Tuesday, October 12, 2010

How Much Fine For Cooking Your Books?

18th Feb 2008, on Business Times

  • SC may take legal action against parties involved

    By Francis Fernandez Published: 2008/02/18

    The regulator says the probe into the issuance of Welli Multi's 2005 and 2006 financial reports that contained false information is in the advanced stages

    THE Securities Commission (SC) may take legal action against those who cooked the books at Welli Multi Corp Bhd.

    An SC spokesperson said that the regulator does not consider the matter closed just because Welli re-issued its financial reports.

    "Investigations into the parties responsible for the issuance of the company's 2005 and 2006 financial reports that contained false information are in the advanced stages.

    "Appropriate enforcement action will be decided upon completion of the investigations," the SC spokes-person wrote in an e-mail to Business Times.

    It is understood that initial investigation revealed a number of bankers acceptance notes were issued by the company to "questionable" companies.

    Last June, Welli was told to withhold releasing quarterly accounts and the annual audited accounts for the period to March 31 2007. This was to verify the authenticity and recoverability of some RM113 million worth of trade receivables.

    The Penang-based palm kernel processor, listed on the second board, was instructed to rectify and re-issue its accounts.

    Last Friday, Welli re-issued its accounts up to the period ended December 31 2006, reporting a net loss of RM17.61 million.

    Net assets per share for the period under review stood at 50 sen a share versus 70 sen a share before.

    It has until March 15 to issue financial accounts for the remaining quarters.

    Welli's managing director Datuk Abdul Ghani Ali Kadir told Business Times that he had been interviewed by the SC, but he declined to speculate on their intentions.

    Abdul Ghani, who was appointed as executive chairman and managing director of Welli in September, is not being investigated.

    In November, Abdul Ghani bought 16.06 per cent of the company from controlling stakeholders, the Ang brothers, who represented the interest of Ang Sun Beng, Ang Soon An and Ang Sun Tiong

    Abdul Ghani, who is currently in South Korea, is heading a team to "rescue" Welli from its current predicament.

    "I believe in the business. It is in a very good industry, but we will have to tweak the operations and have proper check and balance mechanism in place," said Abdul Ghani.

16th April 2008, on Business Times:

  • Charged with cooking books

    Published: 2008/04/16

    The Securities Commission says two former Welli Multi directors, the Ang brothers, falsified company accounts in the 2005 annual report and quarterly reports for 2006

    THE Securities Commission has charged two former directors of Welli Multi Corp Bhd with falsifying company accounts, about 10 months after it first took action against the palm kernel crusher.

    The regulator has sued Ang Sun Beng, 62, the former managing director of Welli and his younger brother Ang Soon An, 58, who was also a former executive director.

    "Upon conviction, the accused persons are liable to a fine not exceeding RM3 million or to imprisonment for a term not exceeding 10 years, or both," the SC said in a statement released yesterday.

    They were charged with falsifying accounts in its 2005 annual report where Welli posted a revenue of RM573 million and a net profit of RM5 million.

    They were also charged with manipulating the numbers for the first three quarters of fiscal 2006, which ends on December 31.

    In addition, the SC has fined Welli's former executive director and chief executive officer, Tan Chin Han, RM100,000 for authorising the submission of the 2006 third quarter accounts.

    The Ang brothers have claimed trial to the charges.

    Judge Rozana Ali Yusoff imposed bail of RM150,000 with one surety on each of them and ordered them to surrender their travel documents. She fixed May 9 for mention.

    In February, the SC told the Business Times that it may take legal action against those who cooked the books at Welli. It had said that investigation was at an advanced stage.

    Initial investigations revealed a number of bankers acceptance notes were issued by the company to "questionable" companies.

    In June 2007, Welli was told to withhold releasing quarterly accounts and the annual audited accounts for the period to March 31 2007.

    This was to verify the authenticity and recoverability of some RM113 million worth of trade receivables.

    The Penang-based palm kernel processor, listed on the second board, was instructed to rectify and re-issue its accounts.

    Welli then re-issued its accounts up to the period ended December 31 2006 in February this year, reporting a net loss of RM17.61 million.

This is the Star Business version: SC queried Welli over unusual market activities

  • PETALING JAYA: Welli Multi Corp Bhd, whose former managing director (MD) and executive director (ED) were charged yesterday for providing false information to the regulators, had been queried by the Securities Commission (SC) several times over the unusual market activities and its string of proposed acquisitions.

    Following the SC’s move to charge former MD Ang Sun Beng and ED Ang Soon An, the company issued a statement saying that the brothers ceased to be directors on April 9 and Nov 22 last year respectively.

    Welli said the brothers had also ceased to be substantial shareholders since March 26.

