UNIVERSITI KUALA LUMPUR

ACCOUNTING INFORMATION SYSTEMS 1 (EAB 21203)

PROJECT (10%)
SEM JAN APR 2014

GROUPS NAME

WAN NUR SYAHIRA AMIRA BT WAN AB AZIZ

(62288212197)

NUR AMALINA BT KHAZALI

(62288212030)

SITI NUR BAIZURA BT ISMAIL

(62288212147)

RABIATUL ADAWIYAH BT MD RADZI

(62288212199)

SUHAIZA BT HASAN
(62288212096)

HANA WAHIDA BT FADZIL

(62288211008)

LECTURERS NAME :

MISS JANNAH BT MOHAIDEN

ASSIGNMENT TOPIC :

Understanding the potential impact of Information Technology on the

Susceptibility of organizations to fraudulent employee behavior.

DATE OF SUBMISSION

: 16TH MAY 2014

TABLE OF CONTENT

1.

INTRODUCTION OF TOPIC

2.

MAIN FINDINGS AND DISCUSSION

3.

CONCLUSION

4.

REFERENCES

5.

APPENDICES

INTRODUCTION
A growing number of banks, retailers, and companies in other industries are making more
extensive use of data analysis to help identify possible cases of internal fraud or other suspicious
behavior by employees that can eat into profits and damage employer/employee trust.
Internal fraud is a significant problem to the world economy of today. Organizations allocate
lots of resources to internal control, a framework implemented in business practice to prevent
internal fraud. These costs, together with the costs of internal fraud itself, represent a large
economic cost for the business environment and did not go unnoticed.
Internal frauds can be broken down into two separate categories: asset misappropriations and
fraudulent financial reporting. Asset misappropriations are the most common and can involve
any of the following (among many others): revenue and cash receipts schemes, purchasing and
cash disbursement schemes, payroll and employee expense reporting schemes and non-cash asset
misappropriations.
Asset misappropriations:
Revenue and cash receipts schemes
Skimming theft of cash before the funds have been recorded on the books. Skimming can be
perpetrated by someone who either initially collects or opens incoming mail, the person who
initially logs in cash receipts, prepares the deposit or takes the deposit to the bank, or door-todoor solicitors of charitable contributions. Checks can also be skimmed. The perpetrator opens
up a bank account in the organizations name with themselves as a signer and simply deposits
and withdraws the checks.
Theft of donated merchandise donated merchandise can be just as susceptible to theft as cash.
While it may be a little harder for the perpetrator to carry the merchandise out, most
organizations have poor controls or recordkeeping over donated items.

Purchasing and cash disbursement schemes

Credit card abuse perpetrators either use organization issued cards for personal use, or more
damaging for the organization is the use of credit card numbers of donors.
Fictitious vendor schemes perpetrators set up a company and submit fake invoices to the
organization for payment.

Payroll and employee expense reporting schemes

Ghost employees whereby either terminated employees are left on the payroll system, or fake
employees are set up in payroll. Payroll checks are issued for non- existent employees and the
checks are cashed by the perpetrator.
Overstatement of hours worked A recent survey found that 16 percent of the 617 workers
surveyed reported witnessing the claiming of extra hours worked by other employees.
Fictitious expenditures submission of fictitious expenditures for reimbursement has become a
significant problem especially with the evolution of desktop publishing. The effort involved in
creating a bogus invoice for reimbursement can be rather minimal.

Other asset misappropriations

Property and equipment schemes outright theft of an asset.
Personal use of organizations assets and other resources (corruption) use of organizations
computers, software, and printers for personal projects. Personal long-distance telephone calls.
Utilizing the organizations Internet access and e-mail for personal use. Photocopying personal
documents on the organizations copy machine.

While not as common as internal frauds, external frauds can occur in organizations and be just as
detrimental. Common examples of external fraud are:
Fraudulent billings by vendors charging for goods or services not delivered or inflating
prices, phony extra charges.
Fraud committed by service organizations to whom organizations outsource important internal
functions using funds for other purposes before remitting, charging for false transactions,
receiving kickbacks from other vendors for subcontracting services.
Fraud by sub recipients reporting fraudulent data or program costs to the not-for- profit that
made the award from the original grant.
Financial assistance fraud students who falsely receive financial aid or others who
fraudulently apply for or use grant funds.

