The Anti-Money Laundering Office (AMLO) is taking action against local management members of fitness club chain California Wow, which it says fabricated its accounts to show losses while transferring more than Bt1.69 billion abroad over a 10-year period of operations.
Secretary-general Seehanart Prayoonrat said yesterday the pattern of behaviour of California Wow pointed to public fraud and tax evasion - offences under AMLO's jurisdiction. These ranged from suspiciously false statements made to the stock market that is was operating a loss since 2003, to suspicious wiring of money overseas despite continuously reporting losses.
Seehanart said California Wow's operation in Thailand was basically an illegitimate money-transaction business, which led to members suffering bad service and losing their membership fees, its stockholders losing their benefits and Thailand losing revenue. "It is basically a systematic, wisely devised and well-planned and operated public fraud," he said. "The motive to cheat customers since the beginning of operation is quite apparent."
There are 10 people facing legal action by AMLO, said Seehanart, who has not yet named them. The Department of Special Investigation, the police's Crime Suppression Division, and the Office of the Securities and Exchange Commission are coordinating with AMLO in jointly probing further into the California Wow case.
He said the suspects, who were part of the Thailand-based management members, were expanding the chain in a few countries, including the Philippines. AMLO believes it can retrieve all the money transferred out of the country, he said.
California Wow was established when the Thailand and Korea locations were spun off from California Fitness in the early 2000s. In 2012, California Wow was sued in Thailand's Bankruptcy Court by Bangkok Bank, which sought the repayment of a Bt72-million loan, including Bt4 million in interest. As a result, California Wow shut down seven of its eight Thailand branches.
Seehanart said California Wow was listed in the stock exchange in 2002 - the first year of its operation in Thailand and the only time it reported profits. AMLO has been tracking the transfer of money and is aware of destination countries where relevant authorities have been informed of the issue.
"The highest amount transferred - Bt495 million - was in 2010," he added.
[quote]California WOW pumps out B1.7bn
Published: 7 Jun 2013 at 18.20 Online news: News
The defunct fitness company California WOW Plc cheated its customers and shareholders by reporting losses while transferring 1.7 billion baht out of the country over 10 years, officials say.
The Anti-Money Laundering Office (Amlo) made the revelation on Friday, saying it believed as many as 10 people were involved in siphoning money out of the business.
The fitness company is now going through bankruptcy reorganisation. More than 1,000 customers have been affected by the closures of its main branches at Ratchayothin, Silom, Sukhumvit 23 and Chaeng Watthana.
The company is currently suspended from trading on the Stock Exchange of Thailand. Its financial troubles date back to 2010 when it defaulted on a debt of 58 million owed to TMB Bank. It was also sued in August last year by Bangkok Bank for unpaid debts of 76 million baht.
California WOW last year proposed to the Central Bankruptcy Court a plan to develop smaller clubs requiring less capital investment which would serve members more effectively and help revive the business.
Even when it was at its peak, however, California WOW drew fire from consumer advocates for its aggressive recruitment and sales tactics, in which staff tried to lock members into long-term contracts and constantly "upsold" them on new programmes.
Investigations of the company's financial transactions showed a pattern of cheating in violation of the Anti-Money Laundering Act, according to Amlo secretary-general Seehanat Prayoonrat.
The Amlo examined the transactions between 2002 and 2013 and found regular transmission of money out of the country with a total value of 1.699 billion baht, he said.
"Since its listing on the Stock Exchange of Thailand in 2005, the company reported a profit only one year, and later reported only losses," he said.
Amlo found that the company transferred 495 million baht out of Thailand in 2010. The highest transactions occurred between 2009 and 2011.
Pol Col Seehanat said Almo found around 10 people involved in the case.
"The pattern of large amounts of money transfers out of the country while the company always reported losses shows that the company's executives had the intention to cheat customers since the beginning of its business operation," he said.
Amlo already knows the destinations of the money so it will cooperate with authorities in those jurisdictions to trace back the money, he said.
The office also found that the same group of people had set up similar companies in the Philippines and other countries.
Californai WOW was founded by Canadian entrepreneur Eric Levine and Waraluck Vanichkul.
Major Cineplex Group Plc was also a large investor in the company but pulled out when it began to sense financial troubles and losses.
Mr Levine owned a 5,900-square-metre luxury villa in Phuket, which was sold last year for US$24 million, according to local reports.[/quote]
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