RM530 million Transmile accounting fraud – how Liong Sik is to assume responsibility as Chairman?

Former MCA President and Cabinet Minister, Tun Dr. Ling Liong Sik was quite active in the past month, as a search with The Star archives would produce eight news items featuring him, including one today at the ceremony at the Universiti Tunku Abdul Rahman (Utar) campus in Kampar yesterday planting a Blue Pine tree.

But he has been very reticent on what has been described as the biggest accounting and corporate scandal in recent times in Malaysia, even likened to the accounting fiasco of Enron and Woldcom, although Ling is the Chairman of Transmile Group Bhd — the company which had overstated its revenue by RM530 million.

According to a special audit carried out by Moores Rowland Risk Management Sdn. Bhd, Transmile made pre-tax losses of RM126 million and RM77 million for FY 2006 and FY 2005 , respectively, instead of pre-tax profits of RM207 million and RM120 million as originally reported.

This means that Transmile had overstated its revenue by RM197 million in 2005 and by RM333 million in 2006 — a total of RM530 million.

Pos Malaysia & Services Holdings Bhd has warned that its earnings for the financial year ended Dec. 31 may be affected by the reported overstatement of Transmile’s sales revenue as the postal group owns 15.3% of Transmile.

I am surprised that Pos Malaysia & Services Holdings Bhd has not admitted that its earnings for the financial year 2005 could also be affected. Pos Malaysia reported a net profit of RM160.2 million for 2006 and RM145.3 million for 2005.

As former senior Cabinet Minister, Malaysians expect Liong Sik to be a model of a responsible corporate player.

For this reason, Liong Sik should be more forthcoming and make a clean breast of his responsibilities and remunerations including all forms of allowances which he had drawn from Transmile in his capacity as Transmile Chairman.

Transmile closed 32% lower at RM6 yesterday from its RM8.90 pre-suspension level last Monday, causing massive losses to small-time investors..

Liong Sik should explain how he is going to assume responsibility for such a Enron-type of corporate fraud in the company which he heads as Chairman.

DAP MPs will be raising the Transmile fraud in the next Parliamentary meeting beginning on June 18, demanding to know (i) how the government is protecting the innocent investors from the Enron-type of corporate accounting fraud in Transmile; and (ii) the lessons learnt from the Transmile scandal.

  1. #1 by Libra2 on Saturday, 2 June 2007 - 4:41 pm

    I am sure nothing will happen to any present or past politicians as long as they are aligned to the Barisan Nasional. Do they care about small time investors?
    I will not be surprised if this the tip of the iceberg. There could be other companies ( with connections) in a similar situation but the scandal kept under wraps.

  2. #2 by moong cha cha II on Saturday, 2 June 2007 - 5:26 pm

    i think Dato Lim Ah Lek would be most happy to help LLS, if such request is made by Ling to Lim AL.

    afterall, there is no longer Team A or Team B

  3. #3 by grace on Saturday, 2 June 2007 - 7:10 pm

    Mr Lim,
    When can we ever find any one leader who really has integrity, honor and pride? Noe that at I can think of at present.
    Ling was labelled a liar by Soh Chee wen at press conference, yet he kept quiet. Now do you expect him to rsign or take full responsibility of the fiasco? Not in the wildest dream!

    I do not have faith at all in our presend group of leaders! Most of them are self serving. All those who work for them are real cows.

  4. #4 by ahkok1982 on Saturday, 2 June 2007 - 7:30 pm

    this would be interesting… spread the word around and most people holding Transmile stock will be throwing it away like rotten eggs thus further plundging the stock price. the malaysian stock market is bn controlled anyway, let them hav a taste of what a real stock market is like.

  5. #5 by k1980 on Saturday, 2 June 2007 - 7:44 pm

    If a shoplifter convicted of stealing RM5.30 worth of goods could be jailed, what about the perpetuator of the biggest accounting and corporate scandal in recent times in Malaysia to the tune of RM530million? Even if he is a Tun?

  6. #6 by nkeng on Saturday, 2 June 2007 - 8:52 pm

    I let go 50 lots before the weekend. Fook, lost some money but expect those who held on to lose more.

  7. #7 by Winston on Saturday, 2 June 2007 - 9:12 pm

    Anyone who caused losses to shareholders, especially small time retail investors, through fraud, embezzlement or other acts of dishonesty, must be dealt with severely.
    Not only must they be caned and jailed as prescribed by the law, they must also continue to be jailed after completing the jail sentence prescribed by law, if they have not reimbursed the victims the full amount of losses they have suffered.
    Only after they have paid back every cent, will they be released. They would have plenty of time to reflect on their deeds in jail!
    Those who, either wittingly or unwittingly permitted such acts under their watch must also be severely penalised. These include the directors, auditors (both internal and external) or anyone who held a position of responsibility, whose dereliction resulted in the commission of such crimes.

