Xian Leng: justice?

I have written several times about Xian Leng, for instance here and here.

The company announced today the below.

I just ask the readers one question: "is this justice?". I am speechless.


Reference is drawn to the abovementioned suit which came up for trial on 17 November 2014, the Board of Directors wishes to inform that pursuant to the proposals letters issued by the Defendants dated 11 November 2014 and 12 November 2014, a consent order had been recorded before the Muar High Court Judge i.e. Dato’ Haji Zainal Azman Bin Abd. Aziz, wherein the terms of the said Consent Order are as follows:

1.The 1st and 3rd Defendants pay jointly a sum of RM500,000.00 to the Plaintiff without admission to any liability whatsoever and not compensatory in nature;

2.The said sum of RM500,000.00 must be fully paid by the 1st and 3rd Defendants to the Plaintiff on or before 1 December 2015 either by way of progressive payments or lump sum payment;

3.The Plaintiff withdraws the suit against the Defendants without any order as to costs and without liberty to file afresh.

The Board of Directors also wishes to inform that the following legal opinions were given by our legal adviser, Krish Maniam & Co. in their letter dated 13 November 2014:

1.The evidence is still has gaps which insufficient to complete the entire picture and present it before the court as a complete cause of action;

2.The trial and subsequent appeal processes may take years to complete. By the time the recovery process is to commence, the Defendants could have already become financial unstable and / or bankrupt. In addition, the 2nd Defendant’s health has deteriorated of late after suffering a stroke in September 2013;

3.There is a risk that at the end of the trial when assessment of damages is carried out, Company may not even be able to recover any significant amount of money;

4.The Honourable Judge had from time to time reminded counsels for the Defendants and Plaintiff that the matter is resolve amicably as the Plaintiff Company is an on-going concern and ought to concentrate on restructuring and rebuilding itself.

After perusal through the legal opinion, majority of the Board member in the meeting held on 13 November 2014 agreed that the Company should take this opportunity of moving forward and concentrating on making the Company stronger and profitable, thus accept the proposal set out by the Defendants and record consent before the High Court Judge.

Update on 4 alleged fraud cases

[1] Silver Bird announced its results, sales is falling of a cliff, it can hardly book a gross profit. The only positive thing I noticed is that its Loss After Tax can be remembered easily: RM 11,111.


[2] Xian Leng announced its results, its operations have fallen to a pathetic level, I don't think it would even have been allowed on the ACE market with those tiny sales, RM 5M for the half year resulting in a loss of RM 1.5M.


[3] Genneva Malayisa; The Star wrote: "Six Genneva personnel slapped with over 900 money laundering charges".

"Six personnel from gold investment company Genneva Malaysia Sdn Bhd and another company have been slapped with 926 charges of money laundering, making false statements and illegal deposit-taking involving RM5.5bil.

Genneva received the RM5.5bil from 35,000 depositors.

Its directors Datuk Philip Lim Jit Meng and Datuk Tan Liang Keat faced 246 and 226 counts of money laundering respectively; business advisers Datuk Ng Poh Weng (155), Datuk Marcus Yee Yuean Seng (17), Datuk Chin Wai Leong (23), and general manager Lim Kah Heng (16)."


The size of the amount (RM 5,500,000,000.00) the number of key people involved (six directors/managers and 35,000 depositors) and the charges (926) are simply breath taking. Why did it have to come so far, should the regulators not have ended this scheme a long time ago?

From Genneva's website: "Preserving Values, Leaving a Legacy".

Values are definitely not preserved (more like the opposite), but the company will definitely leave a legacy, although "somewhat" different from what its clients envisioned.


[4] SJ Asset Management; No recent news regarding SJ Asset Management or its manager Tan Whai Oon.

According to this website, Tan Whai Oon (on the left in the picture) looks like this these days:

He seems quite happy, probably more happy than his previous clients.

According to this article from The Star:

"Tan, also known as Jigme Phende, has been on the run since the end of June 2010 after his fund management company had run into trouble, the result of Tan being investigated initially by the Securities Commission (SC) for charging his clients high commissions.

The managing director and 70% shareholder of SJAM is rumoured to have gone into hiding in Nepal, and his last location was tracked to a monastery called Gyalwang Drukpa in Kathmandu, the country's capital."

Is there a extradition treaty between Nepal and Malaysia?

More shocking from the same article:

".... a senior finance executive of the company spilled the beans on the accounts that have apparently been cooked since 2001."

Why did it take almost 10 years before action was taken against the asset management company?

A simple search for "LinkedIn" and "SJ Asset Management Sdn Bhd" reveals many people who worked with this asset management company. Did nobody notice anything wrong? That is hard to believe. Could they not have dropped a hint at the Securities Commission, if needed anonymously?

