No need for deputy chairman to recuse himself on Indon project: Darco

Singapore

THE board of Darco Water Technologies is of the view that there is no reason to consider deputy chairman Robert Wang Zhi as having a potential conflict of interest in a controversial Indonesia waste management project that he has been pushing for the water treatment firm to invest in.

It made this statement on Thursday night in response to shareholders' questions ahead of Darco's annual general meeting (AGM) on Friday.

Minority shareholders who own a combined 15 per cent stake in Darco had earlier appealed for Mr Wang to recuse himself from further discussions and decisions on the project, since he is liable to fully reimburse Darco for any and all costs incurred in pursuing the acquisition if for any reason Darco cannot or decides not to proceed with it. This means he would face personal losses if Darco ditches the project.

However, Mr Wang is not conflicted, the board argued, saying: "None of Mr Wang Zhi, his family and associates is interested in the project . . . Mr Wang Zhi is also not a director in the company which currently holds the project."

As things stand now, minority shareholders fear that the project - which Darco has said could require fresh funding of up to US$46 million - will be a major drag on Darco, even as returns are uncertain.

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Darco said on Thursday that it continues to be in talks with the West Java government to renegotiate the terms of the project "so as to render it viable and earnings accretive".

Although the West Java government has already indicated in a letter that it is not agreeable to a renegotiation of terms, Darco said that its business partner, Emsus Co, "is of the view that there remains room . . . to continue to engage with the West Java government to find an acceptable solution with a view towards rendering the Nambo Project viable from a financial perspective".

Separately, two of Darco's four independent directors were voted out at the AGM on Friday. They are lead independent director Lester Tay Lee Chye and independent director Tay Von Kian. Both had been on the board before Mr Wang Zhi became Darco's controlling shareholder through a placement in 2018. Mr Wang Zhi controls 44.44 per cent of Darco.

These exits have left the board with two independent directors. Both joined last May, after Mr Wang Zhi staged a surprise coup and turfed out Darco's former chief executive and two other directors.

One of Darco's two remaining independent directors is Joanna Ong Joo Mien, who is linked to Qarah Consultancy, which had tried to facilitate a placement of Darco shares that was eventually called off in March after protests from minority shareholders.

Ms Ong's husband was Qarah's sole shareholder until Aug 22 last year. He transferred his shares to Alyssa Pek less than five months before the placement was announced.

When shareholders dug further, they found that Ms Pek shares a home address with Gregory Pek, who became a Darco shareholder late last year. According to share variance reports, Mr Pek sold Darco shares on Dec 17, the same day that shareholder Robert Stone witnessed unusual trading activity in the stock that resulted in suppressing Darco's share price.

The Business Times reported last week that the Monetary Authority of Singapore is reviewing a complaint on suspected market misconduct in the shares of Darco Water.

Mr Stone, who has an 11.68 per cent stake in Darco and is one of the shareholders who had pressed for a special audit of internal controls and a review of potential conflicts of interests at the board level, told BT on Friday: "The thing that I have found most significant about all the responses from Darco in the last few days is the lack of any response to the reference to Gregory Pek in BT's article. If his actions were innocent or the relevant director had no knowledge of his actions, you would expect a statement or a denial."

In response to shareholders' questions, Darco revealed on Thursday that prior to the aborted placement, Qarah Consultancy had provided consultancy services to Darco over a period of three months in 2019.

However, Ms Ong has confirmed that she herself did not provide any services to Mr Wang Zhi or organisations related to him, Darco said.

Voting patterns at Darco's AGM on Friday suggest a rift among its shareholders. Mr Wang Zhi, Ms Ong and executive chairman Wang Yaoyu were each re-elected by a 71.04 per cent majority, with 28.96 per cent of shares voted against them.

Darco shares ended unchanged at S$0.19 on Friday.