Investors' interests should be above directors' interests

 

If one does a search on Google for “Serba Dinamik”, the results can be mind-boggling because a long list of choices appears. Among others, there’s “Serba Dinamik fined”, “Serba Dinamik KPMG”, “Serba Dinamik directors”; but the one which takes the cake is “Serba Dinamik scandal”.

The issue has resulted in several police reports and has drawn in two of the “Big Four” accounting firms, the listing body, the regulator, financial institutions, the Attorney-General’s Chambers and a battery of lawyers. Perhaps, the only ones who have been spared (for the moment at least) are the prime minister and his cabinet.

There’s enough material from various authoritative bodies, news reports, and even the company itself, which covers a gamut of information on governance - or rather the lack of it.

This involves the public-listed entity - Serba Dinamik Bhd, which over the past few months has been making headlines for all the wrong reasons.

Take this April 7, 2022 report from The Edge: “ …. the authority found 59 company and personal stamps of external parties in a box, according to court documents.

“Some of the stamps were from prominent companies such as Malaysia LNG Sdn Bhd, Petronas Gas Bhd, Petronas Carigali Sdn Bhd, Petronas Methanol (Labuan) Sdn Bhd, Petronas Chemicals Methanol Sdn Bhd, Petronas Refinery and Petrochemical Corp Sdn Bhd, Petronas Chemicals Ammonia Sdn Bhd, Sarawak Shell Bhd, Petronas Chemicals LDPE Sdn Bhd, ExxonMobil Exploration and Production Malaysia Inc, Petronas Carigali (Turkmenistan) Sdn Bhd, Petronas Chemicals Derivatives Sdn Bhd, Sabah Shell Petroleum Co Ltd, Shell MDS (Malaysia) Sdn Bhd, PRPC Utilities and Facilities Sdn Bhd and Shell Cyberjaya.

“Bursa Malaysia Bhd chief regulatory officer Julian Mahmud Hashim in his affidavit in the case against Serba Dinamik says, ‘Premised on the above observations, there is a question as to the rationale for Serba Dinamik to have in its possession company stamps of external parties. Further, depending on the circumstances surrounding the use of these company stamps, then the above could lead to concerns on the veracity of the (company’s) transactions.”

Julian’s proclamation in a legally drafted document says many things. It does not take a rocket scientist to infer that these stamps were being used for sinister reasons.

The affairs started innocuously last August with the company’s auditors, KPMG stating that they were unable to reconcile and confirm certain financial statements. As required, these discrepancies were reported to the authorities.

This prompted the appointment of yet another auditor - EY Consulting - to undertake an independent review by which time, the regulator, the Securities Commission (SC), stepped in.

Slap on the wrist

Following intense investigations, the SC charged four top executives in December last year for fraud - submitting a false statement involving revenue of RM6.01 billion for its financial period ended Dec 31, 2020.

The four individuals were chief executive officer and group managing director Mohd Abdul Karim Abdullah; executive director Syed Nazim Syed Faisal, who was chief financial officer (CFO) from June 2016 until mid-2020; its current group CFO Azhan Azmi, and vice-president of accounts and finance Muhammad Hafiz Othman.

Syed Nazim Syed Faisal

But the company’s lawyers (and the officers) made a representation to the attorney-general - who had given consent to the SC to charge the four in December - reversed his decision on April 7 and directed that the offences be compounded.

Subsequently, the SC imposed the maximum fine allowed - RM3 million on each of the four individuals and another RM1 million on Hafiz for falsifying the accounting records of a Serba Dinamik subsidiary.

The murmurings that followed were fathomable - how and why should such serious offences be compounded, given their gravity, especially over allegations of falsifying financial statements.

The case, said to be the biggest corporate fraud by a company listed on Bursa Malaysia, and the AGC’s decision was questioned by corporate and investor groups like the Malaysian Institute of Corporate Governance (MICG) and the Minority Shareholders Watch Group (MSWG).

Then in yet another expected turn, SC executive chairperson Syed Zaid Albar resigned and appeared to make a reference to the AG’s decision when his statement said the regulator’s integrity and professionalism had been put to numerous tests during his three-and-a-half-year tenure.

Syed Zaid was appointed in October 2018, and his contract was renewed for another three years just six months ago. A day after Syed Zaid resigned, three other top SC officials resigned - a managing director and two executive directors.

Even before the investing public could digest the reasons for their departures, the whole issue took a nasty and dangerous turn.

Mudslinging

Over the weekend, a video clip lasting a little over two minutes began circulating on social media. It was broadcast by hitherto an unknown TV station called “7.57”, which made serious and unscrupulous accusations with racial undertones against Syed Zaid and the SC.

Perhaps aimed at the bumiputera community, Syed Zaid bore the brunt of the attack and, among others, was described as “not a Malay” and that SC is not helping Malay companies.

But SC and other regulatory bodies were set up to protect the interest of the investing public - not any company or bumiputera companies. Its primary duty is to ensure compliance with all laws so that shareholders in public-listed companies don’t get short-changed.

The adage that “you do the crime, you do the time” is applicable to all and sundry and the much overused cliché - no one is above the law - has been the cornerstone of decisions made by the SC.

But there was yet another twist to this whole episode when the people behind that TV station were identified.

Searches on the Companies Commission of Malaysia website show that the station is owned and operated by Awesome TV Media Network Sdn Bhd, whose directors include two former directors of Serba Dinamik - Mohd Ilyas Pakeer Mohammed and Johan Mohammed Ishak.

The other directors are Ezzani Zailah Zulkfadzli, popular singer DJ Dave and Ilyas’ son Adam Mohamed Ilyas.

This again should raise eyebrows and discussions in the business and legal communities. If interested parties were behind the vicious attack on Syed Zaid - as a professional whose task was to ensure the laws of the land were complied with, then the full brunt of the law must be applied.

Malaysiakini understands that a police report has been made on these scurrilous attacks just as a report was made on similar attacks on the judiciary last month.

The police owe a duty to the public to carry out thorough investigations to bring to book the perpetrators and protect the integrity, independence and honour of the people behind established systems in this country who make important decisions to protect the interests of all Malaysians. - Mkini

---

R NADESWARAN is a veteran journalist and writes on bread-and-butter issues. Comments: citizen.nades22@gmail.com

The views expressed here are those of the author/contributor and do not necessarily represent the views of MMKtT.