  8. #8 by Orangutan on Saturday, 2 June 2007 - 9:24 pm

    I wander how Robert Kuok is going to say about letting LLS take the heat. Well, with his business acumen I would expect him not to trust this BN (or ex-BN) devil. I guess, everyone makes mistake, including Malaysia’s richest. No wonder he is slowly taking his billions out of Malaysia.

  9. #9 by shortie kiasu on Saturday, 2 June 2007 - 9:27 pm

    There are many guilty parties within and without Transmile. They should be severely punished, however high a position they may hold. As in the case of Enron, the investigation was swift and effective, and all the high officials of Enron were charged and found guilty, and eventually sent to jail.

    Every body are trying to talk so much about trying to emulate transparency and good governance in the corporate management as in the developed world, irresponsible acts as such continue and persist.

    Like the case of Transmile, it could just a tip of an iceberg.

    Let us see what will come out of it, and let the world see for themselves and judge for themselves whether they will continue to pour their money into this country.

  10. #10 by sheriff singh on Saturday, 2 June 2007 - 10:50 pm

    All the director and senior management must be held accountable. Maybe even fined or jailed and disqualified from holding any management positions like directorships.

    SC, Bursa, Bank Negara where are youuuuuuuuuu????

  11. #11 by Jeffrey on Saturday, 2 June 2007 - 11:49 pm

    Transmile’s share price plummeted on the news that Transmile’s directors being informed by the firm’s auditors, Deloitte & Touche, in early May that they had not been able to obtain relevant supporting documentation from management to confirm the validity of “certain transactions involving trade receivables and related sales and additions to property, plant and equipment”.

    All we know at this moment in the wake of CIMB Group recently appointing PricewaterhouseCoopers to review the 2005 financial statements of Southern Bank Berhad (acquired by CIMB), Securities Commission’s investigations into and charges against senior managers of GP Ocean Food Berhad and Nasioncom, is that the state of corporate and financial governance of our corporates leaves much to be desired.

    Nothing is known at this moment who is responsible and whether Chairman of Transmile -former MCA President and Cabinet Minister, Tun Dr. Ling Liong Sik – is implicated in any way or entirely innocent without being in the know.

    Dodgy creative accounting (recognition of front end income without matching against expenses that will be incurred later), fictitious business transactions from fictitious delivery orders and invoices to inflate sales and profit figures – for purposes of whether to convince bankers for additional credit lines, institutional investors or fund managers to take placement of shares to support market price or to rig and push share price – may be done by any CEO, CFO or any management staff, accountant, book keeper, sales manager of a corporation, and the question is always from whom they take their instructions.

    They make take the instructions from a director unknown to other directors or even a substantial shareholder other than the two major shareholders of Transmile (17% Kuok Group that initiated the probe or Khazanah), not necessarily a director though he controls the appointment or dismissal of directors or even some third party not in the company controlling behind either substantial shareholder or directors.

    It is also not known what part, if any, external auditor(s), present or past, or any partner responsible for Transmile accounts have contributed to the fiasco or could have played a part to discover the irregularities earlier.

    Before through investigations and completion thereof, there are just too many unknowns at this moment for any finger pointing at any one including the Chairman to make a clean breast of his responsibilities and remunerations including all forms of allowances which he had drawn from Transmile in his capacity as Transmile Chairman.

    It is however agreed that regulatory authorities should immediately conduct an extensive investigation to ferret out the facts.

  12. #12 by mendela on Sunday, 3 June 2007 - 12:12 am

    Can someone look into Transmile Annual Report and tell us how much each Director including the Chairman are getting each year?

    If LLS did not do wrong, why he is still remaining silent?

    This guy is a big running dog!

  13. #13 by Jeffrey on Sunday, 3 June 2007 - 12:18 am

    Pending investigations the Chairman should remain silent. What could he say? If he says he knows nothing, it is self serving and worth nothing. It is up to independent investigations to vindicate him. If he points at others, it is also unfair because what he says could compromise and influence investigations which should be independent and unbias.

