UPDATE 1-Board of Saudi contractor Mojil quits after three sentenced

Saudi stock market regulator fined MMG SAR1.6 billion ($427 million) and sentenced three people, including founder Mohammad Al-Mojil, to jail.

  
(Adds comments by company and regulator, context)

DUBAI, June 20 (Reuters) - An effort to restructure debt-burdened Saudi builder Mohammad Al Mojil Group (MMG) was thrown into doubt on Monday when the firm said its board had resigned after three people involved with the company were sentenced to jail.

Last week, Saudi Arabia's stock market regulator ordered MMG to pay it damages of 1.6 billion riyals ($427 million) and sentenced three people, including founder Mohammad Al-Mojil and his son Adel Al-Mojil, the firm's chairman, to between three and five years in prison.

They were found guilty by the Capital Market Authority's Committee for the Resolution of Securities Disputes of manipulation and fraud relating to MMG's initial public offer of shares in 2008.

In a statement on Monday, MMG said the comittee's decision was based on "fundamentally flawed" evidence and had severely hurt the board's ability to run the company.

"The decision to resign is, in part, due to their serious concerns about the unlimited director and executive liabilities in the Kingdom of Saudi Arabia," the statement said, without specifying what the company would do after the resignations.

The CMA, which said the committee's decision was not final and could be appealed, charged that "illegal profits" were made during the IPO through the difference between the shares' value in the offer and their real value.

The shares have not traded on the Saudi bourse since July 2012, when the CMA suspended the stock over losses which the company incurred as it over-extended itself trying to take advantage of a construction boom in the kingdom.

Since then, the company has been trying to rebuild itself, partly by seeking hundreds of millions of riyals which it says it is owed by other firms for its work.

MMG said on Monday that before the committee's decision, the recovery had been going well, with the company posting a net profit in the first quarter of this year - its first profit since 2012.

The board had also helped to prepare a capital restructuring plan which could have paved the way for MMG shares to resume trading, it said.

The committee's decision came at a time of turmoil for the Saudi construction industry as a whole as the government cuts spending in response to low oil prices, which have slashed its revenues.

Some of the kingdom's biggest construction conglomerates, including Saudi Binladin Group and Saudi Oger, have been forced to lay off tens of thousands of staff as the government has delayed some payments to the companies. Thousands of workers have gone unpaid for months.

"Recent events highlight the dire need for a systematic and far-reaching overhaul of the construction sector in the Kingdom of Saudi Arabia as well as the regulations which govern these firms," MMG said in its statement.

(Reporting by Andrew Torchia; Editing by Keith Weir) ((andrew.torchia@thomsonreuters.com; +9715 6681 7277; Reuters Messaging: andrew.torchia.thomsonreuters.com@reuters.net))

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