The allegation is a consequence of various complaints lodged to the SEC in relation to the increased debt of THB 26,000 million of EARTH following its submission of the financial statement for the first quarter of 2017.  The increased debt resulted in a decrease of the shareholders’ equity of THB 10,349 million to become minus THB 15,651 million.  In addition, in July 2017 the Board of Directors had resolved to approve that EARTH underwent a business rehabilitation process.  The SEC, then, had a question regarding the existence and status of the increase debt of THB 26,000 million.  Later, on 12 June 2018, the SEC file a criminal complaint against 11 directors of EARTH for making false entries or failing to enter any material statement in documents regarding the increased debt.*

In addition to the allegation in June 2018, the SEC’s further investigation revealed that in 2017 seven directors and key executives of EARTH, namely, (1) Mr. Phisudhi Phihakendr; (2) Mr. Khajohnpong Khamdee; (3) Mr. Thanawat Pratoomsuwan; (4) Mr. Phiroon Phihakendr; (5) Mr. Phipat Phihakendr; (6) Mr. Phiboon Phihakendr, and (7) Miss Kanchana Chakvichitsopon and 10 creditors and their authorized persons, namely,

(8) Tianjin Botai Zhongxing Trading Co., Ltd.; (9) Jiangsu Guangrun Trading Co., Ltd.; (10) Mr. Lin Dong Hai; (11) Imasen Pte Ltd.; (12) Marco Polo Venture Co., Ltd.; (13) Napoleon Logistics Co., Ltd.; (14) Mr. Ruangyos Mahaworamakorn; (15) Mr. Samart Suwatcharachai;  (16) Miss Nattha Saelee; and (17) Mr. Amnat Tangurimarn had jointly acted or knowingly conspired and supported the creation of false debts in accordance with the following details.

(a) The former directors and executives of EARTH  maliciously created a false debt for EARTH with the intention of entering into a business rehabilitation process. This was based on an untrue source of obligation arising out of the fact that a number of trading partner creditors had claimed payment of damages from EARTH  and had filed civil lawsuits against EARTH for an unreasonably high amount of indebtedness, in order that EARTH’s indebtedness would be greater than its assets, despite the fact that they opined or were in a position to know that such indebtedness amount could not be recorded as liabilities in the financial statement in line with the applicable accounting standards.  It was also found that there was evidence that certain creditors were allowed to take assets out of EARTH and use those assets to take legal action against EARTH, constituting an offense of committing an act in order to prevent creditors from receiving full or part payment.  

(b) During such period, EARTH and certain creditors had entered into various transactions that resulted in taking assets out of EARTH that were not in the ordinary course of business, unreasonable, and placed certain creditors in a favourable position, constituting fraudulent misappropriation of assets of EARTH for one’s own interest or third parties’ interests, and obtaining unlawful gains for one’s own interest or third parties’ interests and thereby causing damage to EARTH.

The aforementioned acts constitute the offenses under Section 308, Section 310, and Section 311 of the Securities and Exchange Act B.E. 2535 (1992).  The SEC, therefore, filed a criminal complaint against the 17 persons stated above to the Department of Special Investigation for its consideration to take further legal action.  In addition, due to the criminal complaint resulting in the fact that the directors and former directors is deemed untrustworthy to perform duties as directors and executives of a securities issuing company and listed company under the relevant notification, they, therefore, can no longer perform their duties as directors or executives of a securities issuing company and listed company during the period they are prosecuted.

In this regard, any shareholders and/or creditors of EARTH, who are affected by the above acts, are entitled to file a complaint to the special investigation officer in his or her capacity, as the direct victims, in order to protect the interest of them and the company.

Apart from the above, the Civil Penalty Committee resolved to impose a civil penalty on the 11 offenders, namely (1) Mr. Khajohnpong Khamdee; (2) Mr. Phisudhi Phihakendr; (3) Mr. Phipat Phihakendr; (4) Mrs. Thanyakamol Tritrakarn; (5) Mrs. Thanaporn Pongthiti; (6) Mr. Piriya Phihakendr; (7) Mr. Patchawat Kunchayangkul; (8) Mr. Jittkasaem Kunchayangkul; (9) Mr. Kasemsan Kunchayangkul; (10) Mrs. Lakkana Chantem; and (11) Miss Supaporn Saikam for committing an insider trading in relation to EARTH’s securities, knowing that EARTH would be faced with a liquidity problem and its request to extend debt repayment period was denied by a financial institution.  The stated 11 persons were required to pay a civil monetary penalty, return the benefits received from committing the offense, a  bar from serving as directors or executives in securities issuing companies or securities companies, and pay expenses incurred in connection with the investigation of the offense.** However, they were not willing to settle the case with the SEC.  The SEC, therefore, issued a letter to request the public prosecutor to file a civil lawsuit against these 11 persons to the Civil Court to impose a civil monetary penalty at the maximum rate permissible under the law.

Accordingly, the SEC will request the Court to fix a civil fine and to return the benefits from committing the offense of THB 183,268,831.70 and to prohibit these 11 persons from trading securities on the Stock Exchange or Over-the-Counter, or from binding themselves under derivatives in derivative exchanges for a period of five years, and from acting as directors or executives in securities issuing companies or securities companies for a period of 10 years.  In addition, these 11 persons shall be required to pay the SEC the expenses incurred in connection with the investigation of offense at THB 18,900.45 each.

Simultaneously, the SEC reported the action undertaken for these two cases to the Anti-Money Laundering Office in order to consider and take further action.

In addition, the criminal complaint by the SEC is only the beginning point of the criminal enforcement process.  Under this process, in order to adjudicate whether a person has committed an offense it will depend on the investigation under the authority of the Department of Special Investigation, the prosecution by the public prosecutor, as well as the discretion of the court of justice, respectively.

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*SEC News No. 62/2018 dated 12 June 2018
** SEC News No. 115/2018 published on 24 September 2018