The Lessons From Chong Fraudulence Case: Financial Loss For Three Big Companies

Chong Ket Pen as Executive Director at Protasco Berhad
The agreement becomes an essential document when two parties want to collaborate and make some deals about their activities and profit sharing. Based on the regulation of agreement, there are some main components such as preamble, recitals, words of agreement, definitions, action section (consideration), reps and warranties, covenants and rights, conditions to obligations, endgame provisions and remedies, general provisions and signatures.

Benefit sharing in the agreement must be stated clearly in contract to make sure each party gets their own rights. Collaboration process between two or more parties is not easy, negotiation art becomes the key to successfulness. Trust is a key when you want to make an agreement.

Here, I want to share about Chong Ket Pen and Protasco Berhad against Global Capital Limited Indonesia and PT Anglo Slavic Utama agreement case, about how Chong Ket Pen make three companies have a financial loss because of him. Here's the story.

Dato’ Sri Chong Ket Pen (Chong Ket Pen) was the Executive Director at Protasco Berhad (Protasco) and owns 15.5% shares of the company. He makes a personal communication with Global Capital Limited Indonesia to propose an Investment Guarantee Agreement with them. Chong uses his power wrongly in this negotiation, he told that one of Transaction Advisor and Official Spokesperson of Global Capital Limited (Tey Por Yee) will nominate as Board Member in Protasco and Ter Por Yee will help Chong to get the position as Group Managing Director in Protasco. To make this deal process more smoothly, Chong told that he will propose the board of Protasco to build a new business in the oil and gas sector. However, it can’t happen without PT Anglo Slavic Utama as the company to secure the agreement. PT Anglo Slavic Utama has licensed from Pertamina to developed and maintain the land in Aceh for oil and gas production in two years period.

In 2012, Chong and Global Capital Limited signing the Investment Guarantee Agreement in his own personal capacity with the contents of the agreement, Tey Por Yee agreed to help Chong Ket Pen to get Group Managing Director position in Protasco Berhad and guarantee Protasco will buy PT Anglo Slavic Utama assets. Not long after the signing of the agreement on November 2012, Ter Por Yee became the largest shareholders of Protasco (27,11%) for USD 24 million or a 33% premium over the market priceThe deal viewed as a ‘premium’ was done on the assurance of Protasco Bhd’s planned venture into the oil and gas sector. 

One month later, Chong arrange Protasco and PT Anglo Slavic Utama to make Sales and Purchase Agreement with the content of arbitration clause and stated Protasco will own 76% of equity interest of PT Anglo Slavic Indonesia for USD 55 million (Rp 880 billion) from PT Anglo Slavic Utama and will complete this agreement within 6 months.

Chong Ket Pen Chong putting on the blame to Tey Por Yee and make a false report to The Edge

However, the process took more than 6 months and PT Anglo Slavic Utama accepted the revision of 63% equity interest deal (22 million). Chong Ket Pen’s son, Kenny Chong Ther Nen, who was entrusted by his father to execute the logistics of the deal, colluded with PT ASU Former Director Tjoe Yudhis Gathrie to forge false documents, to make it look as if PT ASU has failed to comply to the terms of the SPA. Furthermore, Chong Ket Pen together with Tjoe Yudhis Gathrie also fabricated misleading allegations against PT ASU to put blame on PT ASU’s alleged failure, and therefore the SPA was terminated. 

The Indonesia-based company is claiming USD 88 million from Chong Ket Pen over his act of contract breach, including loss of investment and future profits for the stake in Protasco Bhd, loss of margin to finance the acquisition of shares up to USD 18 million, liability of USD 55 million to PT Anglo Slavic Utama as guarantor for Chong Ket Pen pursuant to the Investment Guarantee Agreement and USD 15.5 million as payment for the profit guarantee under the Investment Guarantee Agreement.

In 2014, the proposal of Protasco transactions was revealed. Chong proved to be abusing his own personal capacity to make deals and signing the Investment Guarantee Agreement as one board of Protasco. Chong tried to cover up his mistakes by putting on the blame to Tey Por Yee, shared false reports and misleading facts which are published by The Edge (Malaysian prominent business media). Global Capital Limited report it to the police and filed a lawsuit. In this process of law, has revealed that Tey Por Yee is not the owner nor control of PT Anglo Slavic Utama. Based on the investigation process by The Malaysia Attorney General’s Chambers (AG Chambers), it proved that all document brought by Chong is a sham document. In 2018, PT Anglo Slavic Utama has filed a report to Indonesian police on fraudulence by Chong Ket Pen against PT Anglo Slavic Utama.

Bursa Malaysia public information also revealed that Chong Ket Pen has been drawing unrealistic remunerations from Protasco Bhd at the peak of USD 576,000 in 2017 and USD 1 million in 2016 respectively, after he gained control over the company. This suggested that Chong Ket Pen entered into business transactions and decisions on the operation, remuneration, payments of dividends and salaries for his own benefit at the expense and the best interests of the company.

Global Capital Limited came into the thought that Chong Ket Pen has failed to ensure that Protasco Berhad was profitable, with a profit before tax of USD 7.1 million and USD 8.3 million in the third and fourth year under the Investment Guarantee Agreement. Aside from that, a total of USD 26.2 million profit was also guaranteed over the four years.

Furthermore, it was also reported that Protasco Berhad had recently lost a huge contract, as its subsidiary HCM Engineering Sdn Bhd received a letter of termination from Turnpike Synergy Sdn Bhd (TSSB) due to delays in the project, suggesting a USD 622,000 earnings impact. Following this, CIMB IB Research has therefore maintained its “Reduce” rating on Protasco Bhd at MYR 20 cents with a lower target price of MYR17 cents (from MYR 30 cents). Weakness job execution and poor contract visibility likely to weigh on its shares price.

From this case, we can learn how Chong Ket Pen is doing very bad things and betrayed trust from Protasco Berhad, Global Capital Limited, PT Anglo Slavic Utama and PT Anglo Slavic Indonesia.