Thaksin's Bt50-billion albatross

November 20, 2000

THAKSIN Shinawatra's Bt50-billion fortune is usually an object of envy, but the telecom tycoon's riches have become a stumbling block on his path to the premiership.

A Thai saying holds that one cannot use leaves to cover a dead elephant, which surely resonates for Thaksin, as he is subject to the disclosure process in this new era of Thai politics. Indeed Thaksin's fortune is so huge that he could not cover it all through nominees or dummy companies.

He is mounting a legal challenge against allegations by the National Counter Corruption Commission (NCCC) that he failed to fully and properly disclose his assets as required by law when he joined the Chavalit government in 1997. If found guilty of any wrongdoing, Thaksin could be barred from running for public office for the next five years.

But Thaksin's allies are confident that he will ultimately overcome these legal and political snags. The events should unfold over the next few months, with the January 6 general election the critical mark, as Thaksin would like to finish the business of the election first.

Most of Thaksin's wealth is concentrated in his flagship telecom companies, Shin Corps and Advanced Info Service (AIS). Both are listed on the stock market. Shin Satellite is another listed firm in the Shin empire. The remaining 60 to 70 companies are not listed. But the NCCC would like him to submit documents related to 17 of his companies that may involve nominees.

He recently transferred his holdings in Shin Corps, worth about Bt13 billion, to his son Phanthongthae, who immediately became Thailand's richest man.

A question often asked about Thaksin is how he amassed his wealth. His close friends say that he made money the old-fashioned way: he earned it.

But a political analyst says his wealth was largely derived from capital gains rather than from dividend yields from his telecom business. In other words, Thaksin's fortune has been closely tied to the free-wheeling stock market.

It is no longer a secret that Thaksin has relied on his domestic help, principally Boonchu Rianpradap, Chairat Chaingphreuk and Duangta Wongphakdi, as nominees. At least as far back as 1992, these individuals held stock in Shin Corps, AIS and Shin Satellite on Thaksin's behalf.

Transactions on the stock market are public records, which can be easily traced. So it is known that Boonchu held 2.79 million shares in Shin Corps on December 1, 1992. By April 4, 1993, her holdings were down to zero. But on November 26, 1993, she repurchased 840,000 shares in Shin Corps.

Once Boonchu, Chairat and Duangta were publicly identified as nominees for the telecom tycoon, it became that much easier to determine whether there were any irregularities in the stock transactions. That is, were these nominees used to create a smoke screen so that the stock could be thrown back and forth to create artificial prices?

Initial findings of the Securities and Exchange Commission (SEC) have not indicated anything unusual. "There were very few transactions, and they did not constitute any violations of the securities law," said a senior official from the exchange watchdog.

With this clearance, the SEC's next step is to probe whether Thaksin violated the disclosure regulations. Under the law, an individual or company is required to notify authorities about every stock transaction that exceeds 5 per cent, 10 per cent, 15 per cent, 20 per cent and so on.

A former banker questioned whether Thaksin, since he and his nominees own a sizeable stake in the listed firms, would need to file for a public tender offer once they had reached a certain level in their holdings.

Bill Heinecke of Minor Group and Goldman Sachs each hold about 30 to 35 per cent in the Rajadamri Hotel, which operates the Bangkok Regent Hotel. They were required to file for a public tender while they waged their takeover battle.

"Did Thaksin need to file for a tender offer? This is an interesting legal question," the ex-banker said.

The SEC official said the exchange watchdog had asked Thaksin to submit documents related to his three listed companies for official investigation. The official added that since the information was mostly public it would be easy for the officials to conduct the probe.

"All the officials need to do is to separate Khun Thaksin's holdings into one column and his nominees into another column before adding them together to see whether there was any violations of the disclosure requirements during the course of the transactions," the official said.

"If it is found that he violated the disclosure requirements, we'll just fine him, because that is a minor offence," the official said.

Again, it appears that Thaksin does not face a major problem regarding the SEC investigation, which will only focus on his stock holdings.

However, the NCCC will probe Thaksin about his assets and the extent to which he fell short of full disclosure. Enter the Revenue Department. Tax officials are also trying to determine whether he committed tax evasion.

This is probably the toughest challenge for Thaksin's legal team. Still, the team is confident that Thaksin will prevail.

BY THANONG KHANTHONG