Hyflux News & Updates – Hyflux-KPMG Audit Saga: What You Need to Know

13 December 2023

hyflux news & updates | correctcounts.com

Hyflux Singapore was a Singapore-based water treatment firm that went into liquidation in 2021 due to financial problems.1 KPMG was Hyflux’s former external auditor. 

In 2022, Hyflux filed a claim against KPMG for alleged negligence in auditing Hyflux’s financial statements. KPMG denied these allegations. The case is still ongoing.

This article summarises the audit allegations concerning Hyflux and KPMG and provides updates on what happened to Hyflux Singapore in 2024.

Timeline: What Happened to Hyflux and Recap of the Allegations

2008: As reported in The Independent Singapore, KPMG had been auditing Hyflux’s financial records since 2008.2

2016: According to research conducted by the National University of Singapore, Hyflux’s power plant project, Tuaspring, had failed to profit since operations began in 2016.3 As reported in The Online Citizen, Hyflux’s commercial decisions were the leading cause of Hyflux Tuaspring’s profit losses.4 Analysts also attributed Hyflux’s downfall to persistently depressed wholesale energy prices in 2016-2018.5

2017-2018: According to The Business Times, Hyflux partially divested Tuaspring in 2017 and filed for bankruptcy protection in 2018.6

2020: According to The Straits Times, former Hyflux CEO Olivia Lum and Hyflux’s directors were under criminal investigation for providing misleading statements and non-compliance.7

2021: According to the Singapore Exchange (SGX), Hyflux Tuaspring went into liquidation on 21 July 2021.8

2022: According to The Business Times, Hyflux filed a $684.6 million claim against its former auditor, KPMG, for alleged negligence in auditing Hyflux’s 2011-2017 financial statements.9

KPMG denied these allegations in Nov 2022, explaining that Hyflux’s financial statements were audited in accordance with auditing standards and there were no material misstatements. The auditors complied with professional standards when making judgement calls. Any incorrect judgements do not indicate misconduct or negligence.10

In late 2022, Hyflux sued its former CEO, Olivia Lum, for over S$690 million. It alleged that Olivia Lum had been negligent and breached fiduciary duties.11

According to The Monetary Authority of Singapore, Hyflux’s management was charged in 2022 for allegedly failing to disclose crucial financial information about Hyflux Tuaspring.12 Former chief financial officer Cho Wee Peng and four former board members of Hyflux were also charged with alleged violations of the Securities and Futures Act.13

Hyflux News 2023

March 2023: According to the Singapore Police Force, Hyflux’s independent director, Lee Joo Hai, was charged for alleged neglect, which caused the omission of information relating to the Hyflux Tuaspring Integrated Water and Power Project, and such information must be disclosed under the Singapore Exchange (SGX) Listing Rules.14, 15

May 2023: According to the Singapore Police Force, former Hyflux CEO Olivia Lum, was charged with three additional offences relating to her alleged failure to exercise reasonable diligence in discharging her directorial duties.16 Olivia Lum had approved the release of Hyflux’s unaudited financial statements in FY2017 and the first quarter of FY2018. These financial statements failed to disclose bank deposits of approximately S$44,700,000, S$45,620,000 and S$63,749,750 that Hyflux did not withdraw as restricted bank balances.17

As reported by the Straits Times, former Hyflux CEO Olivia Lum previously faced two charges for disclosure-related offences and allegedly failing to comply with accounting standards. She currently faces a total of 6 charges and is out on bail.18

June 2023: Hyflux’s independent director, Lee Joo Hai, was charged with neglect under the Securities and Futures Act. His alleged negligence caused Hyflux’s intentional failure to notify the Singapore bourse of Hyflux Tuaspring’s expansion into the electricity market. Additionally, Hyflux did not disclose that Hyflux Tuaspring’s profitability would significantly depend on its electricity sales.19

Hyflux News 2024: What’s New

March 2024: As reported by The Straits Times, the High Court granted Olivia Lum’s application for a joint trial of Hyflux’s 2022 civil lawsuits against Olivia Lum and KPMG. KPMG supported the application. 21

Hyflux, its two subsidiaries, Hydrochem and Tuaspring, and liquidator Cosimo Borrelli filed the lawsuit against Olivia Lum in 2022. They claimed at least S$690 million for Lum’s alleged negligence and breach of fiduciary duties.

