Recent Corporate Scandals in Malaysia
RECENT CORPORATE SCANDALS IN MALAYSIA
Air-freight firm Transmile Group Berhad hit the business news headline for the wrong reason in 2007. The share price suffered turbulence when it was revealed that auditors of Deloitte & Touche were unable to substantiate the accounts of year 2006. The fraud was discovered after a special audit conducted by Moores Rowland Risk Management Sdn. Bhd., stating that the company has been overstating its revenue between the periods of 2005-2007 to reduce the net loss shown in its financial statements and total overstatement being RM 530 million. Transmile had recorded revenues which were actually companies that were set up by its former CEO Gan Boon Aun. Share price plummeted from its RM14.40 high to just RM0.37 as of 2nd of September, wiping out RM 1.2 billion gains of the last two years in its market capitalisation. The company is now classified as a PN-17 status company, given to companies that are under financial distress. The current board of directors has now filed a writ of summons and statement of claim in the Kuala Lumpur High Court against its former CEO.
Next to the Transmile fiasco is the government funded regional industrial park called Port Klang Free Zone (PKFZ). Initially, the project was to be modelled after the successful Dubai-based Jebel Ali Free Zone (Jafza) which offered extensive manufacturing and distribution facilities. The scandal began when the project had cost overruns of up to RM3.5 billion and the land where the PKFZ is built on was bought over from another private company owned by a politician at an exorbitant amount. Jafza was responsible to manage PKFZ pulled out, citing “strategic purposes” as a reason, but following after, a local daily newspaper soon uncovered that Jafza pulled out due to red tape, political interference and many other reasons. The Malaysian Government then engaged the services of PriceWaterhouseCoopers to conduct an independent audit on PKFZ and its findings led to the
Air-freight firm Transmile Group Berhad hit the business news headline for the wrong reason in 2007. The share price suffered turbulence when it was revealed that auditors of Deloitte & Touche were unable to substantiate the accounts of year 2006. The fraud was discovered after a special audit conducted by Moores Rowland Risk Management Sdn. Bhd., stating that the company has been overstating its revenue between the periods of 2005-2007 to reduce the net loss shown in its financial statements and total overstatement being RM 530 million. Transmile had recorded revenues which were actually companies that were set up by its former CEO Gan Boon Aun. Share price plummeted from its RM14.40 high to just RM0.37 as of 2nd of September, wiping out RM 1.2 billion gains of the last two years in its market capitalisation. The company is now classified as a PN-17 status company, given to companies that are under financial distress. The current board of directors has now filed a writ of summons and statement of claim in the Kuala Lumpur High Court against its former CEO.
Next to the Transmile fiasco is the government funded regional industrial park called Port Klang Free Zone (PKFZ). Initially, the project was to be modelled after the successful Dubai-based Jebel Ali Free Zone (Jafza) which offered extensive manufacturing and distribution facilities. The scandal began when the project had cost overruns of up to RM3.5 billion and the land where the PKFZ is built on was bought over from another private company owned by a politician at an exorbitant amount. Jafza was responsible to manage PKFZ pulled out, citing “strategic purposes” as a reason, but following after, a local daily newspaper soon uncovered that Jafza pulled out due to red tape, political interference and many other reasons. The Malaysian Government then engaged the services of PriceWaterhouseCoopers to conduct an independent audit on PKFZ and its findings led to the