In this corporate misdeed story, the SIDC unveils another creative accounting technique used by a perpetrator to siphon off money from a company.

This is how the story goes…..

Initially

Mr A, a director and substantial shareholder of PLC A, was planning to siphon off money from his listed company. He thought hard about how he was going to execute his plan without being detected. After much thought, he had an idea.

Mr A, besides being the director of PLC A, owns another profitable company, K Sdn Bhd, which is very dear to him. However, in devising his scheme to con PLC A, Mr A caused PLC A to buy K Sdn Bhd at an inflated price of RM30 million. Subsequently, the following entries were recorded in PLC A’s balance sheet to reflect the acquisition of K Sdn Bhd:

Subsequently

After, the sale of his company, K Sdn Bhd, was finalised and he had pocketed the proceeds of the sale, Mr A felt restless again. Mr A never really wanted to sell K Sdn Bhd to PLC A because it was a very profitable company. He was merely using the company to facilitate his devious tactics to strip PLC A’s asset. Mr A started thinking again and this time he was planning to recover K Sdn Bhd. In his strategy to get K Sdn Bhd back, he then asked his nominee, who is a director of Y Sdn Bhd, to buy K Sdn Bhd from PLC A. Mr A then caused PLC A to sell off K Sdn Bhd to his nominee’s company, Y Sdn Bhd, for RM30 million. Since Y Sdn Bhd did not have sufficient funds to pay PLC A the following accounting entries were recorded in the balance sheet of PLC A: