By CHEW XIANG

Jurong Technologies Industrial Corp was carrying more than $100 million in doubtful or non-existing assets on its balance sheet months before it went into judicial management, an investigation has found.

That allowed the company to report a respectable financial position for the quarter to Sept 30, 2008, but it is now known that the company was by then technically insolvent.

The irregularities include $50.6 million in consigned inventory with 'no physical inventory to support such a value', plus some $60 million in unrecoverable related party balances, according to an affidavit filed earlier this month by Tam Chee Chong of Deloitte and Touche.

'As part of my investigations, I discovered that certain account receivables were grossly overstated and stock and inventories were either non-existent or not realisable,' Mr Tam said.

Mr Tam and Keoy Soo Earn, also of Deloitte, were appointed judicial managers of the contract manufacturer in February this year after six banks demanded repayment of over $200 million in loans.

Jurong Tech reported on Nov 12 that it had total assets of some $742 million and liabilities of $438 million, leaving equity of $303 million as at Sept 30. But the judicial managers found among other things that:

# The company recorded on Jan 31, 2008 inventory worth $50.6 million but no evidence of physical inventory was discovered;

# $63.3 million were recorded as sales in December 2007, but there were no supporting documents and no evidence of inventory movement;

# In June 2007, Jurong Tech waived its claim for invoices totalling some $20 million from Motorola but kept the full amount recorded on its books; and

# A subsidiary sold to a Jurong Tech employee last year was deemed 'questionable' and no inventory movement could be traced to support the sale.

Other writedowns resulted from provisions made for amounts owed by related parties which were later deemed unrecoverable.

In all, adjustments totalling $272 million were provided for the 2008 financial year, leaving the company some $340 million in deficit, according to a summary table duly authorised by the company's board and incorporated into its financial results for 2008, which it recently announced.

The results show the company booked a loss of $502 million, and held negative equity of $326 million. While it had cash and cash equivalents of some $8.4 million, overall the company was facing a negative cash balance, Mr Tam said.

The irregularities were disclosed on Aug 7 but few further details were then revealed.

It is understood that the matter has been reported to the Commercial Affairs Department, Singapore's white collar crime unit.

The affidavits by Mr Tam were filed in support of a pending High Court case. Mr Tam and Mr Keoy, in their capacity as judicial managers of the company, are suing DBS and Rabobank in separate suits for 'unfair preference' - a situation where a company transfers assets to a creditor shortly before insolvency.

In the first case, the judicial managers are seeking to recover the proceeds of Map Technologies shares sold earlier this year. The shares were held by Jurong Tech but had been given in charge to DBS last November as security for unpaid loans.

The second similar case concerns the recovery of the proceeds of the sale of Min Aik Technology shares last December from Rabobank.

A special audit by Ernst & Young commissioned by the company last December to probe irregularities in the administration of its receivable financing facilities is still ongoing. The stock has been suspended since January.

This article was first published in The Business Times.