Hong Kong appoints investigator to probe fraud allegations in the financial affairs of Apple Daily's publisher Next Digital
Next Digital, the parent company of the defunct tabloid Apple Daily, has been engaging in illegal and fraudulent activities, Hong Kong's government said as it announced a rare appointment of an inspector under the Companies Act to probe the firm's finances
Clement Chan Kam-wing, the managing director for assurance of the accounting firm BDO, has been appointed as inspector to investigate allegations of fraud in the operations of Next Digital Limited, the publisher of Apple Daily, according to Hong Kong's top financial official.
"There are issues that show that the senior management engaged in unlawful and fraudulent activities within the company," Financial Secretary Paul Chan Mo-po said on Wednesday during a press conference. "The management allegedly breached its fiduciary duties. [The company's] corporate governance appeared not to have met the standard of listed companies." The appointment of the inspector was the first since Richard Farrant was picked in 1999 by the government to investigate the collapse of Peregrine Holdings during the 1997 Asia Financial Crisis. It followed the June 30 announcement by Next Digital about ceasing operation, only to retract the statement two days later with an apology to employees.
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Copies of the Apple Daily newspaper at a newspaper stall after it looked set to close for good by Saturday following police raids and the arrest of executives in Hong Kong on June 22, 2021. Photo: Reuters alt=Copies of the Apple Daily newspaper at a newspaper stall after it looked set to close for good by Saturday following police raids and the arrest of executives in Hong Kong on June 22, 2021. Photo: Reuters
"Suspicions surround the company's disclosure of its status," Chan said. "While [Next Digital] claimed it had sufficient internal resources to keep operations running, it abruptly closed Apple Daily within a week."
As of September 30 last year, the group had a total of 2,095 employees, of whom 1,228 were in Hong Kong, 866 were in Taiwan and one in the US, according to its 2020 interim report. The unprofitable company claimed its average net circulation per issue stood at 86,189 copies per day between April and September 2020.
Next Digital's founder Jimmy Lai Chee-ying, who was charged with colluding with foreign forces under the national security law, arriving at the Court of Final Appeal in Central on February 9, 2021. Photo: Sam Tsang alt=Next Digital's founder Jimmy Lai Chee-ying, who was charged with colluding with foreign forces under the national security law, arriving at the Court of Final Appeal in Central on February 9, 2021. Photo: Sam Tsang
Apple Daily closed abruptly on June 23 after the Chinese-language newspaper became a subject of a crackdown under the national security law. The now-defunct newspaper, founded by Jimmy Lai Chee-ying, was accused of publishing more than 30 articles calling for foreign sanctions on Hong Kong and mainland China.
About a week before the newspaper's closure, Hong Kong authorities froze HK$18 million (US$2.3 million) worth of assets kept in the publisher's bank accounts and warned the company not to handle any related transactions. Next Digital refrained from using internal resources - totalling hundreds of millions of dollars - to pay for the wages of Apple Daily's staff or the bills of its suppliers for fear of breaching the national security law, sources familiar with the matter told South China Morning Post.
On July 22, Next Digital said its unaudited bank and cash balances shrank by HK$183.6 million, or 35 per cent, to HK$337.8 million as of May 31 from the end of March. The money was held at various bank accounts registered under the company's subsidiaries, including those in the frozen bank accounts of three affected subsidiaries, under the Secretary for Security's order in relation to alleged national security offences.
The drop in the bank balance was also due to the April 1 repayment of a shareholder's loan totalling HK$150 million to founder Lai and operational expenses incurred from April to May. A total of nine former Apple Daily personnel including Lai is facing charges of national security law.
This article originally appeared in the South China Morning Post (SCMP), the most authoritative voice reporting on China and Asia for more than a century. For more SCMP stories, please explore the SCMP app or visit the SCMP's Facebook and Twitter pages. Copyright © 2021 South China Morning Post Publishers Ltd. All rights reserved.
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