Zhitong Finance App News, Xie Ruilin (00417) issued an announcement. The board of directors has taken note of recent criminal legal proceedings and related media reports involving a former purchasing manager (former purchasing manager) of the Group. In view of public concern about the incident, the Board hereby provides shareholders and potential investors with certain information on the incident.
The former purchasing manager has pleaded guilty to a criminal case involving the misappropriation of diamonds supplied by several of the Group's suppliers and reselling them for personal gain between 2017 and 2023. The former purchasing manager joined the Group in 1988 and has established a considerable level of familiarity and trust with several of the Group's suppliers over a period of over 30 years.
According to the Group's internal control policy, each supplier must first enter diamond data into the Group's supplier management system (internal control procedure) before delivering diamonds and obtaining confirmation of receipt by the Group. However, with regard to the diamonds involved, internal control procedures were not strictly followed.
The former purchasing manager used his familiar relationships with such suppliers to obtain the diamonds in question on the grounds that they ordered the diamonds on behalf of the Group. After the former purchasing manager voluntarily made a confession, the Group reported the case to the police in March 2024. The Group has cooperated fully with the relevant authorities throughout the investigation and subsequent legal proceedings.
Since ownership of the diamonds in question is held by the supplier, this incident mainly involves the Group's liability for inventory losses suffered by the supplier, rather than the Group itself directly suffering asset losses. After a thorough investigation and fair assessment of the Group's liabilities, the Group has basically resolved matters arising from this incident by compensating some suppliers for losses. After taking into account some of the insurance claims received and/or payable, the Group's estimated net financial risk as a result of this incident is approximately HK$3 million. The entire processing process was carried out from the financial year ended March 31, 2025 to the second quarter of the financial year ended March 31, 2027.
The Board believes that this incident will not have any significant adverse impact on the Group's financial position, business operations, or working capital.
In order to prevent similar incidents from happening again, the Group immediately carried out a comprehensive internal control review after the incident was revealed, and considered that the relevant monitoring design was appropriate. The Group has further strengthened the implementation of internal control procedures by strengthening the following measures (including but not limited to): (i) the Group has formally reminded all suppliers to comply with internal control procedures; (ii) suppliers are required to immediately report any discrepancies in delivery data within the Group's supplier management system; (iii) the Group will only confirm receipt and/or assume responsibility for diamonds delivered by suppliers that have fully complied with and completed the relevant internal control procedures; and (iv) the Group requires at least two employees to jointly confirm the supplier's delivery Otherwise, the Group reserves the right to refuse to confirm receipt of the goods and assume related responsibilities.
The Board believes that the measures implemented are appropriate and can further strengthen the Group's internal control procedures in relevant areas of operation.
The Group will continue to monitor its internal controls and risk management systems and make further improvements as appropriate.
As of the date of this announcement, the Board was unaware of any information indicating that this incident had had any significant adverse effect on the Group's continuing business operations.