LAFE HOLDINGS REGROUPS AFTER INSIDER TRADER FLAP

LAFE HOLDINGS REGROUPS AFTER INSIDER TRADER FLAP

Lafe Holdings Ltd., a once high-flying electronics concern with big U.S. contracts, is about to come under new control in a bid to recover from its fall from grace.

Chairman Clifford Pang, his sister and another supporter quit after a disastrous plunge in profits. It emerged that Mr. Pang had sold all but 10 percent of his 50 percent stake without informing stockholders or regulatory authorities.Lafe, a maker of advanced disk drives and other computer components, turned in an interim loss of HK$17 million (US$2.2 million) for the six months through last June. That contrasted with a profit of HK$11 million in the corresponding 1988 period.

More than half its output goes to the United States, with Control Data Corp. of Minneapolis its single biggest customer. Lafe also owns Magnetic Arts Corp. of Escondido, Calif.

Local entrepreneur Stanley Ho, who has close ties to China, is moving to take effective control of Lafe via a share placement to a company he controls.

The deal will give that entity, Barrican Investments Corp., 35 percent of Lafe's equity. Barrican, a unit of Grande International Holdings Ltd. of the British Virgin Islands, then will make a general offer for the rest of the shares.

Mr. Ho has the lucrative casino concession in neighboring Macao, holds stakes in the Portuguese enclave's tourism and television undertakings and owns 6 percent of Semi-Tech Microelectronics (Far East) Ltd.

Semi-Tech last year won a fierce bidding battle for SSMC Inc. of Shelton, Conn., which holds rights to the Singer brand name. Mr. Ho and Semi-Tech President James Ting say they want to make the company a significant force in consumer electronics.

Lafe was badly dented by a downturn in the computer market as well as the revelations of Mr. Pang's share-dumping desertion just before the results were announced.

A government tribunal has found Mr. Pang culpable of "a very high degree" of insider trading relating to his share disposal.

Insider trading is not illegal in Hong Kong, attracting only public censure. Mr. Pang rejected the finding.

In its judgment published Wednesday, the tribunal estimates that Mr. Pang netted nearly HK$112 million from his "blatant and deliberate" insider dealing. He also would have saved about HK$23 million as Lafe's share price tumbled.

"The enormous sales he procured manifest a callous and reprehensible disregard for the consequences of his action," the tribunal said. "We do not think (censure) can be a realistic view, particularly where substantial profits can be made or losses avoided."

The government board is recommending to the financial secretary the introduction of effective sanctions in cases of culpable insider trading, including the recovery of ill-gotten gains. The local legislature is studying proposals for a new law that may stiffen penalties.