Transmile faked RM530M of revenue and its founder got a day in jail

Transmile Group was Malaysia's air-cargo star: Gan Boon Aun founded it and listed it on the second board of Bursa Malaysia in 1997, and by 2004 he had sold his stake to the Kuok group. On 15 February 2007 the company announced its 2006 results — revenue up 80% to RM989.2 million, net profit more than doubled to RM157.5 million. Investors did not know that its auditor Deloitte had already told the CEO, the CFO and the audit committee that the revenue figure was inaccurate; the numbers went out to the market anyway, and the board was never told.

The fiction unravelled within weeks. On 7 May 2007 Transmile told Bursa that Deloitte could not verify the 2006 accounts for missing documents; a special audit by Moores Rowland followed. Its findings, out on 31 May, were devastating: revenue was possibly overstated by RM530 million for 2005–2006 — RM333 million in 2006 alone, about 30% of stated revenue — enough to flip a RM207 million pre-tax profit into a RM126 million loss. Receivables had swollen to RM381 million from RM111 million, and RM604 million of sales had been booked to CEN Worldwide, a loss-making customer owing RM103 million.

The market reacted at once. The stock was suspended at RM8.90; when trading resumed on 1 June it plunged 32.6% to RM6.00, a three-year low, and RAM Ratings put Transmile Air Services' RM150 million notes on downgrade watch. Police reports and a Securities Commission report followed over false statements and documents. On 19 June 2007 Gan Boon Aun resigned as CEO, relinquishing all executive functions — the founder's exit came days after the company revealed the scale of the fiction.

The law took its time. The Securities Commission charged Gan in 2007 with abetting a misleading statement in the February 2007 quarterly report, a case that ran thirteen years while a constitutional challenge to the law went up to the Federal Court, ruling in March 2017 that directors can be liable for statements their companies file. On 27 August 2020 a sessions court convicted him — one day in jail and a RM2.5 million fine, with 18 months' jail if he failed to pay. In October 2021 he failed to appear at the hearing of his appeal; the High Court issued a warrant of arrest and dismissed it.