"Rogue" operations for "illegal personal gain" are said to be behind disappointing first-half earnings at Guangdong Tannery Ltd which today said authorities have arrested a former director for leading a team of former executives in a scam run in parallel with one of its legitimate business units.

In a statement Guangdong Tannery said it found out in June that Zhang Muhan, a former director of Guangdong Tannery, was using Nanhai Tannery & Leather Products Co in a "rogue operation."

Investigators working on the case say that "since the rogue operations were elaborate and their transactions were complex, the legal consequences which may arise as a result are uncertain."

Results reported Wednesday showed Guangdong Tannery swung to an unaudited loss of HK$182.3 million in the six months ended 30 June from a profit of HK$5.02 million a year earlier. Revenue fell to HK$314.2 million from HK$363.9 million.