121
FRONTKEN CORPORATION BERHAD
(651020-T)
ANNUAL REPORT 2014
NOTES TO THE
FINANCIAL STATEMENTS
(cont’d)
30. SIGNIFICANT EVENTS DURING THE FINANCIAL YEAR
(i)
Following the resignation of a senior management personnel of Frontken Malaysia Sdn Bhd (“FM”), a
wholly-owned subsidiary of the Company, in 2012 the Board of Directors of the Company (the “Board”)
was made aware that there may be some irregular dealings between FM and its suppliers.
On 1 October 2012, Messrs Crowe Horwath was appointed to carry out a special investigative audit.
Messrs Crowe Horwath issued a report on 18 February 2013 followed by an Expanded and Revised
Investigative Audit Report on 3 June 2013.
The Company had on 11 June 2013 lodged a police report at the Police Headquarters, Commercial
Crime Investigation Department at Bukit Aman on the alleged financial irregularities.
A civil suit had also been lodged against an ex-senior management personnel and 5 others (“collectively
known as Defendants”) in the High Court of Penang for inter alia recovery of monies identified to have
been wrongfully paid out by FM to some of the Defendants in view of the findings of the Investigative
Audit conducted by Messrs Crowe Horwarth.
An ex-parte Mareva Injunction Order was subsequently obtained by FM against one of the Defendants
on 2 August 2013. This was followed by an ex-parte Ad Interim order dated 16 August 2013. In essence,
the purpose of the ex-parte Orders was to freeze his assets. FM’s Mareva application against the one
of the Defendant was allowed by consent on 18 March 2014. The main civil suit has been fixed for case
management on 16 March 2015. The trial dates have been fixed from 21 to 23 July 2015.
In respect of the main civil suit, some of the Defendants filed Defences and Counterclaims against FM
and some of its existing senior management. The aforesaid counterclaims are being resisted by FM as
well as its senior management.
The Board has lodged a second police report on one of the Defendants for fraudulently and/or unlawfully
altering the email details in the Defendant affidavits for attempting to mislead the Court and pervert the
course of justice.
(ii)
On 4 February 2014, Frontken (East Malaysia) Sdn Bhd (“FEM”), a wholly-owned subsidiary of the
Company, had served, via its solicitors, a writ of Summons together with a Statement of Claims on
Kuching Barrage Management Sdn Bhd (“KBM”).
FEM is claiming for an aggregate outstanding sum of RM2,571,570 in respect of unpaid invoices for
work done and services rendered by FEM to KBM for the repair and refurbishment of the downriver
shiplock gate cylinders at Pier 7 and 8 (“the said works”) at the price of RM2,050,420 and RM521,150
respectively. FEM has duly completed the said works and the same had been commissioned and tested
to KBM’s satisfaction.
On 6 March 2014, FEM received in total four cheques amounting to RM2,581,570 including legal fees
in the sum of RM10,000 from KBM’s lawyer. FEM withdrew the matter against the defendant upon the
clearance of the abovementioned cheques.
(iii)
On 28 August 2014, Frontken MIC Co. Limited (“FMIC”), a subsidiary of the Company, increased its
issued and paid-up capital from HKD14,990,812 to HKD18,173,025 by the allotment and issuance of
3,182,213 new ordinary shares of HKD1 each at par for cash.
Pursuant to the above allotment of 3,182,213 new ordinary shares, the Company’s effective equity
interest in FMIC, held directly and indirectly by the Company diluted from 41.61% to 40.43%.
(iv)
On 30 April 2014, the Company entered into a Sale and Purchase Agreement to acquire 900,000 ordinary
shares of RM1.00 each (“TTES Shares”) representing 45% of the issued and paid-up share capital of
TTES Frontken Integrated Services Sdn. Bhd. (formerly known as TTES Team & Specialist Sdn. Bhd.)
(“TTES”) for a total cash consideration of RM11 million or approximately RM12.22 per TTES Share.