    The company had on several occasions sought Bursa approval for time extensions to release its financial results. It had on Dec 6, 2006, sought to delay the release of the financial results for the quarter ended Sept 30, 2006. When it released the results on Feb 28, 2007, it reported a net profit of RM375,000. However, when the results were revised and released on Feb 15 this year, there was a net loss of RM5.01mil instead

    Welli had also sought extensions to submit the reports for the quarters ended June 30, 2007; Sept 30, 2007; and Dec 31, 2007. It also sought for delays in submitting the audited financial statements for the period ended March 31, 2007.

    However, on April 8 this year, Bursa rejected all the extensions.

    Last year, while Welli was delaying the release of its results, its share price saw heavy speculative trading from May to June. The stock surged from 92.5 sen on May 16 last year to RM3.32 on May 29, a whopping 258%.

    On May 18, in response to a Bursa query, Welli said it was in discussion with a food company for a possible tie-up to expand and grow its businesses. This announcement sent the share price rallying, prompting a warning from Bursa on May 22 that it would not hesitate to take appropriate regulatory action to ensure fair and orderly trading of Welli shares after the run-up in the share price.

    It hit a 52-week high of RM3.32 on May 29 before tumbling to RM1.11 on June 3. On June 26, the SC ordered the company to withhold the release of its results as the authority had received information questioning the authenticity and recoverability of 84% or RM113mil of its trade receivables of RM135mil as at Dec 31, 2005.

    Welli is involved in processing copra and palm kernel, foodstuff and also provided computer software consultancy services. Over the past two years, it had also announced a string of deals, ranging from a plan to build the world’s largest, state-of-the-art halal gelatine plant, which was later dropped.

    It also announced in July last year that it had entered into a heads of agreement with the government of Inner Mongolia to develop halal beef and major infrastructure like mining, toll roads and power generation.

    It also said it would acquire a stake in China’s Chi Feng Dadi Basic Industry Co Ltd, which is listed on the Shenzen Stock Exchange.

    It closed 0.5 sen lower to 30.5 sen yesterday.

So the brothers ceased to be shareholders since March 28th. (Anyone interested in doing the audit in how much they got from disposing their shares? Check Bursa links below)

Remember in 2008, SC made the following statement:

  • "Upon conviction, the accused persons are liable to a fine not exceeding RM3 million or to imprisonment for a term not exceeding 10 years, or both," the SC said in a statement released yesterday.

On today's Business Times.... judgement day.

  • 2 former Welli directors convicted

    Published: 2010/10/12

    WELLI Multi Corp Bhd former managing director Ang Sun Beng and former executive director Ang Soon An were convicted in the Kuala Lumpur sessions court yesterday for furnishing the Securities Commission with misleading sales information.

    In a statement yesterday, the SC said both executives had furnished RM141 million in fictitious sales in its audited financial statement for the year ended December 2005.

So how much were they fined?

  • At the Sessions Court yesterday, judge Rozana Ali Yusof sentenced each of the accused to one day’s jail and a fine of RM400,000 in default of one-year imprisonment.

One day's jail and a fine of RM 400,000!

They cannot be serious!? Can they?

Posted on Saturday: Lack Of Punishment For Corporate Crimes!

On Star Business: Too little punishment for too much

Several points to highlight:

  • Now, the scale of the offence becomes much clearer. Ngu used RM15.5mil to finance his purchase of shares in Pancaran Ikrab and caused RM37mil to be transferred out of the company, making in all a massive RM52.5mil.
    And all he got was a day’s jail and a fine of RM2mil. Why? And there was nothing said about restitution or return of the monies.

A day jail and a fine of 2 million for an offence worth rm 52.5 million???

Sigh!

With punishments like these, would we ever see the end of corporate crimes? Yeah, how are we going to stop corporate crimes?

Star Business had a slightly longer coverage: Former Welli Multi directors convicted

  • Brothers jailed one day and fined for false reports

    PETALING JAYA: Two former board members of Welli Multi Corp Bhd, a food manufacturer, was convicted by the Kuala Lumpur Sessions Court yesterday for falsely reporting sales in the company’s audited financial statement for the year ended Dec 31, 2005.

    Judge Rozana Ali Yusof sentenced each of the accused, who are brothers, to one day jail and a fine of RM400,000 in default of one year imprisonment.

    The brothers pleaded guilty to the charges and were convicted under the Securities Industry Act 1983 together with three other charges that were taken into consideration in the sentencing.

    The Securities Commission (SC) said in a press release that the two, Ang Sun Beng, 64, a former managing director of the company, and Ang Soon An, 60, a former executive director and member of Welli Multi’s audit committee, had furnished misleading reports which consisted of over RM141mil in fictitious sales for that financial year.

    “The misleading statement which was released to the market, made a significant impact on the market price of the company,” the SC said.

