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Bach Tuyet Cotton Corp’s magic turns loss into profit
The trick by Bach Tuyet Cotton Corporation (BBT) of reporting profit when it really made a loss has shocked many shareholders. A question has been raised: how many other companies have released incorrect figures?
The 2007’s shareholders’ meeting heard a report that BBT made the profit of VND2.2bil. However, in fact, the corporation had lost more than VND14bil since 2006.
Before the Bach Tuyet case was discovered, investors heard about ‘mistakes’ in the business reports released by some other companies. The Hanoi Securities Trading Centre last year announced that Viglacera Tu Son (VTS) earned profit of VND1.3bil in the third quarter of 2007. However, investors later discovered that the real profit was VND600mil only. VTS had to correct the false piece of the news, and a lot of investors sold VTS at that moment.
SSI also had to correct a cash flow statement for the first quarter of 2008 after an investor discovered ‘mistakes’. The noteworthy thing was that SSI didn’t publish the correction of the figures of the first quarter of 2008 on its website until July 2008.
Le Nhi Nang, Deputy Director of the HCM City Stock Exchange, was embarrassed when asked about the responsibility of enterprises in information exposure. He said that it was still necessary to clarify if enterprises committed fraud to decide punishment levels.
It is clear that investors make decisions after considering business reports released by enterprises, and that false information can lead to wrong investment decisions. Under Decree No 36 on imposing punishment on violations of stock-related regulations, institutions that deliberately release false information or hide the truth are fined between VND20mil and VND50mil.
Nevertheless, state management agencies have not discovered the mistakes, while they have to do that. “State management agencies do not simply receive reports from listed companies and publish the reports on websites, they also have to check the reports and discover mistakes to inform investors,” said Le Dat Chi, MA, a lecturer at the HCM City Economics University.
Moreover, auditing firms also must take responsibility for the financial reports’ quality. In the case of BBT, AISC, which audited BBT’s finance reports in 2006 and 2007, gave two absolutely different results about BBT’s operations.
HOSE said that it is going to have a working session with AISC to clarify the responsibility of AISC in this case.
In the latest news, BBT is now facing bankruptcy. At the July 14 shareholders’ meeting, shareholders did not come to an agreement on issuing 8.16mil shares to strategic shareholders to raise its chartered capital to VND150bil in an attempt to rescue the company from drowning.
However, Gia Dinh Textile and Garment Company Director Le Dong Trieu, the representative of 30% of state-owned capital in BBT, vetoed the plan on share issuance.
VNE
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