Noble Group in its 7 July announcement said: "In the interests of transparency, the Board of Directors of Noble Group, in consultation with Noble’s senior management, has commissioned a third party review of Mark to Market (“MTM”) models and valuations. Accordingly, the Board has set up an independent Board Committee consisting of four non-executive independent Noble Board members:- Paul Brough (as Chairman), Irene Lee, Richard Margolis, and Christopher Pratt. The Committee in turn has appointed PricewaterhouseCoopers LLP to conduct an assurance review of Noble’s MTM models, valuations, and governance framework. On completion of the PwC’s review, the Committee shall report to the Board and a summary of the review will be released."

Michael DeeMichael Dee. Photo: whartonmagazine.comMichael Dee has put out a response: 

Let me be clear in my response to Noble’s statement.

“This is one small step in the wrong direction. My problem with this supposedly independent committee is it’s extremely narrow and limited scope of only looking at MTM valuations, that only a Noble vetted summary will be released by the board committee, PWC will not be reporting independently to the the market, and that this hand-picked, insider board committee should not in anyway be considered “independent”.

“Noble is engaging in a PR exercise in which I for one have no confidence in. As long as Mr Elman, the 75 year old founder of Noble, Executive Chairman, 20 percent shareholder and member of the Audit, Nominating and Compensation Committees has a formal role in Noble there can be no possibility in my personal opinion of a truly independent assessment of Noble’s accounting.”

Three of the four members of Noble’s newly appointed “independent’ accounting review committee, including its Chairman, are all existing members of the audit committee which includes Mr Elman. Are we really to believe they will be willing accept any other finding than one which supports what decisions and policies they themselves have done? The mere fact that an outside accounting firm must be brought in is itself a scathing indictment of E&Y and further proof they should be fired. Will Mr Elman allow a truly independent committee to objectively assess his handiwork as Executive Chairman after he declared this matter “finished” at the AGM? I for one think not.”

“Noble have had many months to provide the facts and willfully and decisively have not done so. The only appropriate response to this announcement is one of outrage at Noble’s audacity in expecting anyone to accept this. Noble has now bought back about two percent of the company’s stock in a futile effort to support the share price. Yet it has been variously reported by the WSJ, the Financial Times, Reuters, Bloomberg and others that bond spreads are wider, CDS spreads have widened dramatically, lenders are selling their positions and the bong ratings are one notch away from junk status. Mr Mak Yuen Teen, an associate professor at the NUS Business School where he teaches corporate governance and ethics, has written an excellent article in the Business Times on the many corporate governance fallings and shortcomings of Noble Group.”

“I therefore reiterate my call for Mr Elman to immediately resign all roles with Noble, for E&Y to be fired, the board to be restructured, and a new truly independent outside chairman to be installed to clean up this mess. Noble’s CEO and CFO should be given one month to fully answer all charges which by now they fully know the answers to. This new committee to assess accounting policies is too little, too late, too conflicted to matter in the least.”

“If Noble wants to begin to restore the confidence of the market on MTM valuations then they should immediately and publicly release the full valuation model for Yancoal both before and after the recent 40 percent write-down of US$200 million which still leaves Yancoal valued by Noble at 25 times it’s public market value. Let the market decide if Noble’s magic model and their top secret assumptions are more reflective of reality than the shares of a public company. Noble should also fully explain how Yancoal is treated as an Associated Company with only 13 percent of the shares, well below the required 20 percent. They could do this today with no new committee.”

“In the past I have dared Noble to release the Yancoal model for public inspection. They have not. So now I will make a formal offer:

“If Noble releases the full Yancoal valuation model, used both before and after the recent $200mm write-down, I will personally donate S$10,000 to Singapore Special Olympics in Noble’s name.”

“Hopefully Noble now has a further incentive to do what they should have done five months ago, respect the owners of Noble and provide the raw data for the market to evaluate. This won’t answer all questions yet it is a small step in the right direction.”

“It’s high time for No-Bull from Noble.”

Note: I reiterate that I have no position in the shares of Noble Group and no economic interest whatsoever, nor do I want to see Noble further negatively impact shareholders through their actions and jeopardize the livelihood of its employees.

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#1 Aquarius 2015-07-10 12:38
Well said and written. Let me add that this decision to appoint PwC for a third party review of its MTM valuation model(s) was done only after and under the pressure of MAS which has been in constant dialogue with the management following its review of the reports made by Muddy Waters and Iceberg Research. It became quite obvious that adequate doubts were raised sufficient enough to warrant a second opinion to be conducted in the interest of all shareholders.

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