When one breaks the law, one ought to be charged and tried in court....What more here, a company that is public listed who allegedly 'submitted a false statement to Bursa Malaysia'...When one is offered a compound, and it is accepted, then no trial...no conviction...and no criminal records?
The use of COMPOUNDS is getting to be a problem, as the power to offer COMPOUNDS is an administrative power exercise-able by the Executive - not the Judiciary.
Remember that in some laws, all offences are COMPOUNDABLE - even Anti-Money Laundering, Anti-Terrorism Financing
and Proceeds of Unlawful Activities Act 2001
92 Power of competent authority to compound offences
(1) The competent authority or relevant enforcement agency, as the case may be, may, with the consent of the Public Prosecutor, compound any offence under this Act or under regulations made under this Act, by accepting from the person reasonably suspected of having committed the offence such amount not exceeding fifty per centum of the amount of the maximum fine for that offence,..
Same to with CAPITAL MARKETS AND SERVICES ACT 2007, where section 373 Compounding of offences
373 (1) The Chairman of the Commission may, with the consent in writing of the Public Prosecutor, compound any offence committed by any person under Part II, III, VI, VII, X or XII or any regulations made thereunder, by accepting from the person reasonably suspected of having committed such offence a sum of money not exceeding the maximum fine (including the daily fine in the case of a continuing offence, if any) for that offence.
Compounds should really be available for SMALL or smaller offences of speeding, etc ...or not wearing face mask ...BUT it should not be available for SERIOUS offences like money laundering, BURSA offences by public listed companies...
COMPOUNDS - well, it not a conviction or 'finding of guilt' > should it be made into admission of guilt? or recorded as a conviction? Should a person being compounded over and over for speeding - not be expected to be 'penalized' more and more every time he does the offence. NO REASONABLE INNOCENT MAN WILL PAY A COMPOUND - HE/SHE WILL MOST LIKELY WANT TO PROVE HIS/HER INNOCENCE...
The Compound mechanisms removes the Judiciary/Courts, and undermines the administration of criminal justice??
The LAWS also do not set MINIMUM Compounds - only the maximum, so, very easily amount of compound can be minimal...(open to possible corruption/abuse)
If you admit your CRIME, then go to court and 'PLEAD GUILTY" - and when you do so, the courts will take that into account in imposing a just sentence...
Compounds usually are offered before one is CHARGED in court >>> when a person is Charged, the prosecutors/Public Prosecutor MUST BE CONFIDENT that they can prove that you are guilty beyond a reasonable doubt. So, when suddenly, those already charged get the charges withdrawn, because they were offered and paid COMPOUNDS - doubts arise as to the reason for this administrative/executive decision.
Sadly, some judges then go and ACQUIT the accused, meaning ever again can they be charged with the same offence (or other offences based on the same facts). JUDGES should never ACQUIT unless after after a full trial, after they have considered all evidence adduced(or available) - it is always wise to Discharge Not Amounting To An Acquittal, if the courts are yet to evaluate all available evidence and make an independent determination of guilt or innocence of alleged wrongdoers.
EPF sold its shares, but what about other individual Malaysians that purchased shares trusting the BURSA to effectively monitor the public listed company...
At the end of the day, those who broke the law escapes conviction and prison sentence. Is this just?
WHO BROKE THE LAW? All the Directors? Why COMPOUND and not trial?
Press Release | Mere Issuance of Compounds towards Serba Dinamik Sets a Dangerous Precedent 6 May 2022 3:05 pm
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The
Malaysian Bar refers to the recent news reports concerning Serba
Dinamik Holdings Bhd (“Serba Dinamik”). It was reported that in
December 2021, four Serba Dinamik officers were charged in court for
submitting a false statement to Bursa Malaysia, which is an offence
under section 369(a)(B) of the Capital Markets and Services Act 2007
(“CMSA”).1 Under section 369(a)(B) of CMSA, if convicted, a
person faces an imprisonment term not exceeding 10 years and shall also
be liable to a fine not exceeding RM3 million. The imprisonment term
demonstrates the severity of such a charge.
