Thai Hire-Purchase Firm, Onetime Benefactor Try to Eradicate Each Other

The corporate squabble between the Singapore-based J Trust Asia and Group Lease Thailand is playing itself out in a series of hostile legal maneuvers in Bangkok, Singapore and the British Virgin Islands, with J Trust’s CEO Nobuyoshi Fujisawa filing for damages, compensation and criminal proceedings against Group Lease and its embattled former chairman and CEO, Mitsuji Konoshita.

The affair, however, is shaping up to be a US$500 million joint bankruptcy in Singapore for both J Trust Asia, a subsidiary of J Trust Co. Ltd of Japan and Group Lease. That should be of growing concern to major international investors including Blackrock, Fidelity, Dimensional Fund Advisers, Invesco, the California Public Employees Retirement System, or CalPERS, and the Seattle, Washington-based Taiyo Pacific investment fund, whose chief investment officer was Wilbur Ross, who later became US Secretary of Commerce under President Donald Trump.

Group Lease, which is closely intertwined with J Trust, was an investor favorite until last February when their auditors flagged massive amount of fraud. In November, the Thai Securities and Exchange Commission and the Stock Exchange cracked down, charging the company, which provides hire financing for motorcycles and agricultural equipment purchases, with fraud and temporarily suspended its shares from trading. At that point, Mitsuji Konoshita left the country and hasn’t been back, leaving his brother Tatsuya and trusted CFO, Regis Martin, holding the bag.

As an indication of just how extensively the two companies were involved with each other, in November J Trust announced it intended to take over the distressed hire purchase firm shortly after Thai authorities announced they were bringing charges.

However, J Trust shortly after that announcement reversed itself and said it would instead part company, saying it was “committed to making an utmost effort with a view to reaching a conclusion…based on engaging in close consultation with the relevant authorities as well as complying with application law and bylaws and the rules of the Stock Exchange of Thailand and the Kingdom of Thailand.”

It also demanded the return of US$180 million of Group Lease’s convertible bonds as well as 80 percent of Group Lease Finance Indonesia. Group Lease said no way.

The affair since has settled into an internecine squabble. J Trust Asia filed a civil complaint to try reclaim the US$180 million as well as damages against Group Lease, its relevant directors and Konoshita. It also filed a criminal complaint with Thailand’s Department of Special Investigation against both Konoshita and Group Lease. In Singapore, it filed against Group Lease Holdings Pte Ltd., Konoshita and a long list of related parties incorporated in Cyprus. J Trust Asia has also filed injunctions in Singapore and the British Virgin Islands.

Group Lease, in a message to its shareholders today (Jan. 15) said it "acknowledges the importance of such matters and has been attempting to verify and obtain additional information from the publicly accessible information systems of the courts, and relevant authorities." Group Lease added that it "trusts that it can disprove all allegations of JTA in all of the legal proceedings."

Now, however, it appears likely that the Monetary Authority of Singapore will force both J Trust Asia and Group Lease into bankruptcy, wiping out at least US$300 million of shareholder equity in addition to 2017 operating losses exceeding US$250 million at least for both the Tokyo-based parent, J Trust Co. Ltd and J Trust Asia.

J Trust itself has been saddled with a massive lawsuit by the Mauritius-based Weston International Capital and several subsidiary units, charging the Indonesian unit of the bank participated in a colossal fraud that deprived it of hundreds of millions of dollars through the allegedly sham purchase of what was then Bank Mutiara.

J Trust, the suit charged, paid only a fragment of the purported sale price in cash, with the remainder in a shariah note from the bank deposit insurance corporation through Bank Indonesia, the central bank, which was allegedly forgiven. Weston and its subsidiary units are seeking US$410 million from J Trust and 12 other defendants including the Indonesian Deposit Insurance Corporation. The suit also claims millions of taxpayer dollars were laundered out of Indonesia and into the notorious FBME bank in Cyprus.

More than US$250 million seems to have been diverted from J Trust to Group Lease entities and back out again to Cyprus through Singapore-led mandates mutually agreed by Fujisawa and Konoshita in the form of US$210 million of convertible bonds and loans. Sources say that two of the Cypriot entities known as AREF Holdings and Adalene Ltd were created and incorporated through a mysterious facilitator vehicle known as Fidescorp Limited (Cyprus) run by Savvas Pogiatzis, whose father-in-law is believed to be Demetris Syllouris, the current president of the Cypriot parliament.

The extent to which Group Lease officials, particularly Konoshita, were involved in the money laundering activities alleged in the Weston suit is unknown. Certainly, J Trust Co.’s stock ownership appears to be intertwined in a maze of cross shareholdings with Group Lease as well as APF Financial, Showa Holdings Ltd, Wedge Holdings Co., Ltd, PT Bank JTrust Indonesia TBK in addition to Group Lease Holdings Pte Ltd (Singapore) and the foreign investors. It seems reminiscent of of Fujisawa's five year running Livedoor Credit and Takefuji portfolios.

But given the extensive connections, and given that Thai authorities have accused Group Lease of its own money-laundering activities, it’s hard to believe there was no collusion between the two.

Today, the maneuvering in court resembles the old PAC-Man computer game, in which one aggressor – J Trust pursues a perceived target, Group Lease, with the aim to swallow it. The target being pursued, however, can turn, become the aggressor and eat its pursuer. In investment-banking terms, this is known as the PAC-MAN defense.

Whether Group Lease and the now-absent Konoshita can reverse course is uncertain. With the Singaporeans and Thais contemplating throwing them into a dual bankruptcy, it is beginning to look like this will be an expensive game with no victors.