DPP: Transmile's Gan advanced own money to fake business transactions

Transmile Group founder Gan Boon Aun (right) at the Kuala Lumpur Courts Complex today. (Photo by: Shahrin Yahya/The Edge)

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KUALA LUMPUR (Nov 26): Transmile Group Bhd founder Gan Boon Aun had advanced at least RM35 million of his own money to 20 different dormant companies, only for the amounts to be transferred back to a Transmile subsidiary, to show the auditors that the company had business transactions, the Sessions Court heard today.

Deputy Public Prosecutor Mohd Hafiz Mohd Yusof had shown to the court Gan's bank statements and how the money was first transferred to a third party company called Primatasi Sdn Bhd before being distributed to the 20 companies, all of which had an issued capital of only RM2 each.

The amounts were then transferred back to Transmile Air Services Sdn Bhd to make it seem like there were business transactions between the companies, Mohd Hafiz said during his cross-examination of Gan.

The DPP also pointed out that one of the directors of Primatasi was Gan's cousin, Gan Beng Luan.

"I am suggesting to you that all these payments were done to show to the auditors that Transmile had genuine transactions with these fictitious companies," Hafiz told Gan.

"I disagree. Without the payment vouchers, [and] without charter contract agreement, I cannot verify [these transactions]," Gan replied.

Hafiz then said: "I am suggesting to you, that you have in fact made some advances made to the company to sort out the accounts of the company."

But Gan again disagreed.

Gan, who is also the former chief executive officer of Transmile, had on Nov 6 pleaded guilty to the alternative charge of being the director of Transmile when the company, with intent to deceive, furnished a misleading statement to Bursa Malaysia in 2006.

However, he denied certain facts of the case presented by the prosecution. He claimed that he did not have any knowledge of the accounting issues, ie untrue statements and irregular transactions, prior to Transmile reporting its quarterly results to Bursa.

As a result, the court rejected Gan's guilty plea on the grounds that the plea was made with certain repudiations of the facts of the case.

Sessions Court judge Hasbullah Adam fixed further hearing of the case to take place on Jan 10.

The Trasmile accounting scandal took place more than a decade ago.

In April 2007, Transmile's external auditor Deloitte found something amiss in the company's accounts and refused to sign off the financial year 2006 (FY06) accounts due to a lack of supporting documents for certain transactions.

The auditor found itself unable to obtain relevant supporting documentation from the management for certain transactions linked to trade receivables and related sales. Deloitte was also unsatisfied with the validity of transactions done in relation to property, plant and equipment.

Subsequently, Transmile's revenue was found overstated by more than half a billion ringgit for FY05 and FY06. An investigation was launched and a special audit conducted.