Here is a link to a court case between CIMB Investment Bank (whose clients had invested in the SJAM managed fund) and Ernst & Young (the accounting firm who performed the audits on the accounts of SJAM). The document shows (paragraph 8) that CIMB compensated its clients, good for the clients, but not good for the shareholders of CIMB who have to fork the bill.


Enforcement is rare and slow in Malaysia, and if VIPs are involved (like in some of the above, directly or indirectly), things often seem to come to a complete stop. Hopefully we will soon get some much needed justice and transparency in the above cases. Not only against the perpetrators, but also to other people who have been sleeping on the job, like auditors, advisors, etc.

Xian Leng, why is still no action taken?

In 2011 investors in Xian Leng were rudely surprised by news of large financial irregularities. I have posted several times about this company.

Key findings were reported by PriceWaterhouseCoopers Advisory Services, the major findings were reported here.

We are now almost two years further and still no action has been taken. KiniBiz wrote about the company recently. Some snippets:

• Chin Seak Huat ceased to be a substantial shareholder in beleaguered ornamental fish breeder Xian Leng Holdings Bhd, after selling 1.45 million shares or two percent equity interest in the company.
• It noteworthy that Chin was instrumental in the special audit on Xian Leng by PricewaterhouseCoopers Advisory Services (PwC) last year, which implicated Chua Bah Bee @ Chua Chong Seng— the brother of MCA president Chua Soi Lek— in the siphoning out of RM85.7 million, set aside to build ponds at Xian Leng.   
• Xian Leng after all has turned out to be a political minefield with many parties uneasy with the findings of PwC.
• While many investigations have commenced, no action has yet to be taken.
• Whether the authorities take any action is taken at Xian Leng remains to be seen, with most of them evasive when questioned.

Hopefully we can soon witness some much needed, tough and transparent actions by the authorities.

The following video is from 2007, when all still looked good.

 

 

On 2:47 one can hear Chua Chong Seng saying:

 

"Sound fundamental of the company .... we are the cautious, prudent, fundamental company .....".

 

The fraud had started already and the Company would book six straight years of losses. 

Xiang Leng: Police confirm probe into Chua Soi Lek's brother

Article from Malaysia Today, orginally from MalaysiaKini:

Police have confirmed that it received a report concerning an alleged corruption case involving MCA president Chua Soi Lek’s brother Chua Chong Seng.

In a text message to Malaysiakini, Criminal Crimes Investigation Department chief Syed Ismail Syed Azizan said the report was lodged on Friday.

He added that a team from the department has begun investigations into the matter but has not classified the case under any section of the Penal Code yet.

According to The Edge, ornamental fish breeder Xiang Leng Holdings Bhd in a special audit had failed to account for RM90.7 million in capital expenditure between 2005 and 2008.

The report said three former directors including Chong Seng were signatories of cash cheques amounting to RM85.7 million given out under questionable circumstances to four contractors for the construction of fish ponds and another RM5 million was paid out to 52 other contractors.

The other two signatories are former managing director Ng Huan Tong and his wife, Lim Wan Hong.

The report added that the cash cheques were made through a licensed moneychanger company which is 80 percent owned by Chong Seng, but he did not disclose them to the company.

According to a filing with Bursa Malaysia by the company, it said the issuance of huge sums of money through cash cheques was against the company’s financial manual and there was a lack of corroborative evidence that the amount was ever paid to the contractors.

Xian Leng: "boxes of cash"

In my previous article about Xian Leng I was rather worried about the pretty vague and indecisive announcement made by Xian Leng to Bursa Malaysia. Most likely Bursa was not happy at all about how things were proceeding, held a meeting with members of the Board of Directors of Xian Leng, upon which the following announcement was made. This is already much more concrete than the previous announcement, with a clear list of preemptive and corrective actions that will be considered and (hopefully) undertaken.

It is good that Bursa Malaysia chases the Board of Directors, although the Managing Director, his wife and Chua Chong Seng have resigned, the Managing Director is still the majority shareholder.

An article in The Star of today reveals more fishy matters:

What puzzled those who have read the auditor's report would be Chua's seemingly cavalier attitude to money. In two interviews with the auditors, he said boxes of cash were left in the office on Ng's instructions to pay the four contractors.

Chua claims not to know what happened to the cash after it was passed over to two employees in the accounts department which, according to Ng, should have been passed to the relevant contractors.

The auditors noted that although payment vouchers for the contractors were signed and receipt of payment have purportedly been acknowledged, neither Ng, Lim or Chua as well as Xian Leng's accounts personnel could confirm the identity of the persons who signed on the payment vouchers.