  14. #14 by khoo19 on Sunday, 3 June 2007 - 1:05 am

    It appears that the accounting and auditing standard in Malaysia is very low . In order to protect the interest of the small investors / shareholders, the accounting and auditing standard should be upgraded / tightened. What happened to Enron and Woldcom could well happen to any company in Malaysia. Can’t leave everything to the Board of Directors / Major shareholders and expect them to look after the interest of other minority shareholders / investors.

  15. #15 by DiaperHead on Sunday, 3 June 2007 - 1:32 am

    “I am sure nothing will happen to any present or past politicians as long as they are aligned to the Barisan Nasional. Do they care about small time investors? Libra2

    Should they? Investors big and small should look after themselves. Nobody owes anybody a living?

  16. #16 by moong cha cha II on Sunday, 3 June 2007 - 1:49 am

    i think if LLS is handcuffed or remanded in Pudu jail, GE can be early.

  17. #17 by mendela on Sunday, 3 June 2007 - 2:18 am

    Pudu jail is no more a jail. It was shut many years ago.
    The main jail is now at Sungai Buloh which Anwar spent for almost 6 long years.

  18. #18 by Godamn Singh on Sunday, 3 June 2007 - 3:31 am

    “I am sure nothing will happen to any present or past politicians as long as they are aligned to the Barisan Nasional. Do they care about small time investors?”

    The only model he came close to being is a 17-year old model at Studio 4.

  19. #19 by dawsheng on Sunday, 3 June 2007 - 3:37 am

    Tun Dr Ling Liong Sik should resign as the Chairman of Transmile, and to avoid similar event in future, I suggest Tun refrain from holding any positions in the corporate entities, so he can enjoy his retirement in peace and kept whatever good names he still have from being tainted with more controversies such as this one.

  20. #20 by BoDo Singh on Sunday, 3 June 2007 - 7:47 am

    Say what you want. He’s the one laughing to the bank! And there is nothing anyone can do about it.

  21. #21 by Winston on Sunday, 3 June 2007 - 9:27 am

    “Nothing is known at this moment who is responsible and whether Chairman of Transmile -former MCA President and Cabinet Minister, Tun Dr. Ling Liong Sik – is implicated in any way or entirely innocent without being in the know.” Jeffrey

    If I am not mistaken, every director is, individually and collectively, responsible for the affairs of the company of which he is a director and know what is going on in the organisation. Particular the chairman. No body can plead ignorance!
    In that case, if anything goes wrong with the company, is it possible to say that the chairman could be “entirely innocent”?
    I think that one would not be an apologist for these people if one knows that immense losses are suffered by the investors due to the misdeeds of the top echelons of a company.

  22. #22 by rm 0.02 on Sunday, 3 June 2007 - 9:38 am

    this saga will end up ala Soh Chee Wen and Eric Chia…long-drawn and slowly forgotten/

    i give up on corporate malaysia.

  23. #23 by Jeffrey on Sunday, 3 June 2007 - 10:14 am

    It is not the case of being apologist for these people but look at the facts and realities.

    Directors “are individually and collectively, responsible for the affairs of the company of which he is a director” as stated by Winston provided the affairs of the company in question – for which they are ostensibly vicariously responsible as alter ego and agent of the company and imputed constructive knowledge – are those in the ordinary course of business and sanctioned by the authorities conferred in the Memorandum and Articles of Association (“M&A”) of the company (available for inspection to public in the Companies Commission of Malaysia).

    Fraud, falsification of documents like invoices and delivery orders, dodgy accounts and book keeping are not activities sanctioned by the M&A and if carried out are illegal activities and prosecutable offences that cannot automatically be attributed to each and every director because in such unsanctioned matters, directors are not imputed to have exercised ostensible authority or imputed constructive knowledge. In fraud and illegal activities they must have actual knowledge to the accountable and prosecutable.

    The Kuok groyuop has 17% equity stake in transmile. Surely uit has board representation. Does it mean its director(s) know? If so why is the probe being ordered by Kuok group?

    Even the Chairman : as a matter of corporate practice, one has an Executive Chairman or a Non executive Chairman. Which is Ling? Even if he were Executive, did he as director sign any accounts passing off as correct when they are not? Did he know? Is he supposed to know if internal accountants did creative accounting and signed off as audited by external auditors?

    As much as one should not be an apologist for the sake of being a apologist one should not be a detractor for the sake of being detractor. Find out what are facts. Just because we don’t like someone politics and whatever else he has done does not presume he is guilty in every scandal to which his name is linked!

  24. #24 by Libra2 on Sunday, 3 June 2007 - 10:17 am

    Diaperhead said “Should they? Investors big and small should look after themselves. Nobody owes anybody a living?”.

