Wednesday, July 26, 2006

CONTAINER OF WORMS

The injunction orders are out but not before Matthias Chang had filed his 55-point affidavit in response to Kalimullah Hassan's RM50 million suit.

If Shahrir Samad, the chairman of PAC, is really going to probe into ECM-Libra's controversial merger with Avenue Capital, the rakyat-owned GLC, he won't ignorePoint No 54 of the affidavit.

It's a container of worms.

IN THE HIGH COURT OF MALAYA AT KUALA LUMPUR

(CIVIL DIVISION)

CIVIL SUIT NO S1-23-68 2006


BETWEEN

Datuk Kalimullah Bin Masheerul Hassan … Plaintiff

and

Matthias Chang Wen Chieh … Defendant

DEFENDAN’T AFFIDAVIT

I, MATTHIAS CHANG WEN CHIEH (I/C No: 500222-10-5571) a Malaysian citizen ..

54. In response to paragraph 15 of the Plaintiff’s Affidavit I verily state that the Plaintiff as Chairman and Co-Chief Executive Officer of ECM Libra Berhad has committed financial irregularities in the management of the said company. In the sale of ECM Libra Bhd’s operating subsidiaries to the government controlled company Avenue Capital Resources Berhad, the Plaintiff aided and abetted corrupt practices committed in the course of the said transaction. The particulars are given in paragraph 54 of the Defence and Counterclaim and I repeat the same here:-

Background Facts – Financial Year Ending 31. 3. 2004

1) The Plaintiff was appointed to the Board of ECM Libra Bhd on 2. 4. 2004.


2) The company was previously known as South Peninsular Industries Berhad and on 31. 3. 2004, the name was changed to ECM Libra Bhd.

3) For the financial year ending 31. 3. 2004, its Annual Report stated that the said ECM Libra Bhd group’s revenue deteriorated to RM39.8 million from RM57.7 million the previous year. It recorded a loss before taxation of RM9.8 million against a profit before taxation of RM9.4 million in the previous year. The Group’s loss attributable to shareholders in the reporting year stood at RM10,602,959 compared with a profit of RM8,625,100 in the previous financial year.

4) ECM Libra Bhd on 30. 4. 2004 completed the purchase of the following companies, namely ECM Libra Partners Sdn Bhd, ECM Libra Capital Sdn Bhd, ECM Libra Holdings Ltd (collectively referred to as the “ECM Purchase”) and ECM Libra Securities Sdn Bhd, which was formerly known as BBMB Securities Sdn Bhd (referred to as the “BBMB Purchase”). Hence the change of name and the appointment of the current directors of the said company.

5) The consideration for the “ECM Purchase” was RM330,000,000 and was satisfied by the issuance of 270,000,000 new ordinary shares of RM1.00 each at an issue price of RM1.00 each and an issue of RM60,000,000, five (5) year redeemable convertible unsecured loan stocks at 100% of the nominal value with a coupon rate of 3% per annum.

6) The “BBMB Purchase” was satisfied by cash consideration of RM172,811,479 via a private placement of 100,000,000 new ordinary shares of RM1 each at an issue price of RM2.10 per ordinary share of RM1.00 each.

7) The value of the Goodwill attributed to the companies [i.e. “ECM Purchase” and “BBMB Purchase”] acquired by ECM Libra Bhd was RM360,699,492 million as reported in the Annual Report.

8) Therefore the total consideration for the purchase is RM502,811,479 (being the total of RM330,000,000 and RM172,811,479 and RM60,000,000 RCULS).

9) The nature of the acquired companies are as follows:

i) ECM Libra Partners Sdn Bhd (formerly known as “Libra Partners Sdn Bhd) – nature of business: Licensed Money Lender. The Plaintiff is a director and substantial shareholder;

ii) ECM Libra Capital Sdn Bhd (formerly known as “ECM Capital Sdn Bhd) – nature of business: Management, Advisory & Investment Consulting Services. The Plaintiff is a director and substantial shareholder;

iii) ECM Libra Securities Sdn Bhd (formerly known as “BBMB Securities Sdn Bhd) – nature of business: Stockbroking;

iv) ECM Libra Holdings Ltd (formerly known as “ECM Holdings Ltd”) nature of business: Investment holding & Advisory Services.

10) The authorised share capital of the company was increased from RM50,000,000 ordinary shares of RM1.00 each to RM1,000,000,000 comprising 1,000,000,000 ordinary shares of RM1.00 each by the creation of an additional 950,000,000 ordinary shares of RM1.00 each.