Cases of Fraudulent employee behavior in

Malaysia or Overseas.
From the research that we have done, there are five companies that we have given which is
Transmile Group Berhad, Tyco International Ltd, Adelphia Communication Corporation, Enron
Corporation and General Motors Company.
There are three types of fraud that we have highlights which is either management or
accounting fraud and employee fraud. This is included the understanding the potential impact of
Information Technology on the susceptibility of organizations to fraudulent employee behavior.
In this case, it is always going to be a challenge to prevent an unscrupulous employee from
committing a fraudulent act if they have their mind set on it. Therefore to prevent a fraudulent
case in the company, there are a few recommendations that the companies must follow or take a
responsibility in such a situation that happen in companies.

1. TRANSMILE GROUP BERHAD.

Company overview
Transmile Group Berhad, an investment holding company, provides air transportation and
related services; and deals in aircraft, and aircraft parts and equipment. It also provides express
distribution and logistics management services; and aircraft leasing services. The company was
incorporated in 1996 and is based in Subang, Malaysia.
Accounting fraud
In Transmile Group Bhd, a company which is controlled by billionaire Robert Kuok,
there were accounting irregularities and fraud discovered in the company (New Straits Times,
2007). The company has overstated its accounts to show it has made profits of RM75 million and
RM158 million for the two consecutive years of 2005 and 2006 respectively. In actual fact the
company was at a net loss of RM370 million and RM126 million respectively (New Straits
Times, 2007). The stock dropped to RM9.55, which is the lowest in two years (New Straits
Times, 2007). The auditors Deloitte & Touche declined to approve the accounts when the
company failed to furnish them proof to substantiate certain trade receivables. However, the loss
was not detected by Deloitte & Touche. It was detected through a special audit by Moores
Rowland (New Straits Times, 2006). The audit was then carried out on CEN Sdn Bhd which is
an associate company. Deloitte & Touche dismissed the claim that they failed to detect the
accounting irregularities. Furthermore, it claimed that it is not practicable to expect audit to
represent a 100 per cent check of a companys financial well-being (New Straits Times, 2007).
As a result of the scandal, the company wishes to replace Deloitte & Touche with KPMG after
many years (New Straits Times, 2007). It should be noted that KPMG is already an auditor for
some of the companies owned by Robert Kuok namely Hong Kong listed Keck Seng
Investments and Shangri-La Hotels (Malaysia) Bhd. KPMG is also offering due diligence and
corporate tax advisory services to PPB Bhd a company owned by Robert Kuok.

Thus, the issue is whether there is conflict of interests and independence of auditors.
However, Transmile Group Berhad have overstated its consolidated revenues by US$157 million
dollars (RM 530 million) over the 2005 and 2006 such was the statement to the stock exchange
when Transmile reported on interim findings made by Moores Rowland Risk Management
which is carrying out a special audit.
The auditor found that in the financial year ended December 31, 2006, invoices were
issued and recorded for purported services to 20 companies totalling US$ 98 million dollars (RM
333 million). The auditors also found invoices issued for purported services to 19 companies
totalling 197 million ringgit in the 2005 financial year. The findings result in Transmile having to
re-state its 2006 and 2005 earnings if full provisions have to be made. According to the
unaudited results for 2006 released to Bursa Malaysia on Feb 15, Transmile reported an 80%
surge in revenue to RM989.2mil from RM550mil a year earlier. Net profit more than doubled to
RM157.5mil against RM74.8mil in 2005.
The findings may result in Transmile having to re-state its 2006 and 2005 earnings if full
provisions have to be made. If the overstating figures were to be taken into consideration,
Transmiles 2006 pretax profit of 207 million ringgit could be reduced to a loss of 126 million,
while the 2005 pretax profit of 120 million could be cut to a 77 million ringgit loss. Besides
Kuok, Transmiles shareholders include JP Morgan Chase & Co. (NYSE: JPM), Goldman Sachs
(NYSE: GS, stock), the Singapore government and national postal company Pos Malaysia &
Services Holdings (KLSE: POSHLDG, stock-code 4634).