Hyflux and its two subsidiaries, Hydrochem and Tuaspring, filed the lawsuit against KPMG in 2022. They claimed S$684.6 million for the audit partner’s alleged negligence. KPMG denied the allegations.10

Conclusion

In summary, the High Court approved the joint trial of Hyflux’s 2022 lawsuits against Olivia Lum and KPMG in 2024.

Business owners and investors should stay updated on Hyflux news for insights into standard accounting and decision-making pitfalls. Find out more about the facts and misconceptions surrounding the Hyflux scandal in our case study.20


References

1. Tang, SK. “Hyflux’s judicial managers file for liquidation as restructuring ‘not possible’ after failed investor talks.” Channel NewsAsia. 5 June 2021. https://www.channelnewsasia.com/business/hyflux-judicial-managers-file-liquidation-restructuring-fail-1835721 (Accessed 9 November 2023).

2. Stolarchuk, J. “Hyflux Singapore: Exploring the KPMG Audit Fallout Amidst Hyflux Scandal.” The Independent Singapore. 10 April 2019. https://theindependent.sg/hyflux-singapore-scandal-kpmg-audit-fallout/ (Accessed 9 November 2023).

3. Toh, YHD. “Hyflux Ltd faces troubled outlook amid poor financial performance.” NUS Risk Management Institute Credit Research Initiative. 6 February 2018. https://nuscri.org/media/static/images/thumbnail-pdf/WCBFEB06FEB122018.pdf (Accessed 9 November 2023).

4.  The Online Citizen. “Hyflux’s current financial rut a consequence of “its own commercial decisions”: EMA.” The Online Citizen. 4 April 2019. https://www.theonlinecitizen.com/2019/04/04/hyfluxs-current-financial-rut-a-consequence-of-its-own-commercial-decisions-ema/ (Accessed 9 November 2023).

5. The Online Citizen. “Hyflux’s current financial rut a consequence of “its own commercial decisions”: EMA.” The Online Citizen. 4 April 2019. https://www.theonlinecitizen.com/2019/04/04/hyfluxs-current-financial-rut-a-consequence-of-its-own-commercial-decisions-ema/ (Accessed 9 November 2023).

6. Tay, PG. “Timeline of Hyflux: From market listing to liquidation.” The Business Times. 11 May 2022. https://www.businesstimes.com.sg/companies-markets/timeline-hyflux-market-listing-liquidation (Accessed 9 November 2023).

7. Choo, YT. “Hyflux and its directors, including Olivia Lum, under criminal investigation for corporate governance breaches.” The Straits Times. 2 June 2020. https://www.straitstimes.com/business/companies-markets/hyflux-and-its-directors-including-olivia-lum-under-criminal (Accessed 9 November 2023).

8. Borrelli, C., Bance, P. “Update on Liquidation.” Burelli Walsh Pte. Limited. 18 November 2021. https://links.sgx.com/FileOpen/SGX%20Announcement%20-%20FAQs%20after%20Townhall%20meeting.ashx?App=Announcement&FileID=691296 (Accessed 9 November 2023).

9. Tay, PG. “Hyflux seeks S$684.6 million from KPMG for alleged negligence.” The Business Times. 30 November 2022. https://www.businesstimes.com.sg/companies-markets/energy-commodities/hyflux-seeks-s6846-million-kpmg-alleged-negligence (Accessed 9 November 2023).

10. Tay, PG. “Hyflux seeks S$684.6 million from KPMG for alleged negligence.” The Business Times. 30 November 2022. https://www.businesstimes.com.sg/companies-markets/energy-commodities/hyflux-seeks-s6846-million-kpmg-alleged-negligence (Accessed 9 November 2023).

