Note: Updated the following on 1 November, 2020, 8.25 am: (a) section titled “Whodunnit”, to provide more clarity about the beneficial ownership (on paper) of the four BVI entities, and nominee relationships involving Charles Spackman, his brother-in-law, his wife, and these BVI entities; and (b) section titled “Rest of the cast” to include a description of a long-term friendship and share transaction between Charles Spackman’s brother-in-law and the current CEO of Spackman Entertainment.
By Mak Yuen Teen
It was 18 May 2000. The share price of Kosdaq-listed Littauer Technologies in Korea had just reached an all-time high of KRW362,000. It had been trading at around KRW5,000 between November 1999 and February 2000. The Financial Supervisory Service in Korea began an investigation into Littauer. Littauer’s CEO, Heo Rok, was arrested for violating the Securities and Exchange Act and the share price collapsed in 2001.
Sang Cheol Woo, a minority shareholder of Littauer, was livid. In 2003, he filed a lawsuit against Yoo Shin Choi, alleging that the latter had caused Littauer to enter into a self-dealing merger with a Bermuda-based company valued at some US$1.3 billion that Choi and his business partners controlled.
Choi reportedly fled to Hong Kong. Woo won a civil judgement for US$4.5 million against Choi in Korea in 2011. This was the start of a drawn-out attempt by Woo to enforce the judgement across four jurisdictions – U.S., Hong Kong, BVI and Singapore where Woo believed that Choi has assets in.
By May 2018, Choi had exhausted all avenues open to him to challenge the Korean judgement which is final and conclusive. But to this day, the Korean judgement remains unsatisfied.
In June 2016, Woo commenced proceedings in Hong Kong to recognise the Korean judgement. The trial was rescheduled from earlier this year to September 2021.
In May 2017, Woo started proceedings in the State of New York to recognise the Korean judgement. In July 2018, the Supreme Court of the State of New York entered judgement in favour of Woo for the amount of about US$13.8 million.
Woo then commenced proceedings in the BVI in April 2019 to enforce the Korean judgement and in June 2020, the BVI Commercial Court entered judgement in Woo’s favour.
Choi challenged jurisdiction when Woo commenced action in Singapore in February 2019 to recognise the Korean judgement but was unsuccessful.
Woo then applied for Mareva relief in the four jurisdictions of US, Hong Kong, BVI and Singapore. In April 2019, the BVI court granted Woo worldwide freezing injunctions against several BVI entities for up to the value of US$13.8 million. The BVI entities are challenging the injunctions.
Worldwide Mareva injunctions against Choi and Richard Lee and domestic Mareva injunctions against several BVI entities were obtained in Singapore in April 2019.
On 15 September 2020, the High Court of the Hong Kong Special Administrative Region Court of First Instance held a hearing to determine three summonses: (1) the summons dated 4 June 2019 for continuation of an ex parte worldwide Mareva injunction obtained by Woo against Choi and the three respondents to the summons, Richard Lee, Azur Investissement and Trinity Capital Advisors Limited; (2) the summons of Choi dated 11 June 2019 to set aside the HK Injunction; and (3) Woo’s summons dated 18 June 2019 to lift the stay of Yoo Choi’s disclosure obligations under the HK Injunction.
The HK High Court found in favour of Woo. The court judgement is available online here: https://legalref.judiciary.hk/lrs/common/ju/ju_frame.jsp?DIS=131421&currpage=T
In writing this latest article, I have drawn extensively from the court judgement.
Who is Yoo Shin Choi?
Unbeknownst to many, Yoo Shin Choi is known by another name – Charles Choi Spackman or Charles Spackman in short. Spackman is an American citizen and a permanent resident of Hong Kong. He is the son of James Choi Spackman, who was adopted by Americans in 1955 after his biological parents died during the Korean War.
James Spackman was the first President of Prudential Life Insurance Company of Korea and in the early 2000s, served as president of the Group’s Asia Region, later becoming both president and CEO for the region.
Charles Spackman (hereafter referred to as Spackman) graduated from Harvard University with an Economics degree and worked in a number of investment banks before establishing Spackman Group Limited in 1997. He is known for his generous donations to this alma mater.