11) During the said financial year, the said company increased its issued and fully paid up ordinary capital from RM42,000,000 to RM433,000,000 by way of the issuance of shares in relation to the “BBMB Purchase” and “ECM Purchase”, Private Placement as stated above and bonus issues.

12) During the said financial year, the company disposed off nearly all existing business of the company and after 1. 4. 2004 the core business of the company as reported in the Chairman’s statement was to be “an integrated boutique investment banking group focusing on advisory services and securities brokering.”

13) In the said Annual Report, revenue from “financial services” as a segment contributing to the group’s income was declared to be only RM2,875,062.00.

14) Loss attributed to the financial services segment was RM3,274,511.00.

15) The Plaintiff has a substantial interest in the said company. He is registered as having 60,000,000 ordinary shares and 18,000,000 redeemable convertible unsecured loan stock (RCULS) representing 13.86% and 30% respectively of his interest in the said company.

16) Datuk Abdullah Ahmad Badawi was appointed the Prime Minister on the 31. 10. 2003.

17) The Plaintiff was appointed a director and the Group Editor-in-Chief of the New Straits Times Press (Malaysia) Bhd on 1. 1. 2004 by the Prime Minister.

Background Facts – Financial Year Ending 31. 3. 2005

18) In the Annual Report of the company for the financial year ending 31. 3. 2005, it was reported that revenue increased by 84.1% to RM73.2 million from RM39.8 million in the preceding year.

19) The company acquired ECM Libra Capital Markets Sdn Bhd (formerly known as Libra Capital Markets Sdn Bhd), a fund management company.

20) Revenue from the financial services segment accounted for 43% and earnings per share improved to 9.32 sen from a loss of 15.6 sen in the preceding year.

21) Group profits for the year was RM40,399,310 as compared to a loss of RM10,602,959 in the preceding year. The Plaintiff, as Chairman stated “the ECM Libra Group posted its maiden profits, achieving a robust turnaround.”

22) On 27. 12. 2005, Khairy Jamaluddin, the son-in-law of the prime minister acquired 13 million ECM Libra Bhd shares equivalent to a 3% stake in the said company valued at RM9 million, based on the purchase price of 71 sen a share. The shares were acquired from the Plaintiff, Lim Kian Onn and Chua Ming Huat who are respectively the Chairman, the CEO and COO of the company.

Background Facts – Year 2006

23) On 19. 1. 2006, the Bernama news agency announced that the government controlled Avenue Capital Resources Bhd and Avenue International Capital Bhd (hereinafter referred to as “Avenue”) signed a conditional share sale agreement with ECM Libra Bhd (for which the Plaintiff is the Chairman and Co-CEO) to fully acquire all the latter’s operating subsidiaries by issuing 442,000,000 fully paid up new ordinary shares of RM1.00 each in Avenue International Capital Bhd, with a proforma market valuation of RM293 million.

24) ECM Libra Bhd’s operating subsidiaries are:

a) ECM Libra Securities Sdn Bhd and its subsidiaries;

b) ECM Libra Partners Sdn Bhd;

c) ECM Libra Capital Sdn Bhd;

d) ECM Libra Capital Markets Sdn Bhd

e) ECM Libra Holdings Ltd and its subsidiaries.

However, the agreed total net tangible assets of the ECM Libra companies were stated to be RM210 million as at the unconditional date of the Share Sale Agreement.

25) Bernama reported that the ECM Libra Bhd /Avenue share sale agreement paved the way for a proposed merger which will enable the merged entity to meet the requirements under new guidelines issued by Bank Negara of having a minimum unimpaired share capital of RM500 million.

26) Prior to the said merger, Malaysia’s Minister of Finance Inc and another government linked company controlled approximately 29.5% stake in the Avenue.

27) Following the merger, the founding partners of ECM Libra Bhd would own and control a combined 20% stake in the merged entity, for which the Plaintiff would own a 6% interest.

28) The share capital of the merged entity would be boosted to approximately RM840 million allowing it to become a full investment bank able to take deposits. Shareholders of ECM Libra Bhd, if they wanted to apply for an investment banking license on its own merit would need inter-alia to inject additional funds as mandated by Bank Negara’s investment banking guidelines which require investment banks to increase their share capital to RM500 million within three years.

