Fraud at Listed Company – Hayleys MGT (MGT.N0000)

milanka · 1 Fraud at Listed Company – Hayleys MGT (MGT.N0000) Mon Feb 21, 2011 10:30 pm

milanka

Vice President - Equity Analytics

Posts : 1102
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Join date : 2011-01-28
Location : Q Soft.

This is not a new development and it has been going on for last 3,4 months.

I am reporting it here for the benefit of those who joined recently and also since it was on the news ( www.ft.lk ) today.

In brief :-

a. As per the above news item it is the biggest fraud in a listed company.
b. Due to the fraud the company (MGT.N000) lost Rs. 625 Mil for 2010/2011 3Q.
c. The company has carried out a physical stock Verification and also checked debtors accounts.
d. Finally it was found that there is a negative discrepancy between the actual inventory and the balance sheet value.
e.Company has recently commenced a Forensic Audit to identify further details
f.A company Director resigned in Nov. 2010 and news was communicated to CSE.

http://www.cse.lk/cmt/uploadAnnounceFiles/2721291804601_403.pdf

Note : I do not hold any shares of the said company or do not intent to buy any.

We could discuss how and what action is taken by relevant authorities to protect the interests of shareholders as the same could happen in another place.

anu

anu

Manager - Equity Analytics

Posts : 278
Equity Stars : 5219
Reputation : 43
Join date : 2011-02-09

Sadly enough, the authorities or regulators can do little in this regard. This is the risk in investing in the shares.

Whether it was enron or Sathyam computers (India) or Bearings Bank(UK, the operational lapse was in Singapore) or Societe Generale(France) or many failures during recent financial melt down, the massive failures were due to lack of effective internal controls and internal audit function. Enron was a triple A rated company until it failed.

Our recent example was Ceylinco group companies, which were known to have very inefffective and loose internal controls giving room for executives to have their own way. The result was evident when the group collapsed like a pack of cards.

The company executives take a ride on the group or company name, which are normally perceived as too big to fail. If you remember senanayake of Blue Diamond (If I remember right) or this senior employee of MGT, who committed crime piggy-backing on the Ceylinco or Hayleys group names to hide their sins.

The authorities have a limit to peep into the internal affairs of a company. They go upto the extend of making the company to publish quarterly financials; but if the internal controls are loose and employees err, then it is the shareholders destiny to loose...!

This time, it is from the oldest group in the Country and that is sad.

Last edited by anu on Tue Feb 22, 2011 6:04 am; edited 1 time in total (Reason for editing : Typo)

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Fraud at Listed Company – Hayleys MGT (MGT.N0000)

1 Fraud at Listed Company – Hayleys MGT (MGT.N0000) Mon Feb 21, 2011 10:30 pm

milanka

2 Re: Fraud at Listed Company – Hayleys MGT (MGT.N0000) Tue Feb 22, 2011 5:50 am

anu

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