    It added that the company’s share price dropped 43% after news of the statement became known to the public in 2008 following a restated financial statement for 2005.

    Welli Multi was then listed on the second board of Bursa Malaysia but changed its name to Energreen Corp Bhd in November 2008.

    Energreen was delisted from the stock exchange on Aug 17, 2009 after Bursa Securities found that the company’s financial condition and level of operations did not warrant continued trading or listing





-------------------

Here's two interesting articles in 2007.

From the Edge:
  • 8 Oct 2007: Corporate: What's going on, Welli?
    By Cindy Yeap

    If anything, investors scoot at the mere mention of "accounting irregularities". Another phrase that elicits similar behaviour is "suspect receivables", especially after what auditors unearthed at Transmile Group Bhd.

    Yet, it seems, investors have made an exception of Welli Multi Corp Bhd. Its share price has held firm over the last three months although the Securities Commission (SC) is investigating the authenticity of RM113 million or 84% of its RM135 million trade receivables for FY2005. This works out to RM1.31 per share.

    Also ignored is the fact that Welli's CEO resigned in the middle of last month after less than four months in the post. Then, there's the fact that Welli has not presented its unaudited quarterly accounts for four quarters (the last unaudited results it released were for the quarter ended Sept 30, 2006) as well as last year's audited accounts. Its reason? There was a fire in its administration department last November.

    Amazingly, there was a spike in the stock's price and volume early last week. The counter rose 17.5 sen or 18% to RM1.14 last Tuesday, with 22.5 million shares traded.

    An SC spokesperson tells The Edge that Welli had until last Friday to reply to a show-cause letter sent to the company "with regard to the discrepancies in its financial statement for the year ended Dec 31, 2005, and quarterly reports for March 31, 2006, June 30, 2006 and Sept 30, 2006".

    "The SC's investigation into Welli Multi Corp is ongoing… Other actions against the company may follow, depending on the outcome of our ongoing investigation," the spokesperson adds.

    The credibility of Welli's books is not the only thing in question here. While the SC had the foresight in June to bar the company from issuing any other financial statements until the regulator had ascertained previous numbers were accurate, that order has not stopped potentially misleading information from being disseminated. At the same time, there has been a slew of board changes at Welli.

    Let's not even go into the number of HoAs (heads of agreement) and MoUs (memorandums of understanding) that have been signed over the past few months, and the rather "suggestive" statements that found their way to the local press. An example: Hadhari Cattle Industry Sdn Bhd offering RM1.50 a share for a 19% stake in Welli, owned by the Ang family led by Ang Sun Beng.

    Whether or not this "leak" was intentional, Welli's share price, which had closed at RM1.05 prior to the speculation, jumped to RM1.61 on July 5. It was only when Welli replied to a Bursa Malaysia query that it became publicly known that HCI's offer for the 19% stake was off. Welli said the two parties could not agree on terms.

    The thing about the revelation is that it came only after Bursa made a query based on a news report.

    Minority shareholders would have benefited if Welli had explained why CEO Abdul Rashid Tang Abdullah left the company and elaborated on the status of its plans to build the world's largest halal gelatine plant with HCI. Abdul Rashid owns 35% of HCI. Moreover, he is on record as saying that he accepted the CEO's post at Welli because he believed its books were clean.

    While the letter of the law does not require a company to provide a reason for its CEO's resignation, a board with its minority shareholders' interest at heart would have provided some details.

    Instead, Welli only announced that it had elevated chairman Datuk Abdul Ghani Ali Kadir, 53, to group managing director. Abdul Ghani, who is also the executive chairman of Boon Koon Group, was formerly the executive secretary of Barisan Nasional Kedah and is said to be a long-time associate of Tan Sri Muhyiddin Yasin.

    Abdul Ghani's redesignation on Sept 17 came together with the appointment of two new independent directors — Datuk Seri Ibrahim Saad and Datuk Wira Jamaludin Abdul Rahim.

    It would be so easy to brush Welli Multi aside. It is a Second Board company with only RM90 million in market capitalisation. But the SC's probe shows that the regulator is serious about ensuring strict adherence to the law, and will wield the stick if necessary.

    Still, there is a need to ensure investors get accurate and timely information about what is going on at the company. If at all, Welli should inform its minorities why Abdul Rashid resigned, particularly since he had a promising story for the company

And...

  • 3 Dec 2007: Big Money: When the message is vague
    By Cindy Yeap

    Ever tried asking those who regularly read company announcements posted on the stock exchange's website how many are pleased with what they see? The announcements may pass muster most of the time but there are times when they are unambiguously vague.

    Really, there should be no need for reminders that announcements must be easily understood by the average investor and in sentences whose meaning cannot possibly be misunderstood. Public-listed companies should know they are required by law to do so.