Recommendation
It is always going to be a challenge to prevent an unscrupulous employee from committing a
fraudulent act if they have their mind set on it. However, Transmile Group Berhad can
implement measures and systems to help protect themselves from acts of fraud. Document
management is one such system that is vital to the prevention of accounting fraud. Other than
that, it is essential for management to engage an experienced professional who has conducted
many fraud-related interviews.

2. TYCO INTERNATIONAL LTD.

Tyco (NYSE: TYC) is one of the worlds largest pure-play fire safety and security companies.
We help to protect more than three million industrial, commercial and residential customers
worldwide. Our 69,000 employees include a diverse group of scientists and engineers, sales
professionals, technicians and business leaders. In more than 1,000 locations in nearly 50
countries including research and development labs, manufacturing facilities, service and
distribution centers, monitoring centers and sales offices Tyco employees work together to
deliver tailored, industry-specific and location-specific fire protection and security solutions to
customers around the world. Tycos United States headquarters are in Princeton, New Jersey.
The companys corporate headquarters are in Schaffhausen, Switzerland. Tyco grew to become
one of the worlds largest dedicated fire protection and security companies from humble
beginnings. Tyco, Inc. was founded in 1960 by Arthur J. Rosenburg, Ph.D., as a research
laboratory to conduct experimental work for the U.S. government. The business focused on
solid-state science and energy conversion. By 1962, Tyco began to transition from U.S.
government research contracts to commercial applications.
Employee fraud.
An infamous contradictory of the social responsibility of business would have to be the Tyco
scandal that occurred in 2002. Tyco, a widely known manufacturing company of products
ranging from health care products to electronics, was shocked to discover that former CEO,
Dennis Kozlowski, was stealing millions of dollars from the company for his own personal use.
With great craftsmanship within the field of deception, Kozlowski along with the Chief Legal
Officer, Mark Belnick, and CFO, Mark Swartz worked together to provide each other ambiguous
loans while falsifying the records to hide the traces. This incident was estimated to be a loss of
$600 million for Tyco.

Bribery
The ethical issue under conflict of interest in the scandal of Tyco International is bribery. This
issue is a conflict of interest because the directors of Tyco have used their position of trust in the
company to fulfil their personal interest rather than the shareholders interest which is to manage
the company well. In this scandal, two major bribery cases were occurred. The first case is Frank
E. Walsh Jr., the director of Tyco International had received $20 million for helping the
arrangement of the acquisition of CIT Group without the knowledge of the rest of the board of
director. Next, the second case is Stephen W. Foss, the member of Tycos board of director
received $751 101 for supplying a Cessna Citation aircraft and pilot services.

Accounting Fraud.
The issue in Tyco case that relate to conflict of interest is accounting fraud. The conflict of
interest arises in this case because the auditors, accountants, and executives of Tyco International
erode trust and their personal interest has greatly varied with the interest of shareholders and the
stakeholders in Tyco. In this case, Tyco International failed to give true financial picture for
several years. Dennis Kozlowski, Mark Swartz and Mark A. Belnick were those Tycos
executives who committed fraud by charged with falsifying business record to conceal a great
amount of loan without approval. Besides, it had been found out that Tyco engaged in financial
gimmicky to deliberate and manipulating its earnings. Jerry Boggess, the president of Tyco Fire
and Security is the one who involved in bookkeeping fraud that affected the earning per share in
Tyco in this case. Besides, Dennis Kozlowski also indicted on tax evasion for avoiding just over
$1 million in New York State and local sales tax (Andrew and Alex, 2002). In addition, Scalzo
(Tycos former auditor) who audited Tyco's financials from the years 1997 until 2001, found that
he failed to conduct sufficient steps in audit procedures which related to certain executive
benefits, executive compensation, and related party transactions. Furthermore, he also engaged in
improper professional conduct (Taub, 2003).

Recommendations
The company should also cultivate an ethical corporate culture. To do so, code of conduct
should be set by the company. International Labor Organization mentioned that code of conduct
is a companys statement to explain ethical standards and applications that should be apply by
the employees. Code of conduct could promote ethical and moral deeds among the employees in
the company. The company should also organize seminars and training for the employees in
order to teach the employees to deal with issue that related with conflict of interest for example
the issue mentioned in the analysis before. Just as what had been mentioned in the analysis,
leadership plays important role in shaping corporate culture. The top management should have
ethical leadership so that the subordinates could have a good role model to follow.

3. ADELPHIA COMMUNICATION CORPORATION

Business Overview.
Adelphia Communications Corporation (former NASDAQ ticker symbol ADELQ), named after
the Greek word "brothers", was a cable television company headquartered in Coudersport,
Pennsylvania. Adelphia was the fifth largest cable company in the United States before filing for
bankruptcy in 2002 as a result of internal corruption. Adelphia was founded in 1952 by John
Rigas in the town of Coudersport, which remained the company's headquarters until it was
moved to Greenwood Village, Colorado, shortly after filing for bankruptcy.
Adelphia fraud activities
a) Hiding debt in unconsolidated in subsidiaries
Adelphia entered into co-borrowing credit facilities with various Rigas family owned
businesses which they are jointly liable for the entire amount borrowed. Adelphia
management kept this liability off the books by allocating the co-borrowing loans among
its consolidated subsidairies. Debt of the subsidiary was increased and Adelphias bank
debt was reduced by the same amount. It gave investors the false impression that the
company was leveraging and paying off debts. The company made further
misrepresentation in public statements and filings to keep up the appreance as well as
creating sham transactions and fictitious documents to prove that debts had been repaid.

b) Intentionally misstatement
Intentionally misstatements of the companys performance to meet analysts expectation
and mislead investors that Adelphia exceeded their expectations for growth. Adelphia
repeatedly misstated the key performance measures used by Wall Street analysts to assess
the performance of cable companies. The number of basic cable subscribers is a key
performance measure for a cable company because it provides a predictable cash flow
that unlikely to shrink in times of economic recession.

To falsely inflate this count, for every quarter from 2000 onwards. Adelphia included
cable subscribed to internet or home security services or other services entirely unrelated
to cable plant upgrades and inflated their earnings by recording fictitious management
fees, recognizing kickbacks as income and shifting expenses to unconsolidated affiliates.

c) Fraudulent misrepresentation and omission of material

Many fraudulent misrepresentation and omissions of material fact carried out to conceal
self-dealing by the Rigas Company. This included actions in which the Rigas family
obtained more that $1.3 billion in a company stock and notes from Adelphias funds
through manipulation of their cash management system. Other self dealing transaction
included paying-off $241m of family personal debt from Adelphias assets paying $26.5
for timber right on Rigas property to preserve the view outside the Rigass family home,
spending $12.8m of company money to built a golf course and club house for exclusive
family use all from Adelphia owned funds. None of these transactions were disclosed to
the investors.
Recommendation
The management should not be using companies profit for personal use and should be reporting
financial situation whatever the situation of the companies in the debt or not. As a auditor in
Adelphia company also need to be independence when audit the company. They should not issue
the report as unqualified reports when the Adelphia company in a debt. We can see that the
company Adelphia has existed the internal control weaknesses. This is because corporation is
owned by the shareholders which is Rigass family. The Internal controls cannot be effective if
the executives in charge have to power to override them. Top employees need to be overseen
their accountability and increased responsibility as public companies which is the best way of
preventing fraud.

