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Bursa Updates
| Date Announced: |
19/01/2010 |
| Subject: |
HO HUP CONSTRUCTION COMPANY BERHAD ("Ho Hup" or "the Company")
| - |
INDEPENDENT FINAL INVESTIGATIVE AUDIT REPORT IN RESPONSE TO BUSINESS LOSSES RECORDED FOR FINANCIAL YEARS ENDED FROM 31 DECEMBER 2001 TO 2008 |
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| Contents: |
The Board of Directors ("BOD") of Ho Hup would like to announce the following: |
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Announcement
Details: |
| (1) |
Dato' Low Tuck Choy ("LTC") was suspended as the Company’s Managing Director on 28.8.2008 on the grounds of, among others, certain breaches of duties owed by LTC to the Company which had caused substantial business loss to the Company ("LTC's Suspension"). The Company has made a general announcement in respect of LTC's Suspension on 29.8.2008 and 3.9.2008; |
| (2) |
LTC was not re-elected as the Company's director at the Company's annual general meeting of shareholders held on 23.10.2008; |
| (3) |
on 1.7.2009 the Company has appointed Messrs Anuarul Azizan Chew & Co. ("Investigative Accountants") to - |
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(a) |
undertake a comprehensive investigative audit of all the business loss suffered by the Company and all the Company's subsidiary and associated companies ("Group of Companies") for the financial years ended on 31 December 2001 to 31 December 2008 ("Period"); and |
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(b) |
ascertain whether there is any violation of law, fraud, breach of duty and negligence in respect of the Period by the former directors and officers of the Group of Companies as well as by other third parties; |
| (4) |
on 5.8.2009, the Investigative Accountants present to the Company their Interim Investigative Audit Report for the Period ("Investigative Accountants' First Report"); |
| (5) |
on 21.8.2009, the Company's Audit Committee ("AC") has considered the Investigative Accountants' First Report and has recommended the Investigative Accountants' First Report for the acceptance by the BOD; |
| (6) |
on 21.8.2009, the BOD has accepted the Investigative Accountants' First Report and has directed a police report to be lodged by the Company's management in relation to the Investigative Accountants' First Report; |
| (7) |
on 21.8.2009, a police report has been lodged on behalf of the Company with respect to the Investigative Accountants' First Report ("Police Report"). The Company has given full co-operation and is liaising closely with the appropriate authorities in relation to the Police Report; |
| (8) |
on 10.12.2009, the Investigative Accountants have completed their "Final Investigative Audit Report" for the Period ("Investigative Accountants' Second Report"). The Investigative Accountants' Second Report consists of a detailed analysis as well as findings and is supported by extensive documentary evidence. |
| (9) |
The Investigative Accountants' First and Second Reports stated, among others, that - |
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(a) |
there existed reasonable suspicion that various offences of criminal breaches of trust, misappropriation of property and cheating under sections 409, 403 and 420 of the Penal Code respectively have been committed against the Group of Companies ("Penal Code Breaches"); |
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(b) |
there existed reasonable suspicion that various breaches of director's duties under section 132 of the Companies Act 1965 have been committed against the Group of Companies ("Companies Act Breaches"); |
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(c) |
the Penal Code Breaches and the Companies Act Breaches concerned the following projects and transactions - |
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(i) |
cash cheque payments, each above RM20,000 and totaling RM5,155,725.07, signed by, among others, LTC, without proper supporting documents; |
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(ii) |
payments via cash cheques being "promoter fees" amounting to RM2.4 million made for "Perlin Mandeera Project" in Sri Lanka authorised by, among others, LTC, when the Company had no record of such a project; |
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(iii) |
excessive progress payments amounting to RM10,626,605.12 made in Phases 1-2, 3-6 and 7A of the "Jalil Sutera Project" of 193 units of 21/2 storey link houses. Such excessive payments were not supported by any document and far exceeded the original contract construction sum. In addition, the project was delayed by more than 2 years resulting in LAD claims from purchasers amounting to RM23 million; |
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(iv) |
LTC has signed on behalf of Bukit Jalil Development Sdn Bhd ("BJD"), a 70% owned subsidiary of the Company, a Development Agreement with Syarikat Kemajuan Perumahan Negara Sdn Bhd ("SKPN") on 16 November 2007 to develop 2 pieces of land owned by BJD measuring 66,250 sqm for a total consideration of RM14.5 million (to be paid over 3 years) and accepted RM1.2 million deposit, without any Board approval of the Company at that material time. Subsequently, LTC had also accepted the offer and earnest deposits amounting to RM584,367 for the same pieces of properties from Hang Foong Property Sdn Bhd & Bukit Pekeliling Sari Sdn Bhd without Board approvals of the Company. By virtue of the above transactions entered into by LTC without proper approvals, caveats were lodged by the respective parties on the said properties; |
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(v) |
appointment of LTC's spouse, Datin Chan Bee Leng, as a Senior Advisor for BJD, without a proper engagement letter and approval by the Board of the Company and no disclosure were made in the accounts. Datin Chan received in total RM111,800 over a period of 26 months; |
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(vi) |
questionable appointment of a certain tax agent and payment by post dated cheques amounting to approximately RM1.6 million being the agreed tax agent's "fees" when there is no evidence of any work done by that tax agent. However the Company managed to stop payment on the cheques except for the amount RM110,000; |
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(vii) |
the acceptance of road projects in Madagascar for contract sum amounting to RM216.9 million without proper feasibility study and Board approval. Furthermore, Company's machineries of a value of RM41.8 million were shipped to Madagascar for the "Madagascar Highway Project" without BOD's approval. The resulting termination of the contracts by Madagascar Government has resulted in total amount being claimed amounting to RM145.6 million without any certainty of recovery; |
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(viii) |
the Company had spent RM8.3 million construction cost in the "NAS Pavilion Project", a project with a total contract sum of RM169.8 million, but had only received RM2.5 million for that project which was entered into by the Company without proper feasibility study and BOD's approval; and |
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(ix) |
sale of Company's machineries without independent valuation nor competitive bidding to one particular buyer, a sole proprietor, without BOD's approval and which has caused the Company to suffer an estimated loss of RM995,500 based on the valuation by the Company. |
| (10) |
as a result of, among others, the Penal Code Breaches, the Companies Act Breaches and other breaches of fiduciary duties by LTC for the Period, the Company had taken all necessary actions including the filing of a suit against LTC at the Kuala Lumpur High Court vide suit number D-22NCC-33-2010 ("Suit") claiming for, among others, damages amounting to RM235.6 million and legal costs. The announcement of the Suit was made by the Company on 8.1.2010. |
| (11) |
on 13.1.2010, the AC has considered the Investigative Accountants' Second Report and has recommended the Investigative Accountants' Second Report for the acceptance by the BOD; and |
| (12) |
on 15.1.2010, the BOD has met and deliberated extensively on the Investigative Accountants' Second Report. Consequently, the BOD has accepted the Investigative Accountants' Second Report based on the recommendation by AC and authorise the AC to make a report to - |
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(b) |
the Securities Commission, and |
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(c) |
Bursa Malaysia Securities Bhd. |
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(d) |
any other authorities, the management deems necessary |
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to ensure that all appropriate action will be taken in respect of the Penal Code Breaches and Companies Act Breaches which have resulted in the Total Loss. |
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