Press Statement

by Lim Guan Eng

(Petaling Jaya, Thursday): The Securities Commission (SC) should also determine whether Nasioncom Holdings Bhd submitted false information of revenue on sales for its 2002, 2003 & 2004 financial statements prior to its initial public offer on 2005. On 15.2.2007, the SC had publicly reprimanded NS for submitting false information to the SC with regards to revenue on sales that were not transacted in its 2005 statements. The SC gave NS a month to rectify and re-issue its financial statements for the year ended Dec 31, 2005.

SC said its investigation revealed that NasionCom's group revenue of RM194,984,186 as reflected in the company's 2005 statements contained RM143,109,727 sales that were not transacted. If NS can falsify its financial accounts for 2005, are its previous financial accounts equally suspect? For this reason SC must launch a full investigation on all its previous financial year statements, especially in the year prior to its IPO and listing in 2005.

More importantly, why was no due diligence done by the SC prior to its listing to ensure that its financial records are reliable? Even though for counters like NS that is listed in Mesdaq where no minimal profit requirements are necessary, there must be basic requirements such as truthful and full disclosure. DAP demands that the SC acts firmly against those responsible for NS falsifying financial reports with fines not exceeding RM 3 million or imprisonment not exceeding 10 years to ensure investor confidence remains in Bursa Malaysia that it upholds principles of integrity, transparency, accountability and full disclosure.

Incorporated in 1993, NS claimed year end revenue of RM 63 million in 2002, RM 76.8 million in 2003 and RM 156.2 million in 2004. What guarantees are there to say that these figures are reliable? In a statement on 15.2.2007, the SC said Nasioncom had been given one month to rectify and re-issue its financial statements for the financial year ended Dec 31, 2005. Making false financial reports to the SC is a serious offence under Section 122B(a)(bb) of the Securities Industry Act(SIA) and is liable on conviction to a fine not exceeding three million ringgit or to imprisonment for a term not exceeding ten years or to both.

A mere reprimand and correction would be seen a mere slap in the wrist completely inadequate to the serious offence of trying to deceive the investor public with sales that were not even transacted. If no stern action is taken against such cheating, how can investors trust Bursa Malaysia and SC with providing complete and accurate information to make rational investment decisions?

Immediate action must be taken against those responsible for issuing the 2005 financial statements containing false transactions of RM143.11 million in sales. The auditors for NS should also be investigated and required to explain publicly how they could "approve" such false financial accounts containing RM 143.11 million of non-existent sales transactions and other inaccurate information. According to news reports, Deloitte KassimChan was auditor for NS accounts that year.

Action should also be taken against the accountants and auditors if they can not justify why they "approved" the accounts or show proof that they were similarly deceived into believing that there existed RM 143.11 million of non-existent sales transactions. Malaysia capital industry can only benefit if SC can root out sloppy or dishonest accountants and ensure that only reliable and professional accountants are allowed to operate, including those who are not so easily cheated into trusting non-existing sales revenue or transactions.