by Ganesh Sahathevan
These figures have been extracted from the Berjaya Sports Toto Bhd audited annual reports fro the respective years. The auditor was. Ernst and Young.
Ali Kadir was appointed as Chairman of the Securities Commission of Malaysia on 1 March 1999 and served in that capacity until 29 February 2004. Prior to his appointment to the Securities Commission, he was the Executive Chairman and Partner of Ernst & Young and its related firms.
The notes to the accounts ,for all financial years , have consistently read:
The minority interests reflect a net debit balance due
to losses borne by a minority corporate shareholder. The minority
corporate shareholder is deemed to have an obligation to take up its share
of liabilities as it is wholly owned by the related party, Berjaya Group Berhad
On 18 June 2004 Berjaya Toto released an unaudited Quarterly Report in which it announced that RM 152 million of the debit balance in the minority interest account had been written-off and charged against revenue in the profit and loss.
Explaining the write-off the Company said in the Quarterly Report :
The minority interests in prior years reflect a net debit balance due to
losses allocated to the minority corporate shareholder, Berjaya Group
(Cayman) Limited, by virtue of its 48.5% share of the investment. These
losses are now absorbed by the Group as the minority corporate shareholder
has indicated that it no longer wishes to invest further in the
investment."
The real issue concerning Berjaya Toto at the relevant time was that of its loans to other Berjaya Group companies. The "investment" quite likely concerned some or all of the loans. EY had nothing to say about the highly unusual accounting treatment above, and neither did the Securities Commission. There is however no reason why the current SC chief Awang Adek should not investigate the SC's inaction, and make his findings public.
To Be Read With
Tuesday, October 18, 2022
Ali Kadir , the SC, Berjaya and a conflict of interest; story circa 1997
by Ganesh Sahathevan
One from the archives
First published in July 1997, website at link below no longer exists and is not archived at WebArchive.
intention to investigate Pilecon and Soh Chee Wen et al, he has been
deafeningly silent on the issue of DigiSwisscom's greater than forecast losses, despite the fact that there is precedent for the SC acting against promoters of companies that did not meet their forecast earnings. Recall the prosecution of Tan Kim Leng, former MD of UCM.
Ali's silence may have to do with the fact that Ernst and Young, the
firm of chartered accountants that he was principal of prior to his
appointment as head of the SC, were in his time, and continue to be
auditors for Berjaya Toto; the engine of the Berjaya Group,and various other ventures that Vincent Tan gets himself into. The issue of BToto's massive inter-company loans, and the consequent detriment to minority shareholders in that company has been raised here before; readers might remember that the SC's response to that issue was to say that it was an issue for the minority shareholders and not the SC to pursue.
The use of BToto to finance other BGroup and Vincent Tan related
ventures continues. Most recent among these is BToto's investment in a 5% stake in Sun Media S/B, publisher of the SUn, and in which Vincent Tan is controlling shareholder and chairman. It is unclear if this investment has been declared publicly via any notification to the KLSE.
Be that as it may, the manner in which Ernst and Young came by the
Berjaya Toto audit should be considered now given Ali's promotion to the SC. Berjaya Toto, together with the all the Berjaya companies were until late 1992 audited by PriceWaterhouse. Berjaya initiated the change in auditors, some say because Price and Berjaya disagreed about the treatment of goodwill of RM 550-600 million which had arisen in BToto's books, as a result of BToto buying Sports Toto(M) Sdn Bhd, for RM 670 million, from another Vincent Tan controlled entity.That goodwill, which remains in the books, valued at RM 547 million, is today, one of the largest, if not the largest asset in the BGroup balance sheet. It is vital in balancing the BGroup books, given the high level of borrowing.
Ernst and Young, then still headed by Ali Kadir, did not see any
difficulty with the issue, as apparently PriceWaterhouse had.
Consequently, Ernst won the BToto audit.
END
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