4. ENRO N CORPORATION.
The Enron scandal, revealed in October 2001, eventually led to the bankruptcy of the Enron
Corporation, an American energy company based in Houston, Texas, and the dissolution of
Arthur Andersen, which was one of the five largest audit and accountancy partnerships in the
world. In addition to being the largest bankruptcy reorganization in American history at that
time, Enron undoubtedly is the biggest audit failure. It is ever the most famous company in the
world, but it also is one of companies which fell down too fast. In this paper, it analysis the
reason for this event in detail including the management, conflict of interest and accounting
fraud.Meanwhile, it makes analysis the moral responsibility From Individuals Angle and
Corporations Angle.

Employee Fraud
In the aftermath of Enrons bankruptcy filing, numerous Enron executives were charged with
criminal acts, including fraud, money laundering, and insider trading. For example, Ben Glisan,
Enrons former treasurer, was charged with two-dozen counts of money laundering, fraud, and
conspiracy. Glisan pled guilty to one count of conspiracy to commit fraud and received a prison
term, three years of post-prison supervision, and financial penalties of more than $1 million.
During the plea negotiations, Glisan described Enron as a house of cards. Andrew Fastow, Jeff
Skilling, and Ken Lay are among the most notable top-level executives implicated in the collapse
of Enrons house of cards. Andrew Fastow, former Enron chief financial officer (CFO), faced
98 counts of money laundering, fraud, and conspiracy in connection with the improper
partnerships he ran, which included a Brazilian power plant project and a Nigerian power plant
project that was aided by Merrill Lynch, an investment banking firm.

Fastow pled guilty to one charge of conspiracy to commit wire fraud and one charge of
conspiracy to commit wire and securities fraud. He agreed to a prison term of 10 years and the
forfeiture of $29.8 million. Jeff Skilling was indicted on 35 counts of wire fraud, securities fraud,
conspiracy, making false statements on financial reports, and insider trading. Ken Lay was
indicted on 11 criminal counts of fraud and making misleading statements. Both Skilling and
Lay pled not guilty and are awaiting trial.

Financial Problem
One of the levers by which Skilling, Causey, and others ensured that Enron met financial
reporting targets was the creation and use of Special Purpose Entities (SPEs). Enron
transferred assets and liabilities to SPEs so that those business activities were deconsolidated
or off-balance-sheet. Under then applicable accounting rules, Enron did not need to
consolidate the SPE on its balance sheet if an independent investor had made a substantive
investment in the SPE (at least 3% of the SPEs equity), had control of the SPE, and had the risks
and rewards of owning the SPE assets. Through the use of SPEs, Enron would, among other
things, record earnings and cash flows while hiding debt. This, along with the other fraudulent
devices described here, enabled Enron to present itself more attractively as measured by criteria
favoured by Wall Street, credit rating agencies, and others.

Lack of independent of management

It has been suggested that conflicts of interest and a lack of independent oversight of
management by Enron's board contributed to the firm's collapse. Moreover, some have suggested
that Enron's compensation policies engendered a myopic focus on earnings growth and stock
price. In addition, recent regulatory changes have focused on enhancing the accounting for SPEs
and strengthening internal accounting and control systems.

We review these issues, beginning with Enron's board. (Gillan SL, Martin JD, 2007) The
conflict of interest between the two roles played by Arthur Andersen, as auditor but also as
consultant to Enron. While investigations continue, Enron has sought to salvage its business by
spinning off various assets. It has filed for Chapter 11 bankruptcy, allowing it to reorganise while
protected from creditors. Former chief executive and chairman Kenneth Lay has resigned, and
restructuring expert Stephen Cooper has been brought in as interim chief executive. Enron's core
business, the energy trading arm, has been tied up in a complex deal with UBS Warburg. The
bank has not paid for the trading unit, but will share some of the profits with Enron.

Recommendation
Enron was a remarkable and innovative company in the world. Its success cannot be
neglected. The company, incentives be paid after a project done or at least when there is really
profiting from that certain project. Operational risk should be minimized and there should be
some sort of check up. Careful selection of accounting approach and financial structure to use.
The company must minimized payment in stocks.