29) The Plaintiff in a press statement, as reported by Bernama on the 19. 1. 2006 admitted that, and on being asked what would happened if ECM Libra Bhd was not able to have the merger approved by the authorities said:

“We would have been seriously disadvantaged against the other new investment banks which had the required capital funds and could carry out the full range of investment banking services. At the end of three years, when we would be required to ensure that our capital funds was at least RM500 million, it would have necessitated huge cash injection from our shareholders. By pursuing the merger route, we will emerge a much bigger and stronger entity and not require cash injection from shareholders.”

30) Additionally, if there was no merger, ECM Libra Bhd’s shareholders will have to inject a minimum of RM100 million to satisfy the financial requirements for “discount house” license, over and above the RM500 million unimpaired share capital requirement.

31) Approvals and or license from the Minister of Finance would need to be obtained. The Minister of Finance did grant such approvals, notwithstanding the conflict of interest as Khairy Jamaluddin, is a director and shareholder of ECM Libra and is also the son-in-law of the Prime Minister who is also the Minister for Finance. The Plaintiff as Chairman of ECM Libra Bhd, knew of the aforesaid circumstances and has therefore aided and abetted in the corrupt scheme. The Plaintiff has also benefited substantially from the said scheme.

32) Other relevant approval agencies are directly and or indirectly beholden to the Ministry of Finance.

33) The merger has created so much controversy that on the 13. 4. 2006, the matter was tabled before Parliament, but the Government has to date failed to give any or any adequate explanation for this glaring act of impropriety.

34) On 28.6. 2006, the merged entity, ECM Libra Avenue Bhd (713570-K) was listed in the main board of the Kuala Lumpur Stock Exchange (Stock Number 2143) with a paid up share capital of RM830,901,953 comprising of 830,901,953 ordinary shares of RM1.00 each.

35) Taking into account paragraph 5 to 8, and paragraph 23 and 24 above, the sale of the ECM Libra operating subsidiaries and the then “BBMB Securities Sdn Bhd” in 31.3.2004 to South Peninsular Industries Bhd (which was renamed to ECM Libra Bhd after the said acquisition) was valued at RM502,811,479, yet within two years, the same operating subsidiaries were in turn sold pursuant to the aforesaid merger with Avenue Capital Resources Bhd for RM442,000,000 with a total net tangible asset value at RM210,000,000.

36) Therefore, the value of the earlier sale and purchase in 2004 of the said companies was grossly over-valued by attributing to “goodwill” an incredible RM360,000,000, which cannot be justified in any circumstances. Being a public listed company that corporate exercise amounts to a fraud on the public.

37) The Plaintiff, as Chairman in his Annual Report as at 31.3.2005 reported that the said company had obtained its maiden profits of RM40.3 million as compared to a loss of RM10.6 million in the previous year. Yet in the said merger exercise, the very same companies, and an additional company (ECM Libra Capital Markets Sdn Bhd) were sold for lesser value as compared to the original purchase price in 2004 which the company paid for.

Therefore I verily state that my comments are justified and or in the alternative, my comments in the circumstances are fair comments on an issue of public interest.

7 comments:

  1. Anonymous9:57 pm

    Dear Sdr Rocky,

    How can one man in such a short time do so much damage to journalism and to a grand old newspaper called the NST?
    The answer is simple. 1. Kali has never been a great journalist. 2. Kali has no experience as an editor. 3. He has no skills in managing people. 4. He depends too much on Abdullah Badawi’s patronage.
    5. He is prone to bragging and showing off his closeness to Abdullah. 6. He is an active businessman – he has to protect his vast business interest and the business interest of his associates.
    7. He does not earn the respect of his subordinates in the NSTP. 8. Unlike Kadir and Kok Lanas, he is monolingual. He does not write in Malay. 9. He has the Singapore Straits Time baggage to carry. 10. He is beholden to Abdullah, Abdullah son and son-in-law.
    Being a businessman, Kali wants to prove that he can do better than Kok Lanas and Kadir. So he bragged and boasted about his great plans. But he hardly understands NSTP’s culture and its market.
    To make it worse he appointed people whom he knew would be subservient to him but are not proven performers in management and editorial.
    Compacting the NST looks like a colossal mistake. The paper became a thrash overnight. Then he made it worst by personalizing it. It became my paper instead of our paper. His “me” journalism was emulated by Brendan Pereira, who was a fine journalist when he was writing to Singapore ST, and Hishamuddin Aun, who suffers from a severe case of inferiority complex.
    Brendan does write in Bahasa and Hisham is not competent in English.
    Because kali is a businessman, he has to behave like one. So, instead of responding to charges and allegations like an editor should, that is to listen to both sides of the story and to practice the right of reply, Kali sued big time. He sued lawyer Matthias Chang for RM50 million and in a tit-for-tat, Chang counter-sued for double the amount.
    In the process freedom of expression and information became the victim. The court has placed “a gag order” on the issues raised by the two of them.
    This is the price journalism and the NSTP has to pay for having Datuk Kalimullah Hassan Masheerul Hassan as the GEIC, deputy Executive Chairman and Editorial Adviser.
    History will not judge Abdullah kindly for assigning Kali to the NST.

