Kamdar: "It's a messy family affair" (2)

I wrote about the Kamdar Group before. The special investigative audit has been completed and the results have been announced.


The Special Auditors have found that there were four non-business withdrawals transactions amounting to RM 8,842,306 effected from KSB’s bank accounts from 23rd March till 26th March 2005 by two individuals who were former officers of KGMB.

1.  RM 2,420,000 was on 23rd March 2005 withdrawn by way of a cash cheque that was encashed by two individuals.

2. RM 5,762,306 was on 23rd March 2005 utilized to purchase a bank draft for the purpose of purchasing 4,801,920 shares in KGMB from the under-subscribed portion of the shares offered for sale during the listing. These were bought in the name of a third party who claims to be a proxy for one of the individuals. When the shares were sold thereafter the proceeds were given to one of the individuals.

3. RM 580,000 was on 25th March 2005 paid by cheque to the one of the individuals for non KSB business purposes.

4. RM 80,000 was on 26th March 2005 transferred directly to the second individual’s account from KSB’s account by way of internal transfer advice. It was repaid on 11th January 2011. This was an unauthorized payment and could amount to an unauthorised loan.

All the cheques and instructions for the above transactions were signed solely by the same individual.
Several shareholders advanced a sum of RM 8,763,089 to KSB from 28th March 2005. There is no conclusive proof as to what these advances were for.

The Special Auditors concluded that in the General Ledger of KSB, the above transactions were wrongly recorded and the financials were misstated to indicate that they were loans taken by a former director and were subsequently set off by the advances from the shareholders.

MATERIAL IMPACT ON FINANCIALS
The Special Auditors are of the opinion that whilst there is no impact on the profitability of the company, the Balance sheet for that particular and subsequent years should have reflected these as :-
Assets : Amount due from Director / Other Receivables – RM8,842,306
Liability : Amount due to Shareholders –RM 8,763,089


The above does not sound good. First of all, it all sounds terribly messy, unworthy of a listed company. Secondly it begs the question why it took eight years to uncover all these facts. Thirdly, while it looks like the asset and liability roughly cancel each other out, there might still be a problem for the Kamdar Group in collecting the amount due from Director.