The Inspection Agency clarified that in determining the value of assets of construction works on land, the consulting unit, Grant Thornton LLC, incorrectly determined investment rates and material unit prices, among other factors, leading to a deviation in the assessed value of assets of over VND 15 billion compared to the regulations.
Headquarters of the Total Faith Corporation |
The Steering Committee for the Equitization of the Total Faith Corporation did not request the People’s Committee of Dong Nai Province to provide feedback on land price determination for the area not yet transferred at the Tan Bien 1 and 2 residential areas, the Tan Bien market neighborhood, and the expected location of the Tan Bien apartment building. This could potentially lead to an incomplete determination of land-use rights value, causing financial losses for the Dong Nai Party Committee.
During the period of 2005–2013, the Total Faith Corporation independently agreed to receive land-use right transfers for the purpose of expanding investment projects, which was not in accordance with legal regulations.
As of the inspection in May 2023, the land area of more than 491,000 square meters has not yet been approved for investment or change of land-use purpose by the People’s Committee of Dong Nai Province, and the procedure for transferring it to the name of the Total Corporation has not been completed.
According to the inspection conclusions, the Provincial Party Committee Standing Committee decided to approve the enterprise value based on the asset value determination method. However, the Steering Committee for Equitization and the Provincial Party Committee Standing Committee did not consider, evaluate, or compare this with the enterprise valuation results using the free cash flow discount method.
The Total Faith Corporation carried out the transfer of shares at Tan Khai Joint Stock Company, Phu Tin Construction and Housing Business Joint Stock Company, Proconco Joint Venture Company, and Dong Saigon Concrete Components Joint Stock Company through agreed sales, with transfer prices not determined by a unit with the function of appraising the price, which is not in accordance with regulations.
The inspection agency discovered that the Total Faith Corporation sold an additional 7.7 million shares (according to the equitization plan approved by the Provincial Party Committee Standing Committee) to employees, which was not in accordance with regulations. As a result, these additional shares were not put up for auction, and the difference in value must be recovered to the budget of the Dong Nai Party Committee, amounting to more than VND 8.7 billion.
The notice of conclusion of the Government Inspectorate clearly states the responsibility for deciding on the enterprise value based on the net asset value method without considering, evaluating, and comparing with the results of enterprise valuation using other methods, and for using the book value of four assets to calculate the enterprise value of equitization, which belongs to the Standing Committee of the Dong Nai Party Committee for the term 2015–2020, the Steering Committee for Equitization, and related organizations and individuals.
The responsibility for violations in the sale of additional shares to employees and the sale of shares to strategic investors belongs to the Standing Committee of the Provincial Party Committee for the term 2015–2020, the Standing Committee of the Dong Nai Party Committee for the term 2015–2016, the Steering Committee for Equitization, and related organizations and individuals.
Based on the results of this inspection, the General Inspectorate of Vietnam recommended that the Standing Committee of the Dong Nai Party Committee direct and organize a review of the responsibilities of related organizations and individuals regarding the above-mentioned violations; and direct the collection of the determined amounts due to violations in the valuation of certain assets, which are construction works on land (VND 15 billion), and the sale of additional shares to employees (VND 8.7 billion), to be returned to the budget of the Dong Nai Party Committee.
At the same time, the People’s Committee of Dong Nai Province should inspect and review measures to manage and guide the Total Faith Joint Stock Company in managing and using the land area received through transfers from households and individuals in accordance with legal regulations.
The General Inspectorate of Vietnam recommended that the Ministry of Finance consider taking measures to rectify the valuation and appraisal activities of Grant Thornton LLC in accordance with the law. If there are signs of criminal offenses, the case should be transferred to the police investigation agency for handling in accordance with regulations.
According to the inspection agency, on September 12, 2023, the Investigation Police Agency of Dong Nai Province decided to initiate a criminal case for “Violation of regulations on the management and use of state assets, causing waste and loss” occurring at the Total Faith Corporation during the equitization process from 2014 to 2016.
The Government Inspectorate has exchanged information on some violations detected during the inspection with the Investigation Police Agency of Dong Nai Province. The inspection conclusions have also been sent to the Investigation Police Agency of Dong Nai Province. Therefore, the limitations and violations mentioned above will be considered and clarified by the Investigation Police Agency of Dong Nai Province in accordance with regulations.
Minh Chien
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