Court of Appeal imposed jail term of 12 months and a fine of RM 1.3 million on Datuk Chin Chan Leong for market manipulation involving Fountain View shares, offence took place over a two-month period from November 2003 to January 2004 during which the price of Fountain View shares increased from RM1.99 to RM6.05, raising its market capitalisation from RM885mil to RM2.73bil

The Securities Commission (SC) has won another battle against market manipulators after the Court of Appeal decided in the regulator's favour to increase the punishment meted on former Fountain View Development Bhd director Datuk Chin Chan Leong.

“In a landmark decision, the Court of Appeal imposed a jail term of 12 months, and a fine of RM1.3mil on Datuk Chin Chan Leong for market manipulation involving Fountain View shares,” the SC said in a statement yesterday.

Chin, who pleaded guilty to shares manipulation two years ago, was initially given a one-day jail sentence and RM1.3mil fine for the offence.

“This is the third conviction for market manipulation which the SC has successfully prosecuted,” the regulator said. The other companies were Suremax Group Bhd and Actacorp Holdings Bhd.

The offence took place over a two-month period from November 2003 to January 2004 during which the price of Fountain View shares increased from RM1.99 to RM6.05, raising its market capitalisation from RM885mil to RM2.73bil.

Fountain View was listed on the Main Board of the stock exchange. The company was delisted on Sept 22, 2010 for failing to submit a regularisation plan to the SC or Bursa Malaysia within the prescribed timeframe.

Chin was charged in 2005 but had only pleaded guilty on Feb 5, 2010 to the offence of creating a misleading appearance of active trading in Fountain View shares by indirectly being concerned in transactions for the sale and purchase of those shares, which did not involve any change in beneficial ownership.

Chin was found to be trading with 20 central depository system accounts which he beneficially owned through the companies that he controlled.

The one-day jail sentence was affirmed by the High Court in September 2010 which led to an appeal by the Public Prosecutor .

The Court of Appeal held that the offence under section 84(1) of the Securities Industry Act 1983 was serious with adverse consequences on the stock market and the economy and that the earlier sentence did not reflect the gravity of the offence.

“In deciding to impose a 12-month jail term, the Court of Appeal took into account the fact that the offence committed was pre-planned and well thought out.

“The SC has been proactively pursuing this and other market misconduct cases (such as manipulation, market rigging and insider trading) because such activities severely undermine investor confidence and tarnishes the reputation of the Malaysian capital market,” the SC said, adding that it would continue to be vigilant and take whatever action necessary to protect investors and to maintain a fair and orderly capital market.

Over the years, there had been a number of account mismanagement and share manipulation court cases. Among them were Kenmark Industrial Co (M) Bhd, Granasia Corp Bhd, Kiara Emas Asia Industries Bhd, Idris Hydraulic (M) Bhd, Aokam Perdana Bhd and Ekran Bhd.

In the case of troubled furniture company Kenmark, its Taiwanese managing directors and key management personnel went missing in May 2010. In June 2010, one Datuk Ishak Ismail emerged as a 32% shareholder, but sold all his shares two weeks later. The SC alleged that he had committed insider trading.

In the case of Granasia Corp Bhd, in March 2010, the Kuala Lumpur Sessions Court convicted Chan Kok Suan, the former managing director of Granasia for submitting false statements to the SC, namely the revenue and profit after tax of the company for the year ended Dec 31, 2002.

The information was submitted in connection with Granasia's proposal to list on the main board of the stock exchange.

Chan was convicted under section 32B(4) of the Securities Commission Act and imposed a fine of RM500,000 in default, 10 months imprisonment, according to the SC. He was charged on Feb 9, 2006 and pleaded guilty on March 1, 2010.

According to reports, the prosecution had filed an appeal against the sentence to the High Court.

Source: www.thestar.com.my

Maybank and RHB have emerged as a substantial shareholder in PN 17 Luster Industries Bhd with 5.95% stake after a debt-to-equity conversion as part of debt settlement arrangement

Malayan Banking Bhd (Maybank) has emerged as a substantial shareholder in Luster Industries Bhd with a 5.95% stake in the latter.

The bank told Bursa Malaysia yesterday that it had acquired 64.16 million shares of 10 sen each in Luster.

“The subscription was made pursuant to the exercise of debt to equity conversion in accordance with a debt settlement agreement dated Nov 25, 2011 involving Luster,” it said.

A PN17 company, Luster is an integrated manufacturer of high precision and precision plastic parts and components.

As part of its proposed regularisation plan, Luster is looking to settle RM64.4mil in debt via the issuance of RM17.9mil in loan stocks, 25.4 million new ordinary shares of 10 sen each, and 263.8 million new shares with 131.9 million free detachable warrants.

The shares and warrants were part of an exercise that saw the company issue a total of 834.1 million new shares alongside 441.6 million free detachable warrants.

Luster posted a net loss of RM3.04mil in its first quarter ended March 31, 2012 versus a loss of RM1.96mil in its previous corresponding period. Revenue slipped to RM8.96mil from RM9.51mil previously.

The company said the loss was partly due to the payment of incentives to its employees and a salary adjustment.

Luster said higher overheads were also incurred during the quarter under review to transfer and test the moulds from overseas for new projects of which the mass production was expected to start early June.

On its prospects, Luster said it was still able to maintain its existing customers, which comprise brand owners including multinational companies.

“The management continues to take steps to differentiate the group from its competitors in order to command a stronger and leading position in the market. The board believes that the corporate exercises will position the group well to cater to the burgeoning opportunities in these regions,” it said in its note accompanying its first quarter results.

Source: www.thestar.com.my

RHB Bank Bhd has also emerged as a substantial shareholder in PN17 company Luster Industries Bhd with a 5.48% direct stake in the latter.

Filings with Bursa Malaysia showed RHB Bank had acquired 59.15 million shares in Luster on June 11 and their entry into the company was due to a “debt settlement.”

RHB is the third financial institution to report that it had acquired substantial stakes in Luster.

It had been reported on Thursday that Malayan Banking Bhd emerged as a substantial shareholder in Luster with a 5.95% stake due to a “debt to equity conversion” exercise.

CIMB Bank had earlier this month also emerged as a substantial shareholder in Luster with a 5.86% stake or a 63.22 million shares due to a “proposed revised restructuring scheme” by the company.

Luster is a PN17 company and is involved with the manufacturing of high precision and precision plastic parts and components.

Source: www.thestar.com.my

Update on SilverBird financial irregularities scandal

(SILVER opening stock price today (24.4.2012) was 18.5 sen)

Shareholders are expected to demand from the board of directors of Silver Bird Group Bhd details on the ongoing investigation into the financial irregularities when the company's AGM is held next Monday.

An official representing one of the major shareholders who spoke on condition of anonymity said the board's independent directors were preparing to be hit by questions on how the fraud, which could expose the company to as much as RM111.5mil in losses, had eluded the board and auditors for so long.

Other likely questions include the validity of the condensed milk joint venture with major shareholder Koperasi Permodalan Felda (KPF), the solvency of the company and the status of its regularisation plan.

The shareholders would also want to know a possibility of a white knight involving Silver Bird's largest shareholder Lembaga Tabung Haji (LTH), of which speculation on LTH's involvement has been rife for weeks. The fund's group managing director and chief executive officer Datuk Ismee Ismail has declined comment on the matter.

The independent directors formed a special committee to run the daily affairs of the bread and confectionary maker after suspending group managing director-cum-founder Datuk Jackson Tan Han Kook, executive director Ching Siew Cheong and general manager for accounts and finance Lai Poh Mei on Feb 24.

They also formed an inquiry committee and appointed PKF Advisory Sdn Bhd as the forensic accountants to conduct a forensic review into the affairs of the company. Both have to complete their investigations within three months from Feb 29.

The directors have also appointed a legal advisor on Feb 25, lodged a police report on Feb 26 and reported the matter to the Securities Commission on Feb 27.

However, the official told StarBiz that fraud was not always easy to detect as a company's balance sheet could be fiddled with in ways that would pass even the independent auditors.

“When people set out to defraud, they'll do anything to hide the wrongdoings for the longest possible time, so there are always tell-tale signs such as messing with the books in order to make it harder to detect,” she said.

Officials from LTH, Berjaya Corp Bhd and Sydney-based venture capital firm CVC Ltd declined to comment officially on what their next course of action would be on the matter. They respectively held 22.19%, 20.53% and 9.07% stakes in the company while Koperasi KPF held a 12.7% stake.

CVC's board representative, Peter John McLoghlin, resigned on April 11, citing that being based in Sydney made it difficult for him to contribute effectively and frequently, a fact that shareholders might pounce on as the resignation has only happened now instead of before.

News of the irregularities surfaced in late February after Silver Bird's independent auditors Crowe Horwath refused to provide a basis for an audit opinion to the financial report for the financial year ended Oct 31, 2011.

The auditors pointed out that poor keeping and the inability to verify sales transactions were among the main reasons why they refused to provide the opinion.

Silver Bird has since defaulted on loans to creditor banks, admitted into Practice Note 17 status and had a distribution agreement for prepaid cards (one of the company's main sources of revenue) terminated by Maxis Bhd.

Source: www.thestar.com.my