Anonymous letter sparks off mTouche discovery of RM6.3m fraud

  • Business
  • Wednesday, 14 Jan 2015

KUALA LUMPUR: Mtouche Technology Bhd’s shares were untraded at 21.5 sen on Wednesday as the company provided details and lodged a police report over the possible financial irregularities concerning operating expenditure transactions totalling RM6.3m from February 2009 to October 2010 following an anonymous letter addressed to its audit committee.

The company had on Tuesday told Bursa Malaysia the transactions were between its unit Mobile Touchetek Sdn Bhd and Pearl Legend International Ltd (PLIL).

mTouche said the transactions were related to the provision by PLIL of a “quality database for data-mining and marketing of Mobile Touchetek’ services” to users in Malaysia as well as to send out SMSes to the database. 

However, an internal probe found that there was no records of PLIL providing the services while there was also uncertainty of the identity of PLIL from the company searches.

mTouche lodged a police report on Tuesday and it had also sought legal advice on the possible courses of action it could take to recover the losses.

It had also reviewed the current internal control processes to ensure that similar transactions will not recur.

“The board of directors is of the view that as the RM6.3mil operating expenses has been fully accounted for in the financial years ended Dec 31, 2009 and 2010, there will be no material impact to the financial statements for the financial year ended Dec 31, 2014,” it said.

To recap, mTouche said the catalyst followed the resignation of two members of the board of directors in 2012.

mTouche said the board of directors was made aware, through an anonymous letter dated Nov 26, 2013 addressed to the audit committee chairman, Yeap Teik Pung, that there may be inconsistencies in the transactions carried out between MTSB and PLIL.

Following the letter, the board of directors instructed the management of mTouche to conduct an internal investigation on its records with regards to PLIL and the database and SMS services which was concluded in February 2014. 

The internal investigation revealed that there are no records showing that PLIL had provided any of the Database and SMS Services as stated in the service agreement entered into between MTSB and PLIL.

mTouche said PKF Advisory Sdn Bhd was then appointed on June 17, 2014 to carry out a special audit to assess the nature and circumstances of the said transactions, perform a review of supporting documentation relating to the transactions and perform system checks to determine the veracity of the said transactions.  

In the latest development on Jan 8, 2015, PKFA submitted their final report to the board of directors. 
“PKFA concluded that the veracity of the payments made to PLIL is highly questionable and there are indications of irregularities, discrepancies, inconsistencies and anomalies in the accounting records and supporting documents with significant payments made to PLIL, whose veracity is suspicious and cannot be reasonably ascertained,” it added.

Its summary of findings showed there were inconsistencies in the payment control process of MTSB pertaining to payments made to PLIL.

There was also non-disclosure of details of the transactions to senior management and there was an override of controls and policy and procedures;

Also there were no corresponding sales traced to the services provided by PLIL while irregularities were noted from the review of the contract entered into between MTSB and PLIL.
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