COMPANY’S BACKGROUND OF SILVER BIRD GROUP BERHAD

The Silver Bird Group Berhad (which is now known as High-5 Conglomerate Berhad)
is a Malaysia-based investment holding company. The company was founded by Mr. Tan
Chin Suan in the year of 1960, by starting Standard Confectionery in a rented premise at
Kuala Lumpur.

The Company operates in two segments. There are manufacturing and distribution of
consumer food and distribution of telecommunication products. It has 13 subsidiaries with 6
main operating subsidiaries including Stanson Bakeries Sdn Bhd which is engaged in the
manufacture of bread, Standard Confectionery Sdn Bhd which is engaged in the manufacture
of frozen and daily fresh/shelf-stable bakery goods, Stanson Marketing Sdn Bhd which is
engaged in the sales and distribution of bakery goods and telecommunication products, Silver
Bird Foods (S) Pte. Ltd which is engaged in the sales and distribution of bakery goods and
Silver Bird International Sdn Bhd.

Silver Bird Group Bhd lists under Main Market of Bursa Malaysia. It has been
classified in the Consumer Products sector. The stock code uses in Bursa Malaysia is "7136"
or identify by stock name of "SILVER".

NATURE OF FRAUD INVOLVES IN THE SILVER BIRD GROUP BERHAD

Fraud occurring within the Silver Bird Company was a financial statements fraud
starting from 2010. Forensic report was commissioned by SBGB in February 2012, following
allegations, among others, irregularities in the accounts of the Company which has been
brought to the attention of the Board of Directors when Crowe Horwath, the auditors
expressed concerns about the legality of certain transactions and the recording for which the
auditor was unable to say obtain relevant evidence that supports and satisfactory explanation
of the Company's management before.

Firstly, Datuk Jackson Tan Han Kook (former group managing director) and Ching
Siew Cheong (former executive director) were found cheating Malayan Banking Berhad by
using false invoices and delivery orders so that the bank’s officers would transfer RM67.4
million into the accounts of three companies which is Asian Food Link Sdn Bhd, Violet
Bonanza Sdn Bhd and Stanson Marketing Sdn Bhd. The financial crisis burst out of control in
2012 when it is being reported having doubtful payments for property refurbishments and

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 machinery upgrades, poor record-keeping and unverifiable sales transactions. The directors
were not able to provide the solvency declaration statement to Bursa Securities within three
market days, which meant that the company was failed to compound a proper record as per
the requirements of the Companies Act 1965.

In addition, Silver Bird also claimed that it could not meet the deadline to release its
audited 2011 accounts, whereby it became an indication that something went wrong. Then,
Bursa Malaysia announced that Silver Bird’s alleged financial irregularities which involved a
sum of over RM111.5 million, equivalent to more than half of the shareholders’ equity. As a
result, Tan, Ching, Lai Poh Mei (former general manager for accounts and finance) were
suspended from word.

Together with other external and internal auditors including Crowe Horwath, they
were filed legal suit for alleged breach of fiduciary duties, abuse of power, conspiracy to
commit fraud, violation on duty of fidelity and loyalty, and facilitating funds
inappropriately. Due to the missing information, the accounting firm refused to form an audit
opinion on the financial statement, which automatically led Silver Bird shoved into PN17
territory - a sign of financial distress. Besides that, Malaysia Stock Picks (2012) claimed that
Silver Bird has defaulted on loans to creditor banks and terminated by Maxis Berhad on the
distribution agreement for prepaid cards. The share price has also plunged dramatically for
approximately 49%.

These scandals have been highly concerned. The Board of Directors seek advices
from the company’s legal advisors on the next course of action to be taken. (Bandic, 2012).
By contrast, the shareholders demanded the Board of Directors to provide details and
explanations on the on-going investigation regarding the financial irregularities during the
company’s Annual General Meeting.

Despite of knowing these actions are unethical and against the rules and regulations, the
two top executives and others still willing to take a risk on it just to get short-term benefits
such as large amount of money in a short time. lthough there are rules and regulations listed,
the regulatory bodies did not take immediate response and stop it. Hence, the top
management keep on going and perform the way they did.

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 ACTION TAKEN AGAINST THE COMPANY

The two top executives, Tan and Ching should take the most blame for their
irresponsible and greedy decisions without further considerations. On the other hand, auditors
should have detected the fraud or financial irregularities at the earlier stage as they are
qualified with forensic and accounting techniques. It was found that the auditors are
involving in the scandal as they are trying to hide certain information. A professional must be
able to make judgement and scepticism wisely, objectively and fairly without being
influenced by the top management. Regulatory bodies should also analyse the case carefully
and take immediate action towards it. Although the other Board of Directors did nothing
wrong, yet they are responsible in analysing and questioning when found something goes
wrong as they were given a full report of the company.

ACTION TAKEN TO PREVENT FRAUD

To prevent this from happen, we suggested that the auditors must be well-trained to
commit a higher level of needs and expectations of investors and capital markets. For
example, a higher audit quality and methodology need to be introduced through the use of
latest innovative technology and processes. In our opinion, the culture of an organization
plays a crucial role in monitoring and ensuring good outcomes. A company also should works
based on a strong ethical framework and focus on long-term obligations to society.

A great leader as a role model to the other employees must show his or her best
attitudes and practices in works. Besides that, power equality in making decision is another
solution. For example, organizations can conduct a voting session before deciding a project
instead of giving the top management a full power in it. This is to ensure high transparency
and open communication. An organization can also provide incentives or rewards such as

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 ESOS to the employees based on their performances. Lastly, a strict legal or regulatory
system could help in reducing number of financial scandals by reinforcing the punishments.

CONCLUSION

In conclusion, an organization, especially public-listed company should never against

the rules and regulations when conducting its business. Gaining benefits from unethical acts
or actions would make a company fall real hard in the near future. It is hard for an
organization to rebuild its brand and reputation after something went wrong in its financial.
The Silver Bird Group Berhad has successfully changed its name to High-5 Conglomerate
Berhad since 23rd December 2013. The company’s shares will be quoted and traded under
the new name: High5 while the number of stock remains unchanged. (Bursa Malaysia, 2013).
The company must attain two consecutive quarters of profit in order to be removed from
PN17 status. (Loh, December 13, 2013). Silver bird should take this as a lesson and never
repeat the same mistakes again.

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