11. Tay, PG. “Hyflux sues Olivia Lum for more than S$690 million over alleged negligence, fiduciary duty breach.” The Business Times. 22 December 2022. https://www.businesstimes.com.sg/companies-markets/capital-markets-currencies/hyflux-sues-olivia-lum-more-s690-million-over-alleged (Accessed 9 November 2023).

12. Monetary Authority of Singapore. “Former CEO, CFO and Independent Directors of Hyflux Ltd charged with offences under the Securities and Futures Act and the Companies Act.” Monetary Authority of Singapore. 17 November 2022. https://www.mas.gov.sg/regulation/enforcement/enforcement-actions/2022/former-ceo-cfo-and-independent-directors-of-hyflux-ltd-charged-with-offences-under-the-securities-and-futures-act-and-the-companies-act (Accessed 9 November 2023).

13. Leong, G. “Hyflux founder Olivia Lum faces 3 more charges, independent director Lee Joo Hai arrested and charged.” The Straits Times. 5 May 2023. https://www.straitstimes.com/business/hyflux-founder-olivia-lum-faces-3-more-charges-independent-director-lee-joo-hai-arrested-and-charged (Accessed 9 November 2023).

14. Singapore Police Force. “Former CEO of Hyflux Ltd Charged with Additional Offences under the Companies Act and another Independent Director of Hyflux Ltd Charged with an Offence under the Securities and Futures Act.” Singapore Police Force. 5 May 2023.

https://www.police.gov.sg/media-room/news/20230505_frmr_ceo_of_hyflux_chrgd_udr_cmp_act_n_ind_dir_of_hyflux_chrgd_udr_scritis_n_ftrs_act (Accessed 9 November 2023).

15. Tay, PG. “Hyflux independent director charged over neglect in failure to disclose material information on Tuaspring.” The Business Times. 4 May 2023. https://www.businesstimes.com.sg/companies-markets/energy-commodities/hyflux-independent-director-charged-over-neglect-failure (Accessed 9 November 2023).

16. Singapore Police Force. “Former CEO of Hyflux Ltd Charged with Additional Offences under the Companies Act and another Independent Director of Hyflux Ltd Charged with an Offence under the Securities and Futures Act.” Singapore Police Force. 5 May 2023.

https://www.police.gov.sg/media-room/news/20230505_frmr_ceo_of_hyflux_chrgd_udr_cmp_act_n_ind_dir_of_hyflux_chrgd_udr_scritis_n_ftrs_act (Accessed 9 November 2023).

17. Channel NewsAsia. “Former Hyflux CEO Olivia Lum faces more charges over failings related to financial statements.” Channel NewsAsia. 5 May 2023. https://www.channelnewsasia.com/singapore/hyflux-former-ceo-olivia-lum-additional-charges-failure-reasonable-diligence-3467356 (Accessed 9 November 2023).

18. Leong, G. “Hyflux founder Olivia Lum faces 3 more charges, independent director Lee Joo Hai arrested and charged.” The Straits Times. 5 May 2023. https://www.straitstimes.com/business/hyflux-founder-olivia-lum-faces-3-more-charges-independent-director-lee-joo-hai-arrested-and-charged (Accessed 9 November 2023).

19. Cheng, C. “Hyflux independent director further charged under Securities and Futures Act.” The Business Times. 16 June 2023. https://www.businesstimes.com.sg/companies-markets/hyflux-independent-director-further-charged-under-securities-and-futures-act (Accessed 9 November 2023).

20. CorrectCounts. “Hyflux Audit Partner Allegations: Exploring the Facts and Debunking Misconceptions.” CorrectCounts. 24 August 2023. https://correctcounts.com/hyflux-and-audit-partner-kpmg/ (Accessed 9 November 2023).

21. Tay, P. G. “Hyflux’s civil suits against founder Olivia Lum, ex-auditor KPMG to be jointly tried.” The Straits Times. 25 March 2024.
https://www.straitstimes.com/business/hyflux-s-civil-suits-against-founder-olivia-lum-ex-auditor-kpmg-to-be-jointly-tried (Accessed 1 April 2024).