Published on the Edge: Transmile case jolts auditors on governance issues
- KUALA LUMPUR: Actions such as hefy fines on Transmile Group Bhd directors have jolted many audit committee members and auditors into paying greater attention to corporate governance issues, said consulting firm Columbus Circle Governanance chairman Navin Pasricha.
“There is a big breakthrough in the actions of regulators when policing corporate governance. In the past, limited policing and action were barriers to getting real corporate governance improvement,” he said in a statement released here yesterday in conjunction with the forthcoming 4th Asia Pacific Audit & Governance Summit (APAGS).
I am so puzzled!
Are the fines imposed on the Transmile Group Bhd directors really hefty?
Have a look at this Bernama news clip on May 5th: SC Drops Charge On Ex-Chief Financial Officer Of Transmile
- KUALA LUMPUR, May 5 (Bernama) -- The Securities Commission (SC) Monday withdrew the charge against former chief financial officer of Transmile Group Bhd after he paid a compound of RM700,000.
Sessions Court Judge S. M. Komathy Suppiah allowed the charge against Lo Chok Ping, 39, to be withdrawn after SC's Deputy Public Prosecutor Foo Lee Mei told the court that the Attorney-General's Chambers had allowed a representation by Lo's counsel N. Sivananthan.
Lo was charged with the company's former chief executive officer Gan Boon Aun and executive director Khiudin Mohamed on July 12 last year with abetting the company in making a misleading statement in its quarterly report.
Lo, Gan, 47, and Khiudin, 51, had claimed trial to committing the offence at Bursa Malaysia Securities Bhd here between Feb 28, 2006 and Feb 15, 2007.
According to the charge, the alleged statement was made in the unaudited consolidated results for the fourth quarter of the financial year ending Dec 31, 2006, and it was likely to induce purchase of securities of Transmile Group by other people.
SC had issued a statement that the misleading statement was related to Transmile's revenue of RM338.473 million.
Komathy fixed May 26 for mention of the case against Gan and Khiudin.
A compound fine of rm700,000 was paid and SC withdrew the charges.
Is a fine of rm700,000 enough?
Transmile was trading as high as rm14.00. It now trades at around rm1.50.
Do you think this fine is just for investors who had purchased the stock based on the misguided figures at around rm14.00?
Yeah, some would simply argue that the stock market is simply a cruel, cruel world but this simply isn't correct!
The so-called misleading statement had caused the market to rate the stock at a much, much higher valuation. There was growth, the stock was going places.
It made the justifications required for the stock to trade above RM14.00.
The market was valuing the stock with a market capitalisation of as much as rm3.7 billion!
As it is, without these so-called misleading statements, Transmile is making losses. Now there is no growth and the company has heaps of massive problems.
And the stock is sinking into the abyss.
And currently the market capitalisation of the stock is only around 400 million!
What a difference the so-called misguided statement had on the stock market capital.
So tell me, is rm700,000 hefty?
We shall see what happens next.
Poor Martha!
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5 comments:
Yes indeed, it's not 'hefty', it's really an incredulously small amount!
Perhaps the authorities ought to look at who is selling and buying when the accounts were first made public. Just to see if there are any 'hefty' profits involved!
Little wonder the exchange is always lagging others!
Great blog, keep it up!
In 2006 to 2007, TRANMIL consistently traded at between $10 to $15. I think it's fair to say that the average price traded there is say $12 for simplicity. Someone else can do a more detailed calculation.
Today, it closed $1.5. So, from $12 to $1.5. In $ terms, the loss is 7 times today's capitalization of $400M. So, the average loss is $2.8 Billion, although the Maximum Loss from $15 is far bigger.
Let's calculate the Loss in Market Cap vs the Fine. 2800M / 0.7M = 4000 times! That's like stealing $4,000 and when caught, being fined $1. Wow! That's really "hefty". Of course, he's not the only guilty person, and there's possibly bigger fishes to fry in this TRANMIL saga, but let's see how badly the bigger fish gets "fined".
I'm sure this $1 fine is going to really discourage future CFO's from ever doing this again. Just like I believe cows can fly too ...
Sigh!
Seng.
Also, this comment.
"“There is a BIG BREAKTHROUGH (my capitalize) in the actions of regulators when policing corporate governance. In the past, limited policing and action were barriers to getting real corporate governance improvement,” he said in a statement released here yesterday in conjunction with the forthcoming 4th Asia Pacific Audit & Governance Summit (APAGS).
"
I suppose "Big Breakthrough" is relative, although I personally measure "breakthrough" in terms of "how much of a deterrent is it in future".
Can we honestly say that this $700k fine is going to be a real deterrent in future, that we can be reasonably confident that there won't be another such "white collar" crime? (Yes, in my own mind, it is a white collar crime even though the courts haven't yet convicted the guy).
Seriously ... I really doubt this is a deterrent when the Payoff is 4,000 times larger ...
So, I personally disagree with that view that it is a "big breakthrough". At best, I would describe it as a "small improvement in the right step, but clearly, not enough is being done".
Seng.
if robbers are sent to jail for 10s of years for their 'deed' , then these lot deserved the same too.. oh, no special treatment, let them mingle with those other prisoners, eating the same food, sharing the same showers... you know what i mean... let see how they'll like it in there
Very good observation.
What intrigues me is why isnt there any shareholder derivative action.
What happened to the minority shareholders.
Transmile is just the tip of the iceberg.
Take a look at Megan Media, Multicode Electronics, BIMB, RHB etc.
The same shit keeps happening - for a short will - big hooo haa after that everyone forgets.
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