Missing person, missing governance?


  • Business
  • Saturday, 26 Oct 2013

LTKM must promptly update stakeholders on status of chairman sought by authorities

IF you’ve watched enough crime shows, you should be familiar with scenes in which anxious relatives or friends are told that they can’t report a person as missing as long as it has not been 24 hours since he was last contacted.

There is, in fact, no such waiting period – presumably, delayed police action is a convenient plot device – but should there be one for chairmen of listed companies whom the authorities can’t locate? Shouldn’t the companies immediately say something when advertisements identify their chairmen as persons sought to assist in investigations?

This isn’t a hypothetical situation. Poultry player LTKM Bhd is facing those exact circumstances.

This week, Bank Negara took out newspaper ads to ask for information on LTKM chairman Ahmad Khairuddin Ilias or his whereabouts. The one in The Star appeared on Wednesday. The ads have his photograph, identity card number and last address.

The central bank says it, the Domestic Trade, Co-operatives and Consumerism Ministry (DTCCM), and the Companies Commission of Malaysia (CCM) are looking for Ahmad Khairuddin in connection with probes under the Banking and Financial Institutions Act, Trade Descriptions Act and Companies Act. It adds that several warrants of arrest have been issued against him.

There were no other details on the investigations but considering that the ads describe Ahmad Khairuddin as “one of the directors of Genneva Malaysia Sdn Bhd,” it’s a safe bet that the search for him has to do with the ongoing court cases against those behind the gold investment company.

About a year ago, the police, Bank Negara, the DTCCM and the CCM carried out joint raids on several premises of Genneva Malaysia and on the homes of its directors. The suspected offences included illegal deposit-taking, money laundering, tax evasion and avoidance, misrepresentation (including false description) and appointment of agents without licence.

In a December press statement to update the public on status of the investigations, Bank Negara said initial forensic accounting showed that the company had “considerable losses” in 2012 and had liabilities exceeding 10 times its assets.

“The actual operations of the company by selling gold at about 20% to 25% higher than the market price, paying returns of about 2% to 3% per month to customers and buying back the gold from customers at the initial purchase price, has not been a sustainable venture,” added the central bank. “In this regard, the cash flow for the company to sustain its operations has relied heavily on the monies collected from new customers.”

On Sept 27, a few days short of the first anniversary of the multi-agency raids, six senior officials of Genneva Malaysia (including two directors) were brought to court for a whopping 926 charges of money laundering, making false statements and illegal deposit-taking involving RM5.5bil.

Over the next several days, at least eight more individuals and another company were charged with over 500 counts of money laundering of almost RM2bil in total that are said to be linked to Genneva Malaysia.

Ahmad Khairuddin is more than just a Genneva Malaysia director. He was its group executive chairman at one point – according to a Google search, the most recent example of him using that designation was an October 2011 news report – but it’s not clear when he stepped down from that post, if at all.

He was among the four Genneva Malaysia directors named as defendants in a civil suit filed in December last year by nine investors for misrepresentation and fraud. It was reported in May that the Kuala Lumpur High Court has set Nov 28 and 29 to hear the dispute.

We don’t know if Ahmad Khairuddin is also a target of prosecution for his part in Genneva Malaysia, or if the authorities only wants him for what he knows about the company, its operations and the people running it. For us to find out, Bank Negara has to first find him.

Given that the central bank has to resort to ads in the hope of getting information on him or his whereabouts, it’s likely that he hasn’t been in touch with its enforcement team for a while.

With warrants of arrest issued against him, is Ahmad Khairuddin able to contribute effectively to LTKM’s boardroom deliberations? Can it be possible that he’s still accessible to the LTKM management and other directors, and yet be on Bank Negara’s list of persons sought? Isn’t there something wrong with this picture?

Compare this with what happened in July last year after the Securities Commission (SC) had charged lawyer Datuk E. Sreesanthan, who was also a director of Sime Darby Bhd, with insider trading.

The Sime Darby board met a few days later to discuss the SC’s charges brought against him. The company then announced that Sreesanthan had taken leave of absence from all board and committee positions in the Sime Darby group.

It added that he had indicated his intention to retire by rotation at the next AGM in November. And he did so.

This was a decisive and transparent handling of a thorny situation, and should be a guide to LTKM on what to do.

There are key differences between these two cases that add to the urgency for LTKM to act. Sreesanthan wasn’t Sime Darby’s chairman and the SC doesn’t seem to have problems getting hold of him

On the other hand, when LTKM was listed in March 2000, Ahmad Khairuddin was already its chairman. In addition, he was a substantial shareholder at the time, but ceased to be so in August 2001.

He also heads the audit committee and is a member of the nomination committee. In other words, he has a big role in the governance of LTKM. But is he available to play his part?

LTKM must address such questions sooner rather than later. Stakeholders shouldn’t be left in the dark when there’s the perception that the chairman is in legal trouble and has gone missing. If the company too can’t contact Ahmad Khairuddin, others have to step in to do the job. All this ought to be communicated to the investing public.

It’s fair to make a distinction between Ahmad Khairuddin’s involvement in Genneva Malaysia and his duties at LTKM. But this could only go so far. The compartmentalisation crumbled when the Genneva Malaysia scandal rudely intruded upon LTKM’s stewardship.

It has been days since the Bank Negara ads first came out. The wait-and-see approach should no longer apply – not when it involves the ability of the chairman of the board to carry out his responsibilities.


Executive editor Errol Oh views the ongoing Genneva Malaysia saga as possibly the country’s most fascinating investment and enforcement story ever. We should all stay tuned.
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