However, in April 2022, the Securities Commission Malaysia (“SC”) with the written consent of the Public Prosecutor, and pursuant to its powers under Section 373(1) of CMSA, compounded Serba Dinamik and its accused officers for a sum of RM3 million each. The Vice President of Accounts & Finance, Muhammad Hafiz Othman, was also compounded an additional RM1 million for falsifying the accounting records of Serba Dinamik’s subsidiary.2 This follows the decision of the Public Prosecutor to accept the representation made to the Attorney-General’s Chambers (“AGC”) by Serba Dinamik and the individuals involved.3 There were no reports whether the SC was informed about the representation letter.
Under section 375 of CMSA, the SC can only institute prosecution proceedings with the written consent of the AGC. Similarly, under section 373(1) of CMSA, the SC requires the written consent of the AGC to issue a compound.
The Malaysian Bar is mindful of the immense authority wielded by the Attorney General. Such powers are granted under Article 145(3) of the Federal Constitution, which provides the Attorney General with the discretion to institute any proceedings for an offence. It is our view that such power must be exercised in a way that would promote and strengthen the rule of law. With due respect, the AGC should refrain from making a decision that overrides the recommendations made by the regulator — in this case, the SC — as this could potentially erode the function as well as the public perception vested in the regulator.
One of the core objectives of securities regulations is to foster a fair market system, thereby instilling confidence in investors and shielding the market from systemic risks. To achieve this, regulators who are exercising their statutory duties must be given the liberty to enforce law and regulations against wrongdoers. The manner in which this matter has been handled and resolved undermines the capital market regulators’ commendable efforts to uphold the integrity of the market. Such leniency is likely to create a negative perception of selective enforcement by the authorities and that the decision of the regulators can be overruled. It is our view that the considered opinions of the market regulators — in this case, the SC and Bursa Malaysia — should be preserved and executed accordingly.
The Malaysian Bar is also concerned with the lack of transparency in this matter, given the wider impact that the Serba Dinamik compound has on the integrity of the capital market’s governance and regulatory framework. At the time of writing this press release, the AGC has yet to provide any statement for its decision not to prosecute Serba Dinamik and the accused officers. As this is a case of public interest, there is a need for the AGC to provide details of how the decisions in such cases are reached.
The Malaysian Bar therefore implores the AGC to make a full and frank disclosure on the reason, if any, for the issuance of compounds to Serba Dinamik and the accused individuals, instead of proceeding with prosecution. The AGC should engage in a purposeful consultation process with the regulators to ensure the proper penalties are enforced. The old adage rings true now more than ever — “Justice must not only be done, but must be seen to be done.”
Mohamad Ezri Abdul Wahab
Vice-President
Malaysian Bar
6 May 2022
1 “SC Charges Serba Dinamik, Its Director and Officers for False Information in Its Financial Statement”, Media Release, Securities Commission Malaysia, 28 December 2021.
2 “SC compounds Serba Dinamik, top execs RM3 mil each for submitting false revenue that KPMG flagged”, The Edge Markets, 13 April 2022.
3 “SC Imposes Maximum Compound against Serba Dinamik, CEO, Director, and Officers for Submitting False Financial Statement to Bursa Malaysia”, Media Release, Securities Commission Malaysia, 13 April 2022.
- Warrant of Arrest Obtained against CEO/MD Dato’ Mohd Karim Abdullah
28 December 2021 | Kuala Lumpur
The
Securities Commission Malaysia (SC) today charged Serba Dinamik
Holdings Berhad (Serba Dinamik), its director and officers for
submitting a false statement to Bursa Malaysia Securities Berhad, an
offence under section 369(a)(B) of the Capital Markets and Services Act
2007 (CMSA).
The
SC has also secured a warrant of arrest against the company’s Chief
Executive Officer/Group Managing Director Dato’ Dr. Ir. Ts. Mohd Abdul
Karim Abdullah, who is currently at large.
According to the SC’s
charges filed at the Kuala Lumpur Sessions Court, the false statement
is in relation to the revenue figure of RM6.014 billion contained in
Serba Dinamik’s Quarterly Report on Consolidated Results for the Quarter
and Year ended 31 December 2020.
The individuals charged today
are the company’s Executive Director Datuk Syed Nazim Syed Faisal,
Group Chief Financial Officer Azhan Azmi, and Vice President of Accounts
& Finance Muhammad Hafiz Othman.