    Yes, they should.
    Small time investors have to take care of themselves and invest wisely but don’t the listed companies and the regulatory bodies too have a greater responsibility to see that small time investors are placed on a level paying field.
    Small time investors buy stocks based on company reports and performance. If companies cheat to deceive small time investors, whom do you blame?
    No, I don’t buy Malaysian stocks as there is too much of insider trading, deceit, manipulation, preferential stocks unfairly given to selected personalities and groups, excessive director fees and unwillingness of the regulatory authorities to deal firmly with people with connections.

  25. #25 by Jeffrey on Sunday, 3 June 2007 - 10:26 am

    Immense losses suffered by small investors warrant thorough investigations to bring those responsible to brook. It is unsafe to assume all in upper echelons would order or know about sheninegans of accounts. Misdeeds of fraud/falsification of accounts are criminal – outside authority of M&A – and not predicated on constructive as distinct from actual knowledge of its officers/directors. SC prosecutes those responsible in GP Ocean and Nasioncom : does it prosecute every director? To just accuse anyone because he is s director or chairman without the facts backing trhe claim is to invite the prospect of being sued for libel for which the defence of justification/fair comment is not even available.

  26. #26 by madmix on Sunday, 3 June 2007 - 11:25 am

    Many chairmen of public listed companies in Malaysia are just figureheads. They are appointed by virtue of their connections to the power centres. Like ex IGPs, ex- DGs and of course ex-ministers.
    They probably have little knowledge of the day to day running of their companies and they do not have executive powers. They chair board meetings and collect their directors’ fees. The amount they get paid is usually stated in the company annual reports and is quite transparent.
    So to point fingers at Ling is not fair as even the AUDITORS were in the dark in 2005 and only came to know of the problems after the 2006 accounts were audited and could not be passed.

  27. #27 by megaman on Sunday, 3 June 2007 - 2:59 pm

    whether or not ling is responsible, I feel is another story altogether …

    but whether any regulatory or legal actions will be taken against the frauds is a more important issue …

    Most small time investors would just blame their loses on bad luck or no insider info and quit investing in the stock market after getting burnt badly. But in actual fact, what happened is a major criminal offence.

    It is very sad to see the apathy of Msians in the face of such blatant crimes …

  28. #28 by greenacre on Sunday, 3 June 2007 - 4:48 pm

    I am disgusted to know this. Whenever I am told by my relations that auditors are coming to check their accounts and they will be a wee bit late. Wonder what this is, they are accompanying this fellas tea break and lunch and the senior staff to dinner. They even order the canteen to prepare specialities a day or two earlier.
    Cheapskates can’t even buy tea, I used to utter.

  29. #29 by kittykat46 on Sunday, 3 June 2007 - 9:55 pm

    The possible misrepresentation of Transmile’s accounts is a very serious matter, but I’m doubtful how much Ling Liong Sik has to do with it. The role of the Chairman of the Board, especially if he is a non-executive Chairman and not a major shareholder (not sure what is the extent of LLS’s shares in the company) is fairly limited, mainly to “Chair” the scheduled Board of Director’s meetings. In fact if a non-executive Chairman started getting too involved in the company’s operations it could be seen unwarranted interference.
    Of course, nowadays, there is increasing expectation for non-executive Directors to play a role in overseeing the Company’s internal controls. Still, they are heavily dependent on auditors, both external and internal. Transmile should have had an effective Internal audit system , precisely to prevent such “cooking” of the accounts.

  30. #30 by ihavesomethingtosay on Monday, 4 June 2007 - 12:52 am


  31. #31 by DiaperHead on Monday, 4 June 2007 - 1:14 am

    Say it then. Just don’t write in CAPS!!!

  32. #32 by Godfather on Monday, 4 June 2007 - 9:22 am

    Just say “Saya Tak Tahu” and that is the accepted norm nowadays when transparency or compliance comes into play.

  33. #33 by Bobster on Monday, 4 June 2007 - 4:29 pm

    Seems like everyone has long forgotten what LLS’s son did in the late 90′. Young graduate with less than 3 yrs working experience in the Bakun Dam project able to purchase Berjaya Industrial share worth RM300 million with cash! I might have missed out some part the stories (as I was overseas) but till to-date have not read LLS explanation nor seen any report on ACA investigation. One of the many scandals that got swept under the carpet in the past. AAB should open up the history book and detain these big time white collar criminals that robbed away the wealth of the nation.

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