5. GENERAL MOTORS COMPANY

Issues
a) Pension
In 2008 and 2009, GMs financial condition had been deteriorating. The issue is about
pension had caused the GMs financial problem. The effective negotiation skills of such
labour unions as the United Auto Workers (UAW) gives some interesting advantages to
individuals regarding pension plan.
The companys cost of manufacturing automobiles suffered huge expenses caused by the
GM's pension plans and other postretirement plans. Toyota, one of the foreign
competitors overtook GM as the worlds largest automobile producer in 2009. This is
because they paid more modest salary and provided employees with less liberal pension
and other postretirement advantages.

Finally, in 2009, GM almost bankrupt because lack of funds. This is because the GM
company needs to pay pension wages monthly to their ex employees. The majority
individuals relied on their GM pension as the principal source of their retirement income.
But, after GM became bankruptcy, they did not get anything.

b) Financial Problem
In the case of General Motor Company the company have the issue it is financial
problem. It is because of the pension plan that General Motor make for their employees.
GMs retires and employees were that the present value of the liabilities associated with
the GMs pension plan was estimated to exceed $100 billion while the pension plan had
total assets of only $85 billion. So as the company tottered on the verge of bankruptcy, it
was unclear that the pension plan would be salvaged if the company filed for bankruptcy.

Other than that, the financial problem happens in the General Motor because the
company not mention they make the rate discount in their pension plan. It means that
every year of rate discount that they make not state in financial statement. So it will make
that General Motor have problem and in the long time make their company bankruptcy
because cannot afford to pay pension.

So in subsequent complaint filed against GM by SEC in January 2009, the federal agency
maintained that the pension related amounts and disclosures within the companys 2002
financial statement were materially misleading. It means that with the materially
misleading the financial statement have problem. So it makes the company not afford to
pay the pension to their employees and then become the bankruptcy.

c) Discount Rate
Unfunded portion caused by falling market prices and falling of interest. SFAS No.87
obligated GM to choose reasonable discount rate to apply in computing the present value
of its pension liability. The mathematical method historically used by the company
produced a discount rate

6 %. However the actuarial firm suggested that 6.18%

discount rate was appropriate. GM executive chose 6.75% for the discount rate. This rate
produced by simply averaging the interest rates on a relatively small sample of high
quality corporate bonds tracked by the Moodys investment services. In fact the actual
interest rate was 6.63%. The GM actually rounded the given estimate to the nearest
quarter of a percent. The Securities and Exchange Commission challenged that assertion.
Deloitte auditors noted that 7.75% was too high. GM personnel ate second meeting
apparently convinced the Deloitte auditors to accept 6.75% rate by pledging to include
sensitive analysis in the companys 2002 Form 10-k to illustrate impact of an array of
discount rates. In January 2009 the federal agency maintained the pension related amount
and disclosure within companys 2002 financial statements were material misleading.

Recommendation
The company needs to provide consolation money for pensioners, not pension funds. So, the
company can decrease their expenses and they can produce the quality automobiles. Moreover,
when the company can produce the good productions, indirectly, it will give good image for the
company.
The financial statement of GM Company was materially misleading. The company ought to
mention all items in the financial statement correctly so that the GM Company can avoid
materially misleading. This is vitally essential to the company to give good reputation to the
investors and stakeholder especially.
Deloitte as the external auditor should be independence when make their work. It is because they
is the external auditor that have their own opinion and GM should agree with their opinion. They
also must be strictly in their work and also when make the decision even though GM executives
have their power to make decision.
Other than that, the GM Company must mention the specific rate of discount in their annual
financial statement. The rate of discount should not too high and it must be affordable to the
company so that they can pay it systematically. This can avoid the company became bankruptcy.

CONCLUSION
Among the business communities, fraud is a serious issue for business owners. In fact,
studies show that occupational fraud now results in the loss of five percent of an organizations
annual revenue. Fraud and white collar crime have increased considerably over the last ten years,
and professionals believe this trend is likely to continue. The cost to business and the public can
only be estimated, as many crimes go unreported. However, the statistics we currently have show
the astronomical values associated with fraud. Also, the expansion of computers into businesses
may make organizations more vulnerable to fraud and abuse.
In order to combat fraud and white collar crime in businesses, a concerted effort must be
exerted by the management of the business, the external auditors, and by all employees of the
business. Everyone must realize that fraud is not a victimless crime. The cost of fraud and theft
are shared by all through higher costs and lower corporate profits. Through adequate internal
controls by management, better working environments for employees, more stringent
requirements for external auditors, and codes of ethics for employees, everyone can start to
combat frauds and defalcations within corporate America.

