misleading information to g8 stakeholders

This correspondence is from Cherie Hearts GROUP INTERNATIONAL relating to 'misleading information to G8 stakeholders' to the ASX:

WITHOUT PREJUDICE
12 May 2011
Mr. Ramy Aziz
CFO
Australian Securities Exchange (ASX)
Dear Sir,
FEEDBACK AND DISCLOSURE ON G8 EDUCATION LIMITED
We have prior to this written in to you, with important business updates from Cherie Hearts Group
International (CHGI) on G8 Education Limited (G8), via emails dated 16 April 2011, ?Important Business
Updates from Cherie Hearts on G8 Education Limited?.
We write to you once more on the dissemination of misleading information to G8 stakeholders
specifically in relation to the following matters;
1. The transparency of estimated profit from the purchase price of Cherie Hearts Group
International
Despite announcements released to the public on the purchase of CHGI at the price of SGD24.6
million, we have the initial and supplementary agreements backing up the actual purchase price
of CHGI at SGD45 million.
2. The wrongful application of receivership on CHGI dated 22 March 2011
Please find attached the court order with regards to the receivership by the Singaporean High
Court following the preliminary court hearing held on 14 April 2011, ruling that G8;
i) The appointment of receiver to be set aside and restrained G8 from appointing
receivers till further order;
ii) The transfer of shares of 13 centres to be reversed back to Cherie Hearts;
iii) Directorship to be reversed back to Cherie Hearts; and
iv) As G8 took the position then to complete the deal, the High Court also ordered
Cherie Hearts to collect and pay collection of monies of the centres to G8 from
March 2011.
Tracing back to G8's past announcements on 24 Mar 2011, it was only announced that "G8
Education ... exercise its rights under those arrangements ... ?. It was only on 28 Mar 2011 that it
issued another clarification that mentioned the appointment of receiver at Cherie Hearts. Prior
to the hearing on 14 April 2011, there was news on 8 April 2011 titled "G8 EDUCATION
CONFIDENT OF MAJOR SINGAPOREAN ACQUISITION" at:
www.goldcoastbusinessnews.com.au/article2753/G8%20EDUCATION%20CONFIDENT%20OF%20
MAJOR%20SINGAPOREAN%20ACQUISITION.html
It was reported in paragraph 1 that " The board of publicly-listed Gold Coast childcare company
G8 Education (ASX: GEM) today assured shareholders that the acquisition of Singapore?s Cherie
Hearts will be a success, despite a dispute with the vendor going before the courts later this
month." It was reported in paragraph 6 that: "At today?s AGM, G8 chairperson Jenny Hutsin told
shareholders the chances of Cherie Hearts winning the dispute were ?beyond remote?."
Apparently the Court Order of 14 April 2011 did not turn out the way G8 Education had wished.
Paragraph 5 of the announcement reads "At a practical level this means that the 13 childcare
centres will contribute to G8 Education's profit as anticipated from 1 Mar 2011 ...? 27 Apr 2011
has passed, and Cherie Hearts has filed its claim against G8 on the damages and also terminated
the Overarching Agreement on the 25 April 2011. This means that G8 has a potentially HUGE
CONTINGENT LIABILITY for both damages as well as refunding all the monies treated as
?profits? (i.e. if it loses the trial and has to pay out the profits so recognized). Whether or not G8
feels that it will triumph at the upcoming trials, the fact that G8 is facing a huge claim is
potentially price-sensitive information, which ought to be disclosed to the ASX for the benefit of
the investors. This, we believe, G8 apparently has NOT done so. The monies G8 collected cannot
be misleading and parked as profits under its Group?s performance.
In addition is G8?s announcement to the ASX. G8 may not have made full and complete
disclosures in their ASX announcements dated 19 April 2011 titled "Cherie Hearts". Paragraph 2
of the announcement reads "The Court in Singapore ordered that the status quo pre the
commencement of proceedings by Cherie Hearts be preserved pending a trial.? Based on the
court order, the truth is receivership has been set aside and all shares and Directors have been
reversed back to Cherie Hearts (please refer to Court Order).
On the whole, it is likely that G8 is overly confident in its anticipation of outcomes, and overly
restrictive with the disclosure of price-sensitive information.
3. Please also be informed that investigations by the Singapore Police Force (SPF), Accounting
and Corporate Regulatory Authority (ACRA) as well as the Corrupt Practices Investigations
Bureau have commenced on the alleged misappropriation of shares and Directorship status of
CHGI of 13 childcare centres in Singapore. The misappropriation was discovered by CHGI during
the receivership.
The police report and all other related documents can be forwarded to you upon request.
4. Lapses in G8?s incumbent responsibility to all stakeholders to announce the commencement
of termination proceedings of its Sales & Purchase Agreement with CHGI
On the 28 March 2011, CHGI filed a Writ of Summons to G8 for damages. A Statement of Claim
was also filed subsequently. The various acts committed by G8 in and around March 2011 have
led to CHGI (Cherie Hearts) formally writing to the solicitors of G8 to terminate all the
Overarching Agreements on the 25 April 2011, as Cherie Hearts regard G8?s acts to be
repudiatory breaches of these Overarching Agreements. If G8 is to lose the case in later trial,
they are required by law to refund all the monies stated in the court order back to Cherie
Hearts. We have noted that no announcements have been made to G8?s stakeholders in spite
of it having been 2 weeks since action was taken by CHGI (Cherie Hearts) to terminate its
agreement with G8.
We wish for your kind investigation into this matter and anticipate a reply from your office. We also
hope and leave it in your capable hands to inform all necessary authorities there as well as the
stakeholders and shareholders that are and may be affected by these recent evolvements.