This article first appeared in The Edge Financial Daily on June 21, 2019 - June 27, 2019
KUALA LUMPUR: Transmile Group Bhd founder and former chief executive officer (CEO) Gan Boon Aun claimed that then chief financial officer (CFO) Lo Chok Ping confessed that he had overstated the air cargo operator’s revenue for the financial year ended Dec 31, 2006 (FY06) in a private meeting between the two on May 8, 2007, and Lo requested Gan to call for a board meeting the next day.
The private meeting was held four days after the board was informed by the company’s external auditor Deloitte & Touche that it was not able to have relevant supporting documentation from the management of certain transactions relating to trade receivables and related sales.
Transmile told Bursa Malaysia on May 7, 2007 that the board had concerns about the reliability of the unaudited consolidated results that were released on Feb 15, 2007 after it received a letter dated May 4, 2007 from Deloitte & Touche.
In short, Gan claimed that he did not know about the cause of the accounting irregularities until Lo confessed to him.
In the cross-examination by Deputy Public Prosecutor Mohd Hafiz Mohd Yusof yesterday, Gan said the private meeting with the CFO was when he found out for the first time that the accounting irregularities had happened in Transmile’s FY06 accounts.
Gan said he did not reveal Lo’s confession to any of the board members until the board meeting on May 9, the day after the private meeting. Lo confessed to the board members his wrongdoing in the meeting.
Mohd Hafiz asked Gan why he as the CEO allowed Lo to take long leave between March and May 2007, the critical time when Transmile needed to iron out the accounting issues.
“He told me he had some family problems [to settle],” Gan replied.
It was also revealed that Lo had met with Deloitte & Touche before the board meeting on Feb 15, which was the day the unaudited accounts for FY06 were filed with Bursa. Details of Lo’s meeting with the external auditor were not disclosed.
To recap, in July 2007, Gan, Lo and former executive director Khiudin Mohamed were charged with abetting the company in making a misleading statement to Bursa in its quarterly report. The trio claimed trial.
The Securities Commission Malaysia withdrew the charge against Lo in May 2008 after he paid a compound of RM700,000, while Khiudin was acquitted of the charge in 2016.
The charge was related to a statement on the group’s revenue of RM338.4 million for the fourth quarter of FY06 and RM989 million for the entire FY06. However, a special audit revealed that the company only earned a revenue of RM656 million for the full year and suffered an annual loss of RM126 million.
For FY06, the air cargo operator’s losses were RM126.3 million instead of a profit of RM157.5 million as reported, and for FY05, its losses were RM369.6 million instead of a profit of RM84.4 million.
After a tumultuous chain of events, Transmile was categorised as a Practice Note 17 company in 2010, and was then suspended and delisted from Bursa in 2011.
The court proceedings for Transmile’s accounting scandal, which happened over 10 years ago, were adjourned by Sessions Court Judge Hasbullah Adam yesterday, and will resume on Oct 22 and 23.