    The Bursa Malaysia listing rules clearly state that a public-listed company's obligation does not end at making timely announcements. Companies must ensure their announcements contain "sufficient information" to enable investors to make informed decisions. They must also clearly state what effects the developments will have on the company, and explain why if it is unable to do so. In short, the content of an announcement is as important as its timing.

    Queries made by Bursa Malaysia officers do help make more information available. But even then, there are still companies that give vague replies to the stock exchange.

    Take, for instance, the announcement by Second Board-listed Welli Multi Corp Bhd last Tuesday. In a statement, Welli Multi announced that the Securities Commission (SC) had on Nov 27 instructed the company to rectify and reissue its financial reports within one month for four financial periods — being its audited accounts for the year ended Dec 31, 2005; as well as quarterly reports for its first, second and third quarter of its financial year ending Dec 31, 2006.

    The company did not specifically say why the SC had ordered the accounts to be reissued. All it did was cite six previous announcements. The six include one dated June 26 where the SC had instructed the company to withhold further issuance of its financial results pending the completion of the SC's investigation on alleged RM113 million in suspect receivables for FY2005, being 84% of its trade receivables of RM135 million for the period.
    The following day, Bursa Malaysia promptly queried Welli Multi, ordering the company to immediately release specific details of the required rectification to its accounts as ordered by the SC.

    Here's how Welli Multi replied in verbatim: "The SC has via its letter dated Nov 27, 2007, instructed the company to rectify and reissue the following financial reports by excluding the following figures from group revenue: (a) audited financial statements for the year ended Dec 31, 2005, with exclusion of RM141,272,866; (b) quarterly report for the quarter ended March 31,2006, with exclusion of RM40,361,892; (c) quarterly report or the quarter ended June 30, 2006, with exclusion of RM45,076,031; (d) quarterly report for the quarter ended Sept 30, 2006, with exclusion of RM86,791,804. The board of directors wishes to advise that the aforesaid exclusion is subject to the auditors' verification."

    Put simply, Welli Multi is saying the SC has found mistakes in the company's revenue in its latest three quarterly earnings announcements as well as in its latest audited accounts and has ordered corrections be made.

    The obvious questions here to an investor are, what impact the reduction would have on the company's book and why the SC ordered the changes. Then there's the question of whether Welli Multi agrees with the SC's findings and whether there are still grounds for dispute. There's no question as to whether these pieces of information are material.

    Even if Welli Multi had been given one month to make the changes and may have planned to give a lengthy explanation after the changes have been made, there's still no excuse for not stating clearly that the changes may result in the company making a loss. If one were to reduce RM141.27 million from Welli Multi's revenue for FY2005, its revenue will be reduced to RM431.26 million, which is less than the reported RM550.7 million in cost of sales. Furthermore, the amount of alleged misstatements is twice the size of Welli Multi's market capitalisation.

    But at press time, there were no subsequent announcements on the matter. The SC, too, had not made any statements on the status of its investigations on Welli Multi's accounts.

    It's regrettable that such a state of affairs is now new. Incidentally, Welli Multi had made another one just the week before. On Nov 21, Welli Multi said three of its main shareholders — Ang Sun Beng, Ang Soon An and Ang Sun Tiong — had agreed to sell a 16% stake in Welli Multi to the company's group managing director Datuk Abdul Ghani Ali Kadir. It did not say at what price the share sale was agreed at nor did it say why two of the Ang brothers, both executive directors of the company, had subsequently resigned. It also did not say if the Ang brothers had any shares left after the sale.

    When asked, a Bursa Malaysia spokesperson said the regulator did not find it necessary to query Welli Multi on the announcement pertaining to the share sale agreement because the company has two weeks from the change in shareholding to make an announcement. If you were an investor of company X and company X made the same announcement Welli Multi did, would you not think the price at which the share sale had been agreed upon is material information?

    Welli Multi was only queried by Bursa Malaysia three days later after it was highlighted in the media that Abdul Ghani had agreed to pay RM1 a share for the 16% block. Still, the company did not say how the price — which at the time represented a 40% premium to market — was agreed upon. Bursa Malaysia had also asked Welli Multi to state the effect of the agreed share sale on those involved.

    The Welli Multi announcements illustrate that much more needs to be done to ensure that all investors get the information they need to make informed investment decisions. The regulators play a great part in ensuring that all public-listed companies toe the line. After all, it's an age-old saying that mice will play when the cat is away — or asleep.
at

1 comment:

  1. solomon8:08 PM

    Netted RM50 million?? Maybe sell more cooking oils.....kua??

    Maybe the regulator, SC must also monthly report all the status of the reported suits in their website?? Old folks like us have short memory but we still know the past....

    ReplyDelete