Cablegate: Yet More Charges Against Thaksin

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E.O. 12958: N/A
TAGS: ECON PGOV TH
SUBJECT: YET MORE CHARGES AGAINST THAKSIN

1. (U) In the latest move against former Prime Minister
Thaksin and his Thai wealth, on June 19 the Department of
Special Investigations (DSI) announced charges of concealing
assets and violating Stock Exchange and SEC regulations in
respect to Shinawatra family holdings of SC Asset Management,
a publicly-listed property development company. Thaksin could
also be charged with having misrepresented his assets in the
asset declaration required of all government ministers, a
violation of Thai anti-corruption law.

2. (U) The DSI charges that in mid-2000 (before becoming PM),
Thaksin transferred some unspecified percentage of shares he
and his wife owned in their privately-held property company
to a British Virgin Islands-registered company (Winmark). In
August 2003 Winmark sold its SC Asset shares to another
offshore vehicle, Value Investment Mutual Fund (VIF). In
September 2003, VIF transferred its SC Asset shares to two
Malaysian entities, Overseas Growth Fund (OGF) and Offshore
Dynamic Fund (ODF). On November 11, 2003 SC Asset listed on
the Stock Exchange of Thailand and, the SEC claims, left the
Shinawatra family as owners of 60.82 percent of the
outstanding shares.

3. (SBU) In conversations with lawyers, accountants and an
SEC spokesperson, no one could explain why assets would be
transferred with such rapidity among offshore entities prior
to the SC Asset public listing. After the IPO, the reasons
Thaksin might want to hide his ownership of the offshore
vehicles could include:
- SET rules prohibit a single group from controlling more
than 75 percent of a listed firm (a super-majority which
could block stockholders from presenting issues for a vote at
the company's annual meeting).
- A source of funds offshore untraceable by Thai
authorities. The SEC claims that OGF and ODF sold off all
their SC Asset shares between April and August 2006, a time
when Thaksin was under severe political pressure.
- By limiting the number of shares available to foreign
SET investors thereby raising the price of such shares and
increasing the capitalization (and share value) of SC Asset.

4. (SBU) Financial analysts are skeptical that the Thai
authorities actually have hard evidence as claimed that
Thaksin was the owner of the offshore vehicles. What they
believe is more likely is that such ownership is implied
because, according to the SEC, OGF and ODF transferred
without compensation their rights to purchase additional SC
Asset shares at a discount in a 2004 rights offering to
Thaksin's daughters. An SEC official told us she did not know
what evidence DSI had as "proof" ODF and OGF were
Thaksin-owned because the SEC has none.

5. (U) DSI has issued a summons for Thaksin to return to
Thailand by June 29 to face charges. Thaksin can seek a delay
and while there is no legal limit, an accused is usually able
to delay appearing up to three times. Eventually, however,
DSI could issue a warrant for his arrest and seek extradition
if he is abroad. Most of our contacts do not believe Thaksin
will return, at least at this time.

6. (SBU) Comment: The financial shenanigans of Thaksin are
exceptionally complex and the reasons behind some of them
unclear. We are confident that Thaksin probably did control
some of his companies through opaque means, just as many
other Thai family-owned companies do, to get around SEC, SET
and Revenue Department purview. Unfortunately despite the
problems facing Thaksin because of his apparent attempts to
circumvent supervision and law, we suspect that the many
other Thai entities that utilize similar structures will be
no more likely to make their holdings more transparent as a
result. Just that they will be more careful when choosing
their enemies.

BOYCE

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