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  2. Anonymous12:23 am

    gag order on kali could be a plot just to give him the reason to be silent over "meeting in japan" spin.

    ReplyDelete
  3. Anonymous1:21 am

    bro..history will not remember kindly to Pak Lah for everything..for the first day he stepped into power..it has been a downhill ordeal for all Malaysians.

    ReplyDelete
  4. Anonymous2:14 am

    rebbit kmu, what meeting in Japan are you talking about? Please don'r talk in riddles like PM lah! You may be rught. Court gag order may save Kali, KJ and Finance Minister from further embarrassment. But will this stop the PAC investigations into EMC Libra-Avenue deal?
    Amin-tandop, hang budak tandop dekat Alox Setax tu ka?
    Bank Negara Governor blamed inflation on higher production costs. Higher oil prices, higher electricity tariffs, higher local government rates, higher water charges.

    ReplyDelete
  5. Anonymous10:00 am

    Rocky, Kali was kind enough to give you a farewell gift of RM700,000.00 when he could have sacked you for spending all your time in the NPC instead of the office.But instead of being grateful you are farking him him and looking forward for the destruction of NSTP. SHAME ON YOU !

    ReplyDelete
  6. Anonymous2:49 am

    Dear Anonymous, anyone who has worked for Mr Rocky at the Malay Mail can tell you that he was perhaps the only editor who served the paper unselfishly. I don't know how much he got for quitting, but he deserved every sen. Every one in the NSTP know that Mr Rocky pushed the circulation to more than 55K a day. He took the paper to JB, Penang, Ipoh and Melaka.

    But the GEIC then, Dato Kali, stopped the Malay Mail's growth by ordering Mr Rocky to cease operations outside the Klang Valley, even though sales were increasing. Apa ni? Dato Kali reduced the NST to a tabloid, believing that it can sell better. Both Dato Kali and Syed Faisal (who is now a Dato) went to the Edge predicting that the NST would reach 180k copies. Today, sales hovers around 135k copies on a good day. Take out the manufactured sales ie sales at a discount to schools, and you'll get the actual sales. As for the MM, sales is said to be around 25k a day.

    So you see Anonymous, if Dato Kali had not stopped Mr Rocky, the MM sales would have been higher, and Mr Rocky would then be a strong candidate to lead the NST. Professionally, Mr Rocky would be one up on Dato Kali, whose rise to the position as GEIC was more due to political patronage rather than journalistic or editorial capabilities.

    So what if Mr Rocky spends a lot of time at the Press Club? So does Dato Kali's stooges! it must also be mentioned that it is during Mr Rocky's time as President that the Press Club is most active and well supported.

    ReplyDelete
  7. Anonymous2:50 am

    Dear Anonymous, anyone who has worked for Mr Rocky at the Malay Mail can tell you that he was perhaps the only editor who served the paper unselfishly. I don't know how much he got for quitting, but he deserved every sen. Every one in the NSTP know that Mr Rocky pushed the circulation to more than 55K a day. He took the paper to JB, Penang, Ipoh and Melaka.

    But the GEIC then, Dato Kali, stopped the Malay Mail's growth by ordering Mr Rocky to cease operations outside the Klang Valley, even though sales were increasing. Apa ni? Dato Kali reduced the NST to a tabloid, believing that it can sell better. Both Dato Kali and Syed Faisal (who is now a Dato) went to the Edge predicting that the NST would reach 180k copies. Today, sales hovers around 135k copies on a good day. Take out the manufactured sales ie sales at a discount to schools, and you'll get the actual sales. As for the MM, sales is said to be around 25k a day.

    So you see Anonymous, if Dato Kali had not stopped Mr Rocky, the MM sales would have been higher, and Mr Rocky would then be a strong candidate to lead the NST. Professionally, Mr Rocky would be one up on Dato Kali, whose rise to the position as GEIC was more due to political patronage rather than journalistic or editorial capabilities.

    So what if Mr Rocky spends a lot of time at the Press Club? So does Dato Kali's stooges! it must also be mentioned that it is during Mr Rocky's time as President that the Press Club is most active and well supported.

    ReplyDelete