DAP rep claims fraud in Perak Corp's scheme of arrangement

KUALA LUMPUR (June 15): Chong Zhemin, a former director of Perak Corp Bhd (PCB), on Tuesday (June 14) claimed that the state-owned company's scheme of arrangement is fraudulent as it had concealed its assets at the group level in a bid to defraud its creditors.

He has called on the police to launch an investigation into PCB's scheme of arrangement under Section 421 of the Penal Code.

“It is crystal clear that the PCB scheme of arrangement is fraudulent and there is a concerted effort to conceal the company assets to defraud the creditors and justifying paying the creditors only 10 sen for every ringgit owed,” said Chong, who is also Keranji state assemblyman.

Chong contended that PCB’s public announcement to Bursa Malaysia on June 10 stating that its scheme of arrangement was prepared at company level basis and not at group level basis is an open admission that it had intentionally excluded all subsidiaries and its assets from its scheme of arrangement, and that it had not taken into account the value of its subsidiaries in the scheme of arrangement.

“This shows that PCB intentionally, deliberately and consciously leaves out its subsidiaries which is an asset to PCB in the scheme of arrangement. PCB shareholding in these subsidiaries including PCB Equity Sdn Bhd, PCB Taipan Sdn Bhd, Casuarina Meru Sdn Bhd, Lumut Maritime Terminal Sdn Bhd, Rungkup Port Sdn Bhd, PCB Development Sdn Bhd (PCBD) and other subsidiaries can be sold to third party and PCB is well aware that the consideration received can be used to pay off PCB creditors,” he stressed.

“PCB's argument that the assets of these subsidiaries are separate legal entities from PCB and not that of the applicants to the scheme of arrangement is also flawed and cannot hold water. In PCB's annual report 2021, it is disclosed that almost all the directorship of PCB subsidiaries are taken up by the directors or senior management staff of PCB. This proves that PCB as the parent company actively participated in the management of its subsidiaries, effectively acting as a 'shadow director' of its subsidiaries. This itself permits the piercing of corporate veil, and PCB subsidiaries may be deemed an extension of the parent company, because the board and management of PCB subsidiaries failed to maintain independence from PCB. This subjects PCB's subsidiaries' assets to inclusion in the PCB scheme of arrangement,” the DAP lawmaker contended.

Chong also pointed to an affidavit filed at the Ipoh High Court by former PCB chief executive officer Mohamed Shafeii Abdul Gaffoor on May 31, 2021 that revealed the total assets of PCB and PCBD amounted to approximately RM1.33 billion, which was not disclosed in the scheme of arrangement.

“In PCB scheme of arrangement page 17, it was represented by PCB that the estimated net realisable value available for the creditors amount to RM10,080,550.00 which can be used to repay a total creditors' [debt] amounting to RM176,660,867.00 hence trying to justify the estimated recovery amount of RM0.06 for every RM1.

“It is clear that PCB intentionally, deliberately and consciously concealed the total assets of PCB worth RM1.33 billion which was listed down in Shafeii’s affidavit to defraud the creditors," he maintained.

“PCB is well aware of the affidavit filed by Mohamed Shafeii, however PCB made no effort to challenge the authenticity and accuracy of this affidavit,” Chong said of the company which is 52% owned by the Perak government via Perbadanan Kemajuan Negeri Perak.

Chong also claimed that PCB has a piece of land in Tanjung Malim whose book value is reportedly RM37 million, and the net realisable value is estimated to be RM20.35 million. However, there is a joint venture agreement signed on Sept 10, 2019 to sell the piece of land for RM79.275 million.

“How could PCB justify the RM20.35 million net realisable value of the land when there is an agreement to sell the piece of land for RM79.275 million?” he questioned.

He also claimed that PCB failed to disclose the shareholding and the value of VC Telecoms Sdn Bhd in its scheme of arrangement, in which the asset was disposed of for RM12.5 million for the 49% stake PCB owned based on an announcement to Bursa Malaysia dated May 27, 2022.

“I urge the police to immediately investigate PCB under Penal Code Section 421."

He said that under the section, whoever dishonestly or fraudulently removes, conceals, or delivers to any person, or transfers or causes to be transferred to any person, without adequate consideration, any property, intending thereby to prevent, or knowing it to be likely that he will thereby prevent, the distribution of that property, according to law, among his creditors or the creditors of any other person, shall be punished with imprisonment for a term which may extend to five years or with a fine or with both.

Previously, PCB had reiterated that the scheme of arrangement was formulated with the aim of restructuring its debts at the company level and not for the group as a whole.

“It is grossly misleading for YB Chong to include the assets of subsidiaries in this matter, as the subsidiaries were never the parties to the scheme of arrangement, i.e., not scheme companies,” said PCB after Chong lodged a police report against the company over an alleged commercial crime arising from a deviation in the group's asset disclosure between its scheme of arrangement and the 2021 annual report.

Earlier, financially ailing PCB had proposed a debt waiver of RM123.61 million or 88% of its outstanding liabilities to be settled under the scheme of arrangement.

Under its scheme of arrangement, which was filed with Bursa Malaysia on March 26 last year, the group’s outstanding liabilities to be settled under the scheme were RM140.12 million, of which RM89.44 million or 64% are intercompany creditors as at June 30, 2020, while RM36.12 million or 26% are categorised as “other creditors”, with the remaining RM11.78 million and RM2.77 million as “contingent” and “essential” creditors respectively.

Shares of the Practice Note 17 company closed unchanged at 36 sen, valuing the group at RM36 million.