All three accused claimed
trial to the charges filed against them. Sessions Court Judge Sabariah
Othman fixed bail at RM300,000 with two sureties each, and ordered the
passports of all accused persons to be surrendered to court.
Additionally, all three accused are required to report to the SC’s
Investigating Officer on a monthly basis.
Independent
Non-Executive Director Abu Bakar Uzir who appeared for Serba Dinamik to
answer to the charge against Serba Dinamik, also claimed trial.
Under
section 369(a)(B) of the CMSA, a person found to have made a false or
misleading statement to the SC, the Exchange or approved clearing house,
if convicted, faces an imprisonment term not exceeding 10 years and a
fine of not less than RM3 million, or both.
The SC’s
investigation into Serba Dinamik started in May 2021 following a section
320 CMSA report by KPMG to the SC. Under the CMSA, auditors have a
statutory obligation to immediately report to the SC, if they reasonably
believe that there are any matters that may constitute a breach or
non-performance of any requirement of securities laws, rules of the
stock exchange or any matter that may adversely affect to a material
extent the financial position of a listed company.
Cover Story: What Serba Dinamik didn’t want you to know
OVER a three-day period in August last year, the Securities Commission Malaysia (SC), which regulates the country’s capital markets, conducted raids on oil and gas outfit Serba Dinamik Holdings Bhd. It carted away 60 boxes of documents from Menara Serba Dinamik in Section 14, Shah Alam, in Selangor.
Market scuttlebutt has it that the SC personnel were forced to take the stairs up and down the 15-storey building as the electricity supply had been cut for some reason.
Nevertheless, 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.”
To recap, Bursa Malaysia had sought legal redress against Serba Dinamik for not adhering to its instructions and making public a factual findings update (FFU) after a special independent review (SIR) undertaken by Ernst & Young Consulting Sdn Bhd (EY Consulting). EY Consulting was roped in after former auditors KPMG highlighted irregularities at the oil and gas engineering services company, and was tasked with coming up with a FFU.
KPMG had flagged total sales transactions of RM2.32 billion, a trade receivables balance of RM652 million and materials on site balance of RM569 million, and there were issues with suppliers, with paid-up capital of only RM100,000 and having similar registered addresses, carrying out transactions of between RM60 million and RM96 million. In total, these transactions amount to RM481 million.
Questions were also raised about a customer and supplier in Bahrain whose office address could not be located. Transactions with this outfit totalled US$101 million (RM417.48 million then) and the trade receivables balance was US$24 million (RM99.2 million then).
While Serba Dinamik had sought to dispel all of KPMG’s allegations as trivial, the EY Consulting report, which is more than a thousand pages in total, seems to confirm KPMG’s suspicions and makes it apparent that the issues at Serba Dinamik are not only real but material.
It is also now clear why Serba Dinamik has been trying very hard to prevent the EY Consulting report from being made public.
Many other discoveries, which in the normal course of business would raise red flags, were also seen in the court documents filed last November by frontline regulator Bursa Malaysia.
Other findings include email exchanges between Serba Dinamik’s staff asking for purchase orders to be prepared under the names of Serba Dinamik’s local suppliers.
EY Consulting named four of Serba Dinamik’s local suppliers — Eastgate Dynamics Sdn Bhd, Kekal Jitu Sdn Bhd, NFZ Engineering Sdn Bhd and Naftech Energy Sdn Bhd — as being connected or related directly or indirectly to employees of Serba Dinamik, indicating that Serba Dinamik was in control of these companies. Two other suppliers, Edaran Kejuruteraan Bengkel Sdn Bhd and FRZ Scientific Sdn Bhd, had other issues.
The EY Consulting report stops short of stating that Serba Dinamik was utilising the company stamps and falsifying documents, boosting contracts to raise funds from financial institutions and paying off suppliers (under its control) that issued invoices, purchase orders and delivery orders.
Some of EY Consulting’s findings
In July 2018, national oil company Petronas launched a new vendor development scheme under which 18 organisations — six petroleum arrangement contractors and 12 oil and gas service and equipment companies (Serba Dinamik was one of them) — were slated to replicate Petronas’ vendor development programme (VDP).
Two of Serba Dinamik’s vendors under the VDP — Vibrant Victory Sdn Bhd and Technorette Sdn Bhd — had links either directly or indirectly to Serba Dinamik’s employees.
Editable Microsoft spreadsheet files containing templates of invoices and delivery orders of 10 vendors under Serba Dinamik’s VDP and email communications with a list of suppliers’ company stamps were found in devices and server files of Serba Dinamik employees. The total transactions in these files amounted to RM357.49 million.
According to Julian’s affidavit, EY Consulting’s findings showed that Serba Dinamik had paid for the purchase of furniture in NFZ Engineering’s office.
EY Consulting also found hard copy invoices for incorporation fees of both Naftech Energy and Edaran that bore the words “to pay using EIL” in handwriting believed to be that of Serba Dinamik’s managing director and largest shareholder (21.22%) Datuk Mohd Abdul Karim Abdullah. “EIL” refers to Emirtech International Ltd, in which Karim and Serba Dinamik non-independent non-executive director Datuk Awang Daud Awang Putera are directors as well.
Transactions with Naftech and Edaran listed as trade creditors in FY2020 amounted to RM169.05 million.
EY Consulting also found that Serba Dinamik’s employees had helped in the incorporation of Regen Batt (M) Sdn Bhd and the setting up of its bank account. Regen Batt is linked to Edaran and FRZ.
Similar issues in Bahrain
Serba Dinamik’s IT business in Bahrain, for which KPMG had sought clarification, could also be plagued with issues.
EY Consulting identified six of Serba Dinamik’s customers in Bahrain, namely Najmat Al Maisan Technical Services LLC, Technobyte Computing WLL, Amban Trading & Contracting WLL, Pentatech Ltd, Tecbit Lanka Pvt Ltd and SPRM Techno Infirmiere Pvt Ltd. Two suppliers identified were Litotec and MJ Trading & Contracting.
EY Consulting found company stamps of both Technobyte and Najmat Al Maisan among the items seized by the SC.
Also found were editable Microsoft Excel spreadsheets containing Technobyte’s invoices and delivery orders in excess of US$10 million.
There was also email communication among Serba Dinamik’s employees requesting for the preparation of purchase orders for 12 of Serba Dinamik International Ltd’s customers, amounting to US$66.89 million, among others. Serba Dinamik International Ltd is a wholly owned unit of Serba Dinamik.
As for KPMG’s queries on Serba Dinamik’s business in Bahrain — on the validity of the transactions and balances of a customer, Lata International Trading and Services SPC, and a supplier, Spectrum Oilfield Solution WLL — EY Consulting found that Serba Dinamik could have been managing, processing and paying the salaries of Lata’s employees, with approvals for the payments given by Mohd Abdul Karim via phone text messages.
There were also email communications between Lata and Serba Dinamik which suggest that Serba Dinamik was involved in preparing invoices for Lata. Lata’s company stamp was also found in one of the boxes seized by the SC.
KPMG’s grouse about Lata had been that its commercial registration address was that of workers’ accommodation.
EY Consulting also found Microsoft Excel spreadsheets containing nine invoices and delivery order templates of Sprectum Oilfield amounting to US$12.72 million in a device belonging to one of Serba Dinamik’s employees.
“The cumulative effects of the findings substantiate the concerns of KPMG,” a court document read.
The plight of Serba Dinamik’s minorities
The management of Serba Dinamik has thus far denied any issues at the company. Speaking to The Edge last June when the issues first surfaced, Mohd Abdul Karim claimed that the company had been treated unfairly by KPMG. “It’s not fair. We have been transparent, we have been in constant contact with Bursa [Malaysia], our shareholders, [as per] our responsibility.
“They (KPMG) have been our auditors for seven years. Why now, suddenly, [have they raised these issues]? The company is intact, we have strong fundamentals, we will ride through this,” he said.
“I’m also bound by the legal framework,” he added, explaining that he was not at liberty to elaborate on the issues adversely affecting the company.
With Serba Dinamik’s management refusing to divulge the FFU, Bursa Malaysia suspended the company’s shares from trading in October last year.
Serba Dinamik had sought an injunction to restrain Bursa Malaysia from compelling it to make an announcement pertaining to the FFU by EY Consulting and attempted to declare EY Consulting’s appointment as void ab initio. It even tried to obtain an injunction to restrain EY Consulting from publishing the FFU.
