Say No To Hudud

Tuesday, December 21, 2010

Part 2 - Both BN and Pakatan are "sleeping at the switch" - major regulatory scandal and accounting fraud by PwC goes unanswered.

Singapore is ranked no.2 globally in protection of investors interests and no.1 among 10 Asian countries. Have they had cases of accounting fraud? Yes,and they were swift and decisive in their actions to root out the culprits.

If we compare the non-action of our authorities with what would have happened if this was a case in Singapore or Australia, we see how far we are getting left behind by our compatriots in terms of governance, accountability and enforcement.

We will now spell out the details of just one of the accounting frauds by PwC in Malaysia here, with regards to the sale of PwC Consulting, the worldwide consulting arm of PricewaterhouseCoopers LLP to IBM Corp for US$3.5 billion in October of 2002.

In Malaysia, the sale of the consulting arm is a 'sham sale', for the following reasons:

1. The renaming of PricewaterhouseCoopers Consulting (East Asia) Sdn Bhd, as PwC Consulting Malaysia Sdn Bhd (289801-A) on 20-11-2001, to be disposed off to IBM Corp.,  while the real consulting arm of PwC in Malaysia, PricewaterhouseCoopers Consulting Sdn Bhd (464379-U), still remains under the ownership of the current Directors of PwC Malaysia.

Sham Company?

2. The sham appointment of a Mr Foong Weng Chee, who was running his own accounting firm, Foong Weng Chee & Co, at the time of his appointment as Director in the renamed PwC Consulting Malaysia Sdn Bhd, and has never been involved in PwC's Consulting business. The sham appointment of a Ms Chu Kum Yoon who was a Company Secretary at the material time of her appointment in the same sham company. She has also never been involved in the consulting business of  PricewaterhouseCoopers in Malaysia. 

Sham Directors?

3 The fact that the Executive Director of PwC Malaysia, Dato Johan Raslan, The MD of PwC Malaysia, Mr Chin Kwai Fatt, the Tax Partner of PwC Malaysia, Mr Koo Chuan Keat  (winning the tax firm of the year award), and Senior Partner in PwC Malaysia, Mr Lee Tuck Heng remain as the Directors and/or shareholders in  PricewaterhouseCoopers Consulting Sdn Bhd (464379-U), the company that was actually supposed to be sold to IBM Corp in the 2002 sale.

PricewaterhouseCoopers Consulting Sdn Bhd (464379-U) is company that still carries contingent liabilities to the tune of several hundred million Ringgit, and this entire process was done to defraud its creditors

One of the conditions under the no-action letter issued by the SEC for the sale in 2002 is as follows:

The conditions described in your letter include, among other things, that

9) indemnification claims for certain losses must be made by IBM within two years of the closing and the aggregate amount of such claims may not exceed 12.5% of the purchase price; 

Not only has this sham sale been left unchecked past the indemnity period, the amount of contingent liabilities left 'parked' there is also a significant percentage of the original sale price. And the creditors are still being defrauded with no one, we repeat, no one in the authorities who are willing to question this accounting fraud.

The only remedy is the immediate dissolution of PricewaterhouseCoopers Consulting Sdn Bhd (464379-U).

In light of PwC's fraudulent misconduct that has been exposed, will CIMB still have the stomach to retain them as auditors?

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