A former head of China Aviation Oil (Singapore) Corp has been sentenced to a prison term of more than four years for his role in a scandal that drove China's biggest jet-fuel trader to the brink of bankruptcy.
Chen Jiulin, 44, pleaded guilty to six charges, including failing to disclose a US$550 million trading loss and deceiving adviser Deutsche Bank AG.
Chen Jiulin is sentenced to a prison term of more than four years for his role in a scandal that drove China Aviation Oil (Singapore) Corp, China's biggest jet-fuel trader, to the brink of bankruptcy.
He will be the first person sent to prison in Singapore for insider trading, after being given a sentence of four years and three months.
The scandal, Singapore's worst since Nick Leeson bankrupted Barings Plc more than a decade ago, prompted the city to review trading and disclosure rules. Leeson, who cost Barings US$1.4 billion, spent three-and-a-half years in a Singapore prison.
"It's a significant development (Chen's sentence) and brings closure to this high-profile derivatives trading debacle," said Michael Coleman, managing director of Aisling Analytics, a US$50 million Singapore-based hedge fund, which had a "small" personal stake in the company.
China Aviation Oil's former finance head, Peter Lim, was sentenced to two years in prison last month, while three Beijing-based directors were fined a total of US$433,000.
Chen, who was also fined US$207,500, will start his prison term on April 11. Prosecution and defence lawyers were expected to meet late yesterday to discuss payment of Chen's bail and fine. His bail was raised to US$1.73 million from US$1.23 million.
The company's former chief executive "persistently engaged in a series of elaborate and illegal practices," Judge Wong Keen Onn said in his ruling.
Chen has 10 days to appeal the sentence.
China Aviation Oil said in November 2004 it was forced to close speculative trades when it could not meet funding requirements needed to back the contracts after oil prices surged to a record the previous month.
The jet-fuel trader is "an example of poor risk management," said Robert Pickel, chief executive officer of the International Swaps and Derivatives Association.
"When you have that, you are planting the seed of a problem further down the road."
The company sought court protection from its creditors and halted trading in its shares after revealing the loss. It averted bankruptcy in June last year when creditors approved its debt-payment plan. BP Plc, Temasek Holdings and the jet-fuel trader's Beijing-based parent company agreed to invest US$130 million in the company in December.
After the verdict was announced, CAO's parent company in Beijing, China Aviation Oil Holding Company, released a statement, saying the "restructuring is in good progress."
"The reshuffle conducted in line with the Singapore's laws and business rules is in the interests of all concerned parties and has won support from creditors, small shareholders, strategic investors and other related parties in Singapore," the statement said.
After the incident, the CAO will improve its management and risk-prevention ability and step up internal supervision over the company so as to offer better returns for shareholders, it said.
Serving his prison term
The convicted former chief executive of China Aviation Oil (Singapore) Ltd. began his prison term immediately on Tuesday after prosecutors objected to a three-week deferment that had initially been granted to him.
Authorities said they were concerned the Chinese national would escape the country.
Chen Jiulin was sentenced Tuesday to four years and three months in jail and fined S$335,000 ($207,150) for his pivotal role in the near of collapse of the Beijing-backed jet fuel trader in 2004 after it hid $550,000 of trading losses from investors.
District Judge Wong Keen Onn, who had granted Chen three weeks before imprisonment to organize his personal affairs, said deputy public prosecutor Daniel Koh had raised objections to Chen not going to jail immediately, despite earlier agreeing to the deferment.
The judge withdrew the bail, which had been set at S$2.8 million ($1.7 million).
Characterizing the situation as "very suspicious," Koh told the court that the defense had not given any good reason to support the deferment or a separate application to defer payment of fines, according to a court document.
Wong, the judge, said in the document: "In addition, the convicted person is a foreigner with no assets, no roots and no ties connected to our country."