Zebra sighted
Read all about it

The blame game

The collapse of Oasis was accompanied by claims that the directors did not agree with each other on certain key issues.  Now we have legal action in prospect:

Two Oasis founders sued over share sale

Two founders of defunct Oasis Hong Kong Airlines have been sued over claims that they orchestrated a deal to buy worthless shares in the company's operating division.  Reverend Raymond Lee Cho-min and his wife, Priscilla Hwang Lee, allegedly gave a green light to a US$4.8 million plan without company approval or an independent valuation of the money-losing unit, according to a writ filed in the High Court.

The couple, who could not be reached for comment last night, also failed to disclose that they had a personal stake in the deal, said the lawsuit filed by Oasis Mezzanine Funding, the airline's capital-raising division.

"Raymond Lee and Priscilla Lee failed to disclose or declare to OMF their conflicting interests" and had a duty not to "engage in secret profiteering or self dealing", the writ said.  Instead, Mr Lee and his wife "misappropriated" US$4.8 million that was raised based on an "unjustifiable and grossly overstated" US$350 million value for Oasis Hong Kong Airlines, the lawsuit claimed.

The cash-starved unit ran the airline's day to day operations, the writ said.  The couple allegedly ordered that Oasis Mezzanine Funding buy shares in Oasis Hong Kong Airlines, the writ said.  But Oasis Hong Kong Airlines' value in September last year was "not more than zero" and would now be "negative", the writ said.

Oasis, the world's first budget long-haul airline, grounded flights in April after operating for less than 18 months.  About 700 staff lost their jobs and around 50,000 passengers were affected.

Mr Lee had said the carrier went under because of higher-than-expected costs for jet fuel and planes.  News reports earlier this year suggested that the airline fell apart after investors disagreed with Mr Lee about whether to pump more money into the airline.

In May, a High Court judge ruled that Mr Lee and other Oasis founders had placed the company in voluntary liquidation to avoid paying a HK$170 million debt owed to the Bank of China.  Meanwhile, the writ said that Mr Lee and his wife, a former executive director at Oasis, had ignored requests for a valuation report or evidence that the company approved the plan.

"The share purchase transaction was not properly authorised by OMF," it said.

Oh dear.  There's obviously a rule at the SCMP that Oasis has to be described as "the world's first budget long-haul airline".  It wasn't a budget airline in any meaningful sense of that phrase.

The following day Rev. Lee and his wife hit back:

Oasis pair deny conning firm into buying worthless shares

The husband and wife team behind defunct Oasis Hong Kong Airlines yesterday denied accusations that they conned the company into buying worthless shares in its operating division.

The Reverend Raymond Lee Cho-min and his wife, Priscilla Hwang Lee, described the claims in a lawsuit filed against them this week as a "joke".  "We were completely shocked and outraged," Mr Lee said. "It is utterly without foundation."

The lawsuit, filed by the airline's capital-raising division, Oasis Mezzanine Funding, alleged that the couple "misappropriated" US$4.8 million from the share-purchase deal.

That transaction was done without company approval or an independent valuation of money-losing Oasis Hong Kong Airlines, which ran the airline's day-to-day operations, the lawsuit claimed.  But Mr Lee said yesterday that company directors and shareholders had full knowledge of the deal and the US$350 million value attached to the share-issuing division.

Money that allegedly ended up in the couple's pockets was actually used to fund the airline's operations, he said. Mr Lee said he and his wife had agreed to provide evidence that the transaction was legitimate and authorised. But three days before the deadline, the plaintiff filed its lawsuit.

The transaction was done for tax reasons related to the couple's status as US-born citizens, Mr Lee said.  He also suggested that the lawsuit was sparked by anger over the airline's demise. "I think we all feel very badly that the airline went under. We all suffered great losses," he said.

Oasis, the world's first budget long-haul airline, grounded flights in April after operating for less than 18 months. About 700 staff lost their jobs and about 50,000 passengers were affected. Mr Lee had said the carrier went under because of higher costs for aviation fuel and planes.

In May, a High Court judge ruled that Mr Lee and other Oasis founders had placed the company in voluntary liquidation to avoid paying a HK$170 million debt owed to the Bank of China.

The sub-Standard was also on to the story by Friday, and had a different angle, though they somehow failed to notice that it was legal action that had prompted the Lees to hold a press conference:

Kwoks almost owned Oasis, founders claim

Objections from Oasis Hong Kong Airlines investors Allan Wong Chi-yun and Richard K Lee scuppered a 2007 deal that would have seen the Kwok family, of Sun Hung Kai Properties (0016), take majority control of the airline, Oasis founders Raymond Lee Cho- min and Priscilla Lee Hwang charged yesterday.

BenjaminScent
Friday, February 13, 2009

Objections from Oasis Hong Kong Airlines investors Allan Wong Chi-yun and Richard K Lee scuppered a 2007 deal that would have seen the Kwok family, of Sun Hung Kai Properties (0016), take majority control of the airline, Oasis founders Raymond Lee Cho- min and Priscilla Lee Hwang charged yesterday.

The connection between SHKP and Oasis would have been akin to the relationship between conglomerate Swire Pacific (0019) and Cathay Pacific Airways (0293), Priscilla Lee told reporters.

In a deal spearheaded by Walter Kwok Ping-sheung in June 2007, the couple wanted to sell their stake in Oasis to the Kwok family, Raymond Lee said yesterday. He said the eldest Kwok brother, Walter, was keen to take advantage of synergies he saw between the airline and his family's property, hotel and restaurant interests.  Oasis was seeking additional funding during its first year of operations because of unexpectedly high oil prices.

As a courtesy, Raymond and Priscilla Lee informed the other Oasis board members, Allan Wong and Richard Lee, of their intentions to sell their stake, as the four were friends who invested in Oasis together, Priscilla Lee said. However, the other two partners would not accept a deal that saw the Kwok family take majority control, because they feared being sidelined, she said.

The negotiations about an investment from the Kwok family took place before a public Kwok family feud erupted and before Walter Kwok took a leave from SHKP starting in February 2008.

Meanwhile, Raymond and Priscilla Lee said Wong and Richard Lee later tried to push them out of the company, giving the Oasis founders an ultimatum they would invest another US$100 million (HK$780 million) to keep the airline flying only if the couple surrendered their stake for one dollar.

Priscilla Lee said the couple was coming forward now to share their story because "it's time to ... clear the air.  Truth-telling is more important than peacekeeping," she said. "Otherwise it's falsehood and deception."

The demand the Lee couple give up their shares came after Wong and Richard Lee stopped a number of outside investors from coming in, according to Priscilla Lee. She said Wong and Richard Lee had already ruled out selling a stake in Oasis to Macquarie, saying they preferred to bring in local tycoon interests, who might be more in line with their vision for the company. But a possible deal with Cheung Kong (Holdings) (0001) in May 2007 was also vetoed by Wong, she said, because he did not feel comfortable with Cheung Kong.

Well, the court case should be fun!

Comments

Feed You can follow this conversation by subscribing to the comment feed for this post.

The comments to this entry are closed.