REFERENCES

1) Adelphia Communication Corporation. Wikipedia. Web. 12 May 2014.

http://en.wikipedia.org/wiki/Adelphia_Communications_Corporation
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Waikato. June 2007. Web. 12 may 2014.
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quence=1
3) Adelphia founders John Rigas found guilty. NBC.News.2013. Web. 12 May 2014.
http://www.nbcnews.com/id/5396406/ns/business-corporate_scandals/t/adelphia-founder-johnrigas-found-guilty/#.U3FMroGSzkA
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8) Liong Sik must explain Transmile fraud. MalaysiaKini.News. 2007. Web. 13 May 2014.
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APPENDICES

Liong Sik must explain Transmile fraud

5:22PM Jun 2, 2007

Former cabinet minister Dr Ling Liong Sik should explain the Transmile accounting fraud,
involving overstating profits up to RM530 million, said Opposition Leader Lim Kit Siang.
Ling, formerly MCA president, is chairperson of Transmile Corporation, a global
aviation group, that has come under fire for overstating its profits.
A recent special audit carried out by Moores Rowland Risk Management Sdn. Bhd,
showed that Transmile made pre-tax losses of RM126 million and RM77 million for 2006 and
2005, respectively, instead of pre-tax profits of RM207 million and RM120 million as
originally reported a total of RM530 million in overstatement.
"Liong Sik should explain how he is going to assume responsibility for the Enron-type ...
fraud in Transmile," said Kit Siang in a statement today.
Pos Malaysia & Services Holdings Bhd has warned that its earnings for the financial year
ended Dec 31 may be affected by the reported overstatement of Transmile's sales revenue
as the postal group owns 15.3% of Transmile.
"I am surprised that Pos Malaysia & Services Holdings Bhd has not admitted that its
earnings for the financial year 2005 could also be affected," said Lim.
Pos Malaysia reported a net profit of RM160.2 million for 2006 and RM145.3million for
2005.
Lim said that as a former senior cabinet minister Liong was transport minister
Malaysians expect Liong Sik to be "a model of a responsible corporate player."
He said Liong Sik should be "more forthcoming" and "make a clean breast" of his
responsibilities and remunerations including waht he had drawn from Transmile in his
capacity as chairperson.

Enron
The real scandal
America's capital markets are not the paragons they were cracked up to be
Jan 17th 2002 | From the print edition

THE collapse of Enron was spread over several months late last year, when the world's attention
was still on Afghanistan. The Texas-based energy-trading giant, once America's seventh-biggest
company, declared bankruptcy on December 2nd. Yet it has taken until now for this simmering affair
to boil over in Washington, DC. And, as so often, the ensuing scandal risks focusing on the wrong
issues.
On Capitol Hill, much of the talk has been of the close links that Kenneth Lay, Enron's chairman, had
with George Bush and other Texas Republicans. The press has been burrowing into how often Mr
Lay and other Enron bosses called administration officials to beg fruitlessly for help. There has been
tut-tutting about congressmen collecting campaign money from Enron, which, far from buying
Republicans alone, was admirably bipartisan: three-quarters of the Senate took Enron cash. And
public indignation has been roused over how much Mr Lay and his colleagues made from Enron
shares, unlike their workers, whose pension funds were largely invested in Enron stock that they
were unable to sell in time.
Yet little of this is new. Certainly, Enron's demise confirms some unattractive features of American
public life (see article). The campaign-finance system puts too many politicians under obligations to
big-business donors: Enron lobbied successfully for exemption from financial regulation for its
energy-trading arm, and it also helped to draw up the administration's energy policy. Executive pay
and stock options have long given bosses too much for doing too little. Some companies have been
at fault in encouraging workers to invest pension money in their shares; after Enron, legislation to
limit this is urgently needed. But for the most part, the bankruptcy of Enron was just part of the
rough-and-tumble of American capitalism, the most successful system the world has known.

