Touchwood: A case of deception and confusion

By Sunimalee Dias

Touchwood Investments PLC has filed an appeal in the Supreme Court against the Commercial High Court order issued to wind up the company.

The company was issued the winding up order on June 5 and liquidator Mr. Sudath Kumar was appointed as well.

Mahogany trees at the Gomaragala Estate in Eheliyagoda.

However, in a stock exchange filing the company stated that they had appealed their case against the winding up order.

Touchwood Investments PLC ran into trouble when they were found to be unable to pay back their investors cum clients who had invested in the purchase of trees on their teak, mahogany, sandalwood plantations in Sri Lanka and Agarwood plantations in Thailand.
It was found out that in the winding up case that the company had duped investors to believe that all Touchwood companies were connected under one large group.

It was noted during the case that the Touchwood which started as a Touchwood Investments (Pvt) Ltd in 1999 changed name in 2001 to Touchwood Investment Ltd and later registered under Touchwood Investments PLC in 2007.

In fact in their Annual Report for 2012/2013 it was found that the company referred to other Touchwood companies as affiliates, subsidiaries, associates and authorised representatives and even in the Harvest Agreement Certificate of the Petitioner in the winding up case. But correspondence with the investors was carried out under the cover of five other Touchwood company names.

The chart indicates the number of companies that were run by Roscoe A. Maloney along with his wife Swarna Maloney.

During the investigation carried out by the Securities and Exchange Commission (SEC) it was noted that the board of directors present remained mum when queried about the number of companies and their connections except to state that the companies only had common directors namely Roscoe and Swarna Maloney and Asitha Koralage who was the company’s Deputy Chairman.

When the company ran into problems in terms of paying back the investors upon the maturity of the trees it was found that the company management was scurrying from one end to another in another in a bid to get the money.

In this respect, the Maloneys used their Touchwood (Pvt) Ltd company registered in Moratuwa to raise over Rs.200 million through a debenture issue to settle the Agarwood plantation clients.

They were found to have settled their personal due to by inflating the values on assets belonging to Touchwood PLC. This money the Maloneys’ used to purchase controlling interest of ASPIC Holding Private Ltd (which is a holding company of Central Investments Finance PLC).

In addition, following investments made in Cambodia on alleged state land development the Maloneys’ borrowed money through Touchwood Investment PLC for Cambodia property firm Touchwood Investment PLC Property with 5 acres of vanilla and 5 acres of sandalwood in Matale valued around Rs.27 million used to settle lenders.

Moreover, the Maloneys’ transferred approximately Rs.150 million deposits held at LOLC under Touchwood Investment PLC to LOLC as payback.

LOLC sold Touchwood Investments PLC shares to recover loans with share composition become 90 per cent public and 10 per cent non-public (Mr. Maloney’s shares) and the Touchwood Hong Kong stake in Touchwood Sri Lanka was also sold in April/May 2013.Further during the court hearings it was revealed that cheques presented in open court by current Touchwood Investments PLC Chairman Lanka Kiwlegedara to pay back the petitioner in the winding up case had bounced.

At the conclusion of the hearings the Commercial High Court issued the order based on the fact that the company had no money to pay back the investors as a reason for the winding up as a result of which the liquidator was appointed as well.

The fact that the company’s continuous failure to settle the debts owed to the Petitioner and other creditors have also been made note of when delivering the Order.