In Serba Dinamik’s failed attempt at obtaining an injunction against the frontline regulator, its then chairman Datuk Mohamed Ilyas Pakeer Mohamed had said in support of the move that in the event the FFU “is made publicly available/searchable through efiling system prior … the defendant (Serba Dinamik) will suffer irreparable damage and is extremely prejudicial to the defendant if any such material is published whether by design or by accident as the existence of the ‘Factual Findings Update’ itself is being put into question at the moment.” The FFU “remains a private and confidential document”, Ilyas contended.
Thus far, all of Serba Dinamik’s attempts to scuttle the court processes have been futile. Nevertheless, the company has not given up and its appeal against a High Court order to comply with Bursa Malaysia’s instruction to make public the FFU has been fixed on April 11.
On March 8, the High Court dismissed an originating summons by the company for an injunction to be imposed on EY Consulting to restrain it from disclosing findings of the SIR to Bursa Malaysia or other parties.
Meanwhile, Serba Dinamik’s legal action against KPMG resulted in the auditor stepping down in June last year, with the void being filled by Nexia SSY PLT a month later. However, it is understood that no suit has been filed against KPMG thus far.
While the wrangling continues, Serba Dinamik has lost more than RM4.7 billion in market capitalisation — from RM6 billion at its peak prior to the issues to RM1.3 billion at present — and could slip more when the suspension is lifted. Serba Dinamik was trading at 35 sen before its suspension.
In early January this year, Serba Dinamik fell into the Practice Note 17 category for cash-strapped companies.
For its six months ended December 2021, it suffered a net loss of RM332.44 million from RM976.49 million in revenue. There are no comparative figures as Serba Dinamik changed its financial year end, just before the issues cropped up, from December 2020 to June 2021.
As at end-December last year, Serba Dinamik had cash and cash equivalents of RM218.94 million. During the period under review, the company had RM2.27 billion in long-term borrowings and RM1.45 billion in current liabilities. Serba Dinamik also had retained earnings of RM724.81 million and other reserves of RM44.99 million.
Serba Dinamik’s finance costs for the six-month period were pegged at RM117.3 million. It is also noteworthy that its cash flow for the six months ended December was negative RM8.77 million.
On its prospects, Serba Dinamik says in its financial report, “Oil prices ended 2021 significantly higher than they did in late-2020, according to major oil futures contracts. However, crude oil futures prices fell for the second consecutive month in December, falling from multi-year highs set in October, owing to persistent market volatility fuelled by rising uncertainty about the impact of the rapidly spreading Omicron variant on the global economy and oil demand.
“However, due to recent geopolitical tensions and resilient oil demand, the consensus has raised their crude oil price forecast from US$75 per barrel to US$80 per barrel, and this re-rating catalyst could benefit the group’s operations.
“Despite the fact that the group has now been classified as a PN17 company, the Board is confident that the restructuring and regularisation plan will benefit shareholders in the long run.
“The Board of Directors anticipates that the group’s operations will
remain challenging. On the other hand, the board of directors’ pledges
to resolve the ongoing issue, including the restructuring and
regularisation plan, in the best interests of stakeholders,” the company
says.- Edge Markets, 7/4/2022
Corporate News
Thursday, 01 Jul 2021
The EPF disposed of 96 million shares on Monday, which brought down the fund’s stake in Serba Dinamik to less than 5%, according to a filing with Bursa Malaysia yesterday.
KUALA LUMPUR: The Employees Provident Fund (EPF) has ceased to be a substantial shareholder in Serba Dinamik Holdings Bhd
following the recent selldown in the open market, filings with Bursa Malaysia showed.
The EPF disposed of 96 million shares on Monday, which brought down the fund’s stake in Serba Dinamik to less than 5%, according to a filing with Bursa Malaysia yesterday.
The EPF owned 377 million shares, or about 10.2% of the company, about a month ago.
But on May 29, a surprised announcement by Serba Dinamik caught investors off-guard.
The company told Bursa Malaysia that its auditor KPMG had raised concerns over RM3.5bil worth of sales and transactions.
It has rejected these concerns and said it would appoint an independent reviewer to assess and verify these concerns.
On June 22, Serba Dinamik filed a court case against KPMG.
KPMG resigned almost immediately, while at least four of Serba Dinamik independent directors also left the company, citing their disagreement with the board’s decision to sue its external auditors. - Star, 1/7/2021
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