Corporate crimes in Malaysia: a profile analysis

Publication Date03 May 2016
AuthorNormah Omar,Roshima Said,Zulaikha ‘Amirah Johari
SubjectAccounting & Finance,Financial risk/company failure,Financial crime
Corporate crimes in Malaysia:
a prole analysis
Normah Omar, Roshima Said and Zulaikha ‘Amirah Johari
Accounting Research Institute, Universiti Teknologi MARA,
Shah Alam, Malaysia
Purpose – Corporate crimes in Malaysia are increasing each year. These issues are bothersome to the
investors, creditors and the public as a whole because of the huge impact on all of them. Employees lose
their jobs, investors do not get optimal return on their investments and creditors are unable to get their
payments, and as a result, the public lose their faith on the legislation. The purpose of this study is to
analyze the cases charged under Securities Commission and Bank Negara Malaysia.
Design/methodology/approach This study analyzes the cases in Securities Commission and
Bank Negara under four criteria which are the corporate proles, details on crime committed,
perpetrators prole and, nally, the offence.
Findings – The ndings show that top-level management, especially the directors, usually commit
such crime and many of them are male.
Originality/value – This study looks into the criteria of the cases charged under both institutions,
Securities Commission and Bank Negara, which can be used to create awareness among the
organizations in Malaysia.
Keywords Corporate crime, Bank Negara Malaysia, Securities commission
Paper type Research paper
Corporate crime is an ongoing reality and no organization is immune to the destructions
of the fraudster. Its insidious nature seeps into and erodes the core elements on which all
business is built upon: condence and trust. Baucus and Dworkin (1991) dene
corporate crimes as rm’s act that violates the criminal law. Corporate crime, also
known as white-collar crime, is dened as the crime committed by, respectable or at least
respected, business and professional men who belong to the upper class (Sutherland,
1940). In other words, they are the “trust violators”. In layman terms, corporate crime
refers to crimes committed either by a corporation (i.e. a business entity having a
separate legal personality from the natural persons that manage its activities) or by
individuals acting on behalf of a corporation or other business entity.
During the past decade, issues of corporate crime seem to be one of the hottest topics
raised by regulators and enforcement agencies globally. These issues are bothersome to
the investors, creditors and the public as a whole because of the huge impact on all of
them. Employees lose their jobs, investors do not get optimal return on their investments
and creditors are unable to get their payments, and as a result, the public lose their faith
on the legislation. Enron, WorldCom and Bernad Madoff