Let’s try Crazy Rich (and Easy) Singapore
Despite his legal troubles, Spackman was able to list Spackman Entertainment Group Limited (SEGL) in July 2014 on the Catalist board through the placement of 69.44 million shares, comprising 50 million new shares and 19.44 million vendor shares at S$0.26 each. The issue manager, sponsor and placement agent was PrimePartners Corporate Finance (PPCF), which also acted as its continuing sponsor until 7 March 2018. RHT Capital took over as continuing sponsor and remains its continuing sponsor today.
The 32 risk factors discussed in the offer document did not mention the legal troubles faced by Spackman, who was appointed as Executive Chairman. Spackman did not own any shares in SEGL, only having a small deemed interest as an officer of another company which owned 3% of Spackman Equities Group, which owned 44.9% of SEGL before the placement and 39.1% after.
The offer document listed Spackman’s name as Charles Choi Spackman and Charles Spackman. His Korean name was not disclosed at all.
It would seem that the issue manager and sponsor, PPCF, was none the wiser about the troubles that Spackman was in. If they had known, would SEGL still have been allowed to list? I am not sure given the number of questionable companies that have passed through the listing process and landed on SGX, especially on the Catalist board.
The share shuffle
The attempts by Woo to enforce the Korean judgement shone the spotlight on numerous transfers of shares of HK-incorporated Spackman Media Group Limited (SMGL) across different entities incorporated in BVI, Cayman Islands and Singapore, some in breach of the injunctions that had been obtained.
SMGL has its genesis from Spackman Media Group Pte Ltd (SMGPL), a Singapore subsidiary of Singapore-listed Spackman Entertainment Group Limited (SEGL) which was incorporated in April 2015, with SEGL citing “internal reorganisation”. The following month, SMGPL started issuing new shares, and SEGL’s shareholding was diluted following multiple share subscription agreements with various “independent investors” whose identities were not disclosed. SEGL received gross proceeds of US$7.1 million from these share issuances.
In May 2016, SEGL completed a share swap, transferring its remaining 45.8% interest in SMGPL for a 27.4% interest in SMGL, which had just been incorporated in Hong Kong. The amount regarded as being paid for each SMGL share in this initial share swap was HK$3.3747 or just under S$0.60. SMGL thus became an associate company of SEGL. SEGL said that SMGL was considering a listing on SEHK. The proposed HK listing never happened.
SMGL shares were also sold to three BVI companies, GD Enterprises Holdings Limited (GD), Azur Investissement Ltd (Azur) and DVG Limited (DVG) at low cost. DVG then transferred some of these shares to another BVI company, Trinity Capital Advisors (Trinity), also at low cost.
These four BVI entities then resold the SMGL shares to SEGL at 23 times their purchase price through five share swap transactions at US$3 per share. Through these share swaps, other individuals and entities also sold shares to SEGL at the same US$3 per share.
In all, a total of more than 283 million SEGL shares were issued in exchange for SMGL shares between March 2017 and August 2018. The total number of new SEGL shares issued was equal to 71% of the 398.77 million issued shares of SEGL as at 31 December 2016. Not surprisingly, SEGL’s share price had fallen from S$0.174 per share just before the first share swap, to S$0.057 by the time the fifth share swap was announced. As of 30 October 2020, its share price was just S$0.007, compared to its peak of S$0.515 on 24 July 2014.
Richard Lee enters the picture
Richard Lee started in SEGL as Head of Business Development and was disclosed in the offer document as residing in California, USA. In the offer document, annual reports, and other announcements by the company, Richard Lee is referred to as just “Richard Lee”. SMGL’s Register of Directors lists him as Korean. Like Christopher “Dracula” Lee, Stan “Marvel” Lee and Spike “Mo’ Better Blues” Lee, it seems that is his full name.
The HK High Court judgement published on 20 October 2020 said that there is ample evidence that Lee is Spackman’s nominee. He was Spackman’s classmate at Harvard University, is a long-time associate/friend of Spackman and helped pay his legal fees and US taxes amounting to US$300,000.
Lee resigned as SEGL’s Head of Business Development on 30 September 2016 to become a director of SMGL in HK. On 18 January 2018, he returned to SEGL to become interim CEO and Executive Director (ED), shortly after Spackman resigned as both Chairman and CEO in December 2017. He remains as a director of SMGL, while also being interim CEO and chairman of Spackman Equities Group (SQG) listed in Toronto, Canada.