Furthermore, the circumstances surrounding the four contractors' getting the projects for the development of the fish farms seems fishy. The auditors said there were no written contracts entered into with the contractors, who only issued invoices stating the work done in broad terms.

They said no tenders or competitive bids were called before the four contractors were appointed since there was no such company policy while Ng said he was the only one involved in engaging the contractors due to the sensitivity and security surrounding the arowana breedstock.

Checks with the Companies Commission of Malaysia by the auditors showed that the contractors were all registered as sole proprietorships with three of the contractors issuing invoices after their business registrations had expired with no subsequent renewal.

The auditors have not been able to contact the contractors, one of which has passed away while the whereabouts of two others were unknown. Another has been hospitalised while one Abdul Razak, said to be the main contractor who brought the other contractors to work on the fish farms, have not been contactable.

A troubling sign which the auditors noted was that a “finance manual” adopted by the company in January 2003 listing down policies and procedures was never tabled to the board nor the audit committee.

Besides this, the external and internal auditors of Xian Leng did not inform the board nor the audit committee of the issuance of cash cheques.

Xian Leng: "fishy payments"

Xian Leng has made an announcement to Bursa Malaysia regarding the special audit. The article from The Edge Malaysia, about which I wrote before, is largly confirmed. "Where is Ze Moola" also has written about the matter.

The announcement is pretty vague, and many questions still remain open: what exactly happened, by who, when, where, why and how?

The company has written of the amount of RM 86 million, but if that is really realistic, why did nobody notice the huge gap between the payments done (huge) and the value of the contract work (tiny)? Huge amounts of capital expenditure of many years have been (almost) fully written off.

How is it possible the checks and balances (internally and externally) failed so hopelessly?

And even about the follow up actions, the company is deliberating its next course of action. It better hurry, the payments where done 6 years ago, memories don't get better over time and proof might get destroyed (records of 2004 and before are already not available anymore).

Xian Leng is pretty small  for a listed company and the amount involved is relatively huge. I hope for some fast and decisive action, to bring some much needed justice to the minority shareholders.

Xian Leng: 90 million accounting issue (updated)

On April 3, 2012 the Managing Director resigned:

As the audit investigation on Xian Leng Holdings Berhad's Group capital expenditure by PricewaterhouseCoopers has come to the final stage, and couple with the deteriorating financial result of the Group for the past few years. I believe that it would be prudent for me to relinquish my position as the Managing Director of Xian Leng Holdings Berhad voluntarily on my own accord.

New developments in Xian Leng, as reported in a rather damaging article in The Edge of this week. The heading is "RM 90m accounting issue in Xian Leng", which is much more than previously estimated, "when it rains, it pours".

The following official announcement was made yesterday:

Reference is made to the article under the title “RM90 million accounting issue in Xian Leng” as appeared in page 18 of The Edge Malaysia dated 2 April 2012. The Board of Directors of XIANLNG wishes to announce that the investigation has yet to be completed and save as previously disclosed in our announcements, no authority has been given to any party for the disclosure of any information pertaining to the investigation. This announcement is dated 2 April 2012.

Looks like the report was leaked to the journalist of The Edge, but the contents are not denied. If the article of The Edge is indeed true, then things look pretty bleak for Xian Leng.

"A draft report by PricewaterhouseCoopers Advisory Services Sdn Bhd on ornamental fish breeder Xian Leng Holdings Bhd alleges that the company cannot account for as much as RM 90.7 million in funds utilised as capital expenditure between 2005 and 2008."

"According to the report, the board of directors was aware of a sum of RM 90.7 million allegedly spent on building large ponds, but it did not give its consent for the expenditure."

This sounds strange, they were aware of it, but didn't give its consent. Then why did they not raise the alarm? The amount of RM 91 million is huge.

"The accounts of Xian Leng Trading do not sufficiently explain the transactions with the four contractors as the cheques were not drawn in their favour. Instead they were drawn in favour of parties connected to the four contractors or to "cash" while the corresponding vouchers were made out to the four contractors". The cheques were allegedely made to a money changer, a company substantially controlled by an individual who was also a director of Xian Leng. The director resigned in August 2008". The director apparently could not account for the RM 37.7 million of the cash paid to the money changer. It is also worth noting that transactions with the money changer, which is a related-party transaction, had not been disclosed to the stock exchange and shareholders."

If this is true, then there are some serious issues regarding internal audit etc in the company. Large cash payments, payments to money changers, Related Party Transactions, all alarm bells should have been ringing. Why did it take so long before action was taken?

The alleged director involved must have been Chua Bah Bee @ Chua Chong Seng, a non-independent executive director and an accountant, since he is the only one who resigned in August 2008. He sold millions of his shares just before he resigned at age 63.

The auditors of Xian Leng are Ernst & Young.