, although these circumstances might make it so. In any event, criminal charges have now been laid, alleging disclosure violations, insider dealing and false accounting.
The SET has also blacklisted the managing director for 10 years, meaning that he can't manage listed companies.
Meanwhile
, the stock has been suspended since the restatement
, at a value of about one-third the November level
, with little prospect of trade resuming.
A fascinating aspect of the whole affair is how little public interest it has aroused. Despite extensive coverage in the local business pages, there's been scarcely a ripple on the surface of Thai life. That's partly because such scandals aren't uncommon.
As in many of the U.S. cases, this case was also the result of a financial bubble whose bursting revealed dishonest and reckless business practices. But in Thailand, unlike the United States
, it was mainly at financial institutions that scandals surfaced.
At one point
, the Bank of Thailand said that it believed that most domestic financial institutions had been run illegally. Sweetheart deals for business and political cronies
, accounting irregularities, insider deals, a governor of the BoT accepting offers of cheap stock from a firm he was supposed to regulate -- all this came to light as the economy crashed in the late 1990s.
It's only somewhat surprising that such cases are still coming to light, when the economy is improving. The Thai legal process is drawn-out and subject to subversion, meaning that "influential figures" (such as the wealthy and politicians) are tempted to take risks with the securities laws.
The record of criminal complaints made by the Thai securities regulators is meager. In 1999, for example, 13 complaints were filed, six of which remain unresolved. In five, "the attempt to arrest failed and the statute of limitations ran out." One case was dropped when the principal accused died. Just one case was prosecuted successfully, and that resulted in only a fine.
The record for 2000
, sadly, was little better.