Adelphia founder John Rigas found guilty.

Updated 7/8/2004 6:07:13 PM

79-year-old Adelphia Communications founder John Rigas, right, was

convicted of conspiracy, bank fraud and securities fraud Thursday.

NEW YORK Adelphia Communications Corp. founder John Rigas and his son Timothy
were convicted Thursday of conspiracy, bank fraud and securities fraud for looting the cable
company and duping its investors. The two were convicted of all 15 securities fraud charges
against them and other counts. Another Rigas son, Michael, was acquitted of conspiracy
charges in the partial verdict; the jury was undecided on most of the remaining counts
against him. Former Adelphia assistant treasurer Michael Mulcahey was found not guilty of
conspiracy and securities fraud. John Rigas, 79, and Timothy Rigas, 47, each faces 30 years
in prison on the most serious charge, bank fraud. John Rigas showed no reaction to the
verdict, leaning forward in his chair and looking down at the defense table. Mulcahey, 46,
hugged his lawyer and supporters in the courtroom. The jurors returned the partial verdict
after telling the judge they were having trouble reaching a decision on some counts. They
had asked for guidance on how to reach a decision without revealing how they were split.
Judge Leonard Sand told them he would accept a partial verdict. It was the eighth day of
deliberations following a three-month trial. Sand said he would give further instructions
Friday on the undecided counts against Michael Rigas, 50. He sent jurors home for the day
and instructed them not to listen to media coverage of the case. Ladies and gentlemen,
youve been working very hard, and your task is not over, he said. The Rigases and
Mulcahey were charged with hiding $2.3 billion in debt at the cable company, deceiving
investors and stealing company cash to line their own pockets.

The verdict marked another success in Manhattan for federal prosecutors, who won
convictions against Martha Stewart in March and former star technology banker Frank
Quattrone in May. The elder Rigas founded the company in 1952 in tiny Coudersport, Pa.,
and turned it into one of the nations largest cable firms. While most of the alleged fraud
took its form in hidden debt, the trial was also notable for examples of the eye-popping
personal luxury that has marked other white-collar trials.
Prosecutor Christopher Clark led off his closing argument by saying John Rigas had ordered
two Christmas trees flown to New York, at a cost of $6,000, for his daughter. Rigas also
ordered up 17 company cars and the company purchase of 3,600 acres of timberland at a
cost of $26 million to preserve the pristine view outside his Coudersport home.
Peter Fleming, his lawyer, told the jurors that the claim was ridiculous If you saw this on
Seinfeld, youd double up and that the company simply wanted to keep the small town
attractive to its employees. Still, the Adelphia founder stole with such gusto from his
company, prosecutors said, that Timothy Rigas became concerned and limited his father to
withdrawals of $1 million per month. The prosecution relied heavily on the testimony of two
former Adelphia executives, James Brown and Karen Chrosniak, to describe a complex
scheme to lie on financial filings and hide Adelphia debt. But Chrosniak, in tearful
testimony, said John Rigas was basically in the dark about the companys money problems
as its financial filings were being prepared. Mulcahey was the only defendant to take the
witness stand in his own defense, testifying that he answered to the Rigas family when
tending the companys books.I understand the corporation is owned by the shareholders,
Mulcahey said. The owners of the company are indirectly my bosses, but thats not who I
reported to.Adelphia now operates under bankruptcy protection and has moved its
headquarters from Coudersport to Greenwood Village, Colo. In his closing argument on
behalf of Timothy Rigas, lawyer Paul Grand tried to distance the Adelphia four from Enron
Corp. officials, whom he called real corporate villains. And Mulcahey lawyer Mark
Mahoney said the disclosure of financial problems at Adelphia in 2002 led to a drive by
some employees to take down the Rigas family rather than fix the company.It wasnt
regicide, Mahoney said. It was Rigas-cide.
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