This article first appeared in The Edge Financial Daily, on June 14, 2016.
KUALA LUMPUR: Businessman Datuk Ishak Ismail, once a key personnel in the shareholder tussle to garner control of KFC Holdings Bhd in the 1990s, is charged by the Securities Commission (SC) again.
This time round, Ishak is charged with giving misleading statement that was likely to induce others buying shares in the financially stressed furniture maker Kenmark Industrial Co (M) Bhd and insider trading that involves selling of 58.69 million Kenmark shares in June 2010.
This is the second high-profile case brought to court by the SC in recent months after Low Thiam Hock, better known as Repco Low in the investing fraternity, who was sentenced to five-year jail term and RM5 million fine in February this year on manipulating Repco Holdings Bhd’s share price in 1997.
Ishak claimed trials for the three charges. The three charges, upon conviction, each carries a minimum fine of RM1 million and an imprisonment term of not more than 10 years.
Ishak was charged for making a misleading statement between June 4 and 5, 2010, that was published in The Star on June 5, 2010. The news report quoted him as saying that “It (Kenmark) is a good company. I checked and there is nothing wrong with the company. There is a misunderstanding”. Ishak commented when asked about the reason he bought into the furniture manufacturing firm at the time the company’s share price tumbled.
Ishak is alleged to have in possession of information that two of Kenmark’s clients had gone bankrupt and EON Bank Bhd did not agree to uplift the receivership of Kenmark as at June 8, 2010.
Kenmark’s share price was already on a downhill on news that the company’s managing director and major shareholder James Hwang was not contactable when Ishak took up a 32.26% stake, or 57.69 million shares. The stock dived from 84 sen in early May, 2010, to 26 sen on June 4 — the day Ishak made his comment on Kenmark. Subsequently, the stock tumbled to barely 6.5 sen two months later, Bloomberg data shows.
According to the charge sheet, the said statement was likely to induce others to buy Kenmark shares, when he ought reasonably to have known that the said statement was misleading in a material particular.
Ishak also faced two insider trading charges that involved sales of 27.69 million shares held by Unioncity Enterprices Ltd on June 9 and 31 million shares held by BHLB Trustee Bhd for a discretionary trust for Ishak’s family on June 11, 2010.
In 2010, the SC had obtained an injunction from the Kuala Lumpur High Court to freeze RM4.8 million of the proceeds from the impugned trades by Ishak. The civil case is ongoing.
This was not the first time Ishak was charged for violating securities law.
On July 24, 1999, Ishak, who was then a director of Idris Hydraulic (M) Bhd (IHMB), was charged for falsely disclosing in IHMB’s proposal to the SC claiming that he did not hold any shares in KFC Holdings.
The information submitted was related to IHMB’s proposed acquisition of KFC’s asset. Ishak pleaded guilty and was convicted on Aug 23, 2001 of the offence of submitting false statement to the SC and was fined RM400,000 in default six months imprisonment.
In another case related to IHMB, Ishak as a director then was charged on June 28, 2002 for abetting IHMB in misutilising RM50 million of the proceeds raised from the disposal of Kewangan Bersatu Bhd. The said amount was used for purposes other than those approved by the regulator. Ishak was compounded RM400,000 for the offence. As a result of the compound, the charge was withdrawn.