CITIC PACIFIC BOSS QUITS AFTER HK POLICE RAID

Larry Yung, one of Hong Kong's most prominent businessmen, resigned as chairman of Citic Pacific yesterday, five days after police raided the company's headquarters as part of an investigation into alleged false statements and fraud at the state-owned conglomerate.

“The execution on 3 April 09 of the search warrant by the Commercial Crime Bureau requiring [Citic Pacific] and its directors to provide information has had a great impact in society,” Mr Yung said in a letter to the company's board.

“Faced with this reality, I think that my resignation would be in the best interests of the company.”

Mr Yung's long-serving managing director, Henry Fan, also quit.

Their positions at Citic Pacific will be assumed by Chang Zhenming, signalling Beijing's intention to assert control over a company Mr Yung had run like a family business.

Mr Chang is also vice-chairman and president of China International Trust and Investment Corp, the state-owned group founded by Mr Yung's father, the late Rong Yiren, in 1979.

The sudden fall of Mr Yung comes five months after Citic Pacific first revealed that it faced billions of dollars of losses on foreign exchange contracts.

On March 25, the company reported its first-ever annual loss, after bets against the Australian dollar and the euro cost it $1.9bn in 2008.

In the wake of the scandal, Citic organised an emergency funding package for its Hong Kong arm and assumed responsibility for the forex contracts.

Mr Yung, 67, and Mr Fan, 60, founded Citic Pacific in 1990 and turned it into one of Hong Kong's most important Chinese conglomerates, with businesses spanning steel, aviation and property.

In an announcement, Citic Pacific praised the two executives for setting the foundation for its growth.

“They made solid progress in realising the company's strategic goals and their business experience and insight have provided much guidance and wise counsel to the board.”

Last year, Mr Yung and Mr Fan said the foreign exchange contracts were entered into without their knowledge or approval.

Mr Yung said then that the bets were made without authorisation by the company's group finance director, Leslie Chang, and not challenged by its financial controller, Chau Chi-yin.

Mr Chang and Mr Chau resigned from Citic Pacific.

Mr Yung's daughter, Frances, then listed as the company's “director, group finance”, was demoted for her role in the scandal.

The revelations attracted criticism from minority shareholders and corporate governance activists, who demanded to know why Citic Pacific, which said it discovered the potential losses on September 7, waited six weeks before informing the market.

Hong Kong's Securities and Futures Commission has also confirmed it is investigating the matter.