Spackman was Chairman and CEO of SEGL during the first two of the five share swap transactions while Lee was ED at SMGL. By the third share swap transaction, Spackman had resigned. Lee returned to assume the position of interim CEO and ED of SEGL for the fourth and fifth transactions, while also concurrently being ED of SMGL.
The HK High Court judgement indicated that Lee was also the corporate secretary of the BVI-incorporated companies DVG, Azur and Trinity, which had resold SMGL shares to SEGL at 23 times the purchase price.
Whodunnit?
There was another man and a lady behind the BVI entities involved in the share swap transactions. It was like three men and a lady, instead of baby.
According to the HK High Court judgement, Jae Seung Kim was the beneficial owner (on paper) of DVG, GD and Azur and sole director of Trinity, the four BVI companies which had acquired SMGL shares at low cost and then swapped them with SEGL shares at 23 times the cost as part of the five share swap transactions.
Kim also turned out to be Spackman’s brother-in-law. He resided in Spackman’s residence in Hong Kong and was the registered account holder for water supplies for both the HK residence and office premises used by Spackman. The sole beneficial owner of Trinity (on paper) turns out to be a lady by the name of So Hee Kim, who is a housewife and unemployed, and happens to be Spackman’s wife and Jae Seung Kim’s sister. Woo argued that Jae Seung Kim, So Hee Kim and the four BVI entities were nominees of Spackman.
In the judgment, the Judge found that Kim’s claims that he was the beneficial owner of GD, DVG and Azur “do not withstand scrutiny” and “the explanations given simply do not add up, seriously undermining Kim’s credibility”.
In other words, at least four of the BVI companies that swapped SMGL shares with SEGL are controlled (on paper) by Spackman’s brother-in-law and wife. The HK Court judgement in effect accepted that Kim, his sister/Spackman’s wife and the BVI entities, are Spackman’s nominees. Further, it also found that there was ample evidence that Lee is Spackman’s nominee.
On the basis of the HK High Court judgement, those share swap transactions were not with just any “certain existing shareholders” or “unrelated third parties”, as SEGL claimed in its announcements. Further, Spackman and Lee were holding key positions on the boards of SEGL and SMGL during the share swap transactions.
Watching not acting
Perhaps both PPCF as the continuing sponsor, and RHT Capital which took over from them, should have flagged concerns with the five highly questionable share swap transactions that took take place between March 2017 and August 2018. Or perhaps they didn’t notice or thought it’s not their job to question “business decisions” of the board of directors.
As an outside observer, I was waving the red flag and privately communicated my concerns to SGX. The transactions simply made no commercial sense to me.
It was ludicrous to me that a company could refuse to disclose the identities of the parties who were swapping SMGL shares for SEGL shares at such a high price by citing “confidentiality reasons”. I thought that as a frontline regulator, SGX Regco should be entitled to know who the “third parties” are. Otherwise, how would it enforce interested person transaction rules, for instance?
Eventually, SGX queried SEGL. However, I felt that the queries and the responses were inadequate and made my views known in an article I posted on this website on 11 June 2018 titled “Query System Needs to be Reviewed”.
Cheering from the side
SEGL provided several justifications for the high price paid for the SMGL shares, one of which was a RHB report by an unnamed analyst who SEGL said had estimated SMGL’s value per share to be between US$4.70 to US$8.00. On the website sginvestors.io, there is a series of reports by a RHB Securities analyst called Jarick Seet. One of the “gems” was published on 3 January 2017, which called SEGL one of the “Quality Names in the Small Cap Space”. It estimated that SEGL’s then 27.2% stake in SMGL to be worth US$45 million, which was about 85% of SEGL’s then market capitalisation. I have no idea how that estimate was arrived at, but based on the NTA, NAV and profitability of SMGL, I had questioned the price being paid for the SMGL shares in my article posted on 11 June 2018.
Seet had set a target price for SEGL of 32 cents in 2017, then lowered it to 27 cents, then 23 cents, then 20 cents and then 10 cents in May 2018, and consistently maintained a “buy” recommendation on SEGL shares. RHB Securities ceased coverage of SEGL shares on 21 November 2019, with its last call a “Buy” and a target price of S$0.10. Today, SEGL shares are worth just S$0.007 each.
Yet another lesson for investors to be skeptical of analysts and do their own research.
The rest of the cast
Up to now, the board of SEGL has remained behind the scenes. Surely, one would expect the board to ask some tough questions about the share swaps.
So, who are the rest of the cast? When SEGL listed in July 2014, Tae Hun Lee was a substantial shareholder owning 8.2% before and 7.2% after the placement. He was also an ED and CEO. One of the risk factors in the offer document said: “Our business depends to a significant extent upon the continued service of Tae Hun Lee and Eugene Lee”. Tae Hun Lee resigned on 8 March 2016, so that was one risk factor crystallising.
Eugene Lee’s full name is Eugene Yoo Jin Lee (Ms). She owned 6.7% before and 5.9% after the placement. She is an ED and Chief Producer of SEGL and continues to hold these positions today.
Jessie Ho is the lead independent director and remains so today. She is a member of SEGL’s Audit and Risk Management Committee (ARMC). Her full name is Thong Yuen Siew Jessie and she was also referred to as Jessie Ho-Thong in a Prestige magazine feature and as Jessie Thong in the list of directors at Halogen Foundation. Her profile describes her as an ED of JHT Law Corporation, which currently does not have a functioning website.
Ho-Thong did not own SEGL shares at its listing but her brother, Thong Soo Kheon, was the shareholder and director of Belview Investment, which owned 2% before and 1.8 % after the placement. Her nephew, Thong Sing-Hau Daniel, owned 2.9% before and 2.5% after the placement.
Anthony Wei Kit Wong has also been an independent director of SEGL since its listing. On 19 December 2017, he took over as independent chairman of the board after Spackman resigned. He also chairs the ARMC. He did not own any shares of SEGL on its listing.
Another independent Ng Hong Whee has also been an independent director since its listing. He is the third member of the ARMC.
Among the management, Kay Kyoungwon Na started out as CFO of SEGL at its time of listing. She was appointed as COO, President and ED from 20 February 2019 and continues to hold those positions today.
John Jihwan Ko is the current CEO of SEGL, being appointed on 20 February 2019. Unusually, he is not a member of the board, while the COO and Chief Producer are. In the HK High Court judgement, Kim’s explanation for a share transfer agreement mentioned that Kim had offered to buy 48 million SEGL shares from “long-time friend John Ko…when the latter was looking to sell them (for regulatory reasons) prior to being appointed CEO of SEGL…” and that Ko subsequently transferred 48 million shares to GD.
Suk Young Jung joined as an ED on 1 September 2016 but left on 20 February 2019.
There are also several individuals involved in the share swaps, some of whom were original shareholders of SEGL at its listing, shareholders of SMGL, and/or also participated in SEGL’s placements. They may well be like “extras” in a movie but perhaps like the Marvel movies, a background character could turn out to have quite a significant role to play.
The story continues….
Following an article I posted here called “Watching Spackman Entertainment” on 2 September that dived into the five transactions, showing the involvement of Spackman’s brother-in-law and wife in the BVI entities that were swapping SMGL shares for SEGL shares, SGX issued a notice of compliance (NOC) to SEGL on 3 September 2020. The NOC requires SEGL’s Audit and Risk Management Committee to perform a “holistic review” of the five share swap transactions.
On 20 October 2020, it was announced that SEGL, in consultation with SGX Regco and the sponsor, appointed Deloitte & Touche Financial Advisory Services Pte Ltd to undertake an independent review of the transactions. There is literally a treasure trove of public documents available online that provides extensive details about these transactions and it should not take too long for the independent review to be completed. Hopefully, further regulatory action will follow.
The five share swap transactions I have written about here are just part of a more complex web of transactions. There is enough material in the court documents for several spinoffs. Woo’s battle to enforce the judgement has now gone on for almost 10 years and is not over yet.
On 10 September 2020, SEGL announced that a movie produced by its indirect wholly-owned subsidiary Zip Cinema topped Netflix globally. The movie is called #Alive. Shareholders of SEGL are #Barely Alive, with the share price at S$0.007.
