Two independent directors from Singapore-listed Sino-Environment Technology Group said on Friday they have received a report highlighting grave and immediate concerns over some of the firm's recent transactions.
The report was from PricewaterhouseCoopers (PwC), which was tasked with a review of Sino-Environment.
The independent directors said PwC's findings call into question the conduct of Sino-Environment's executive directors, particularly the conduct of Sun Jiangrong, the chairman and CEO of the company.
The PwC report highlighted several key transactions by Sino-Environment's management to buy materials and for investments.
The first was in May when one of Sino-Environment's units, China Energy Environment, paid S$14 million to a Japanese firm for the purchase of raw materials.
However, the Japanese firm, JGC Catalysts and Chemicals, told PWC there was no such deal and that it had not received any payment from China Energy Environment.
JGC added that it had no employee bearing the name of the alleged JGC representative who had supposedly signed the purchase contract.
The payment was purportedly made from a Xiamen International Bank account, which required only a single signatory Mr Sun.
When PWC representatives visited the bank's office in Quanzhou, they found that a specific bank officer had been pre-arranged to meet with them and that the officer already had bank statements and documents prepared for PwC to inspect.
He didn't allow PwC to verify the information in these statements and documents with the bank's IT systems, and refused to answer any of PwC's questions about China Energy's bank account.
In another transaction highlighted by PwC, a Sino-Environment unit, Fujian Fuda Desai Environmental Protection, invested some S$50 million in four waste power plant projects.
Of the amount, PwC said about S$41 million was made without the board's approval, despite the independent directors' instructions that all payments above half a million dollars had to be properly authorised.
Furthermore, although the construction for some of the waste power plant projects was supposed to have been completed by April or May, no significant work had been carried out on any of the projects in August.
PwC added that there did not appear to have been any formal supplier tender process undertaken for these projects.
It also discovered that the power generator contracts and subcontracting work contracts for these projects had purportedly been awarded to contractors with asset sizes and operation levels that were significantly lower than the stipulated contract sums.
In a filing to the Singapore Exchange, Sino-Environment's independent directors said they are surprised and troubled by the executive directors' latest announcement that the firm has S$31 million deposited in Singapore and China banks.
This falls short of the S$40 million amount that Mr Sun initially said the firm had.
The Securities Investors Association of Singapore (SIAS) said the information found in the PwC report is worrying to minority shareholders.
SIAS' president David Gerald said the disclosure of phantom transactions and questionable conduct by Sino-Environment's executive directors in China borders on criminality, and must be dealt with firmly and decisively.
SIAS is calling on the authorities in China to conduct a thorough investigation into the firm's affairs in China and deal with the situation under the law.
Mr Gerald added that Sino-Environment's independent directors must now, together with the shareholders, take legal action to appoint a new board to ensure that the company's remaining assets are fully protected.
He said SIAS will approach the Chinese Embassy in Singapore to relay its concerns to the Chinese authorities.