This article first appeared in Corporate, The Edge Malaysia Weekly, on June 13 - 19, 2016.

THE Securities Commission Malaysia (SC) could be taking more action against some of the personalities involved in the Kenmark Industrial Co (M) Bhd fiasco several years ago, sources familiar with the matter say.

It is learnt that the SC is mulling charges and could make a decision to initiate more proceedings early next week.

“Investigations are being conducted and it seems likely that the SC will seek more punitive action,” a source says.

To recap, the Kenmark debacle took place in May 2010. The company’s shares were suspended after they fell 22 sen or 68% to 10.5 sen on news that its managing director and major shareholder James Hwang could not be contacted, that its premises had been sealed and that a receiver was to be appointed.

To put things in perspective, some 71.9 million shares, or more than 40% of Kenmark’s share base, were traded on May 31, 2010.

What happened was that only independent directors Zainabon @ Zainab Abu Bakar and Yeunh Wee Tiong were present at an audit meeting. While Hwang was incommunicado, deputy general manager and finance and administration manager Goh Kim Chon, who was usually present at the meetings, did not turn up.

Goh had resigned by then while Hwang and the Taiwanese directors could not be reached. In response to an unusual market activity query, Kenmark said the company’s financial results could not be presented at the audit meeting because of Goh’s departure.

In the meantime, staff were turned away from work because operations had ceased, and Bursa Malaysia classified Kenmark a Practice Note 17 (PN17) company.

Kenmark told Bursa that Hwang, who held a 27.61% stake in the company, and the Taiwanese directors — Huang Ching Hsiang and Chen Wen-Ling (non-independent non-executive directors) and Chang Chin-Chuan (executive director) — could not be contacted. Chen controlled 18.7% of Kenmark while Chang held 0.14% equity interest, and collectively, the three directors owned 46.45% of the company.

Hwang resurfaced a few days after disappearing, saying that he had been taken ill and that he was unconscious, which somehow made matters worse. He said he was “sorry for the confusion” and that he was “taken ill in China ... and was in a delirious state from lack of sleep and was in and out of consciousness”.

What is of significance is that in that one week, more than RM100 million was wiped out of Kenmark’s market value. And because it failed to submit its financials on time, stockbroking outfits force-sold Kenmark’s shares while jittery creditors came a-knocking.

Among others, the manufacture of computer workstations, printing packaging materials and consumer products was the company’s mainstay. It supplied international chains such as Wal-Mart, either directly or via agents. In short, it had a viable business. In its financial year ended March 31, 2009, the company registered a net profit of RM3.8 million on revenue of RM259 million.

The second part of the Kenmark story centres on the emergence of Datuk Ishak Ismail, a prominent corporate player of the 1990s who was involved in a fight for KFC Holdings (M) Bhd and controlled the fast-food operator and Idris Hydraulics (M) Bhd, among others.

Ishak and his family emerged as 32.36% shareholders of Kenmark on June 7, a week after the problems began. News reports surfaced, suggesting that Ishak and Hwang were old friends and that the former was a bumiputera shareholder of Kenmark with a 20% stake in 1997. This was when the company was first listed but Ishak subsequently sold his shares.

At the time, he told a newspaper that he had received a call from Hwang, seeking help, and that he had stepped in. Calculations back then indicated that Ishak had forked out eight sen per share. But the shares shot up more than 120% from 11.5 sen to 26 sen, giving Ishak a paper gain of some RM10 million.

To cut a long story short, Ishak had acquired Kenmark’s shares on June 1 and 2 as other shareholders were dumping their shares, spooked by the disappearance of Hwang and the company’s inability to file its financials.

The SC, meanwhile, obtained an injunction, preventing Ishak from utilising the RM10 million he had received from the sale of Kenmark’s shares as it suspected he had breached securities laws.

The High Court ordered Ishak to give full and complete details of his assets, whether in Malaysia or elsewhere, within four days.

Ishak was charged with making false or misleading statements under Sec 177 of the Capital Markets and Services Act 2007, and insider trading under Sec 188 of the same Act. The case is ongoing. 

Save by subscribing to us for your print and/or digital copy.

P/S: The Edge is also available on Apple's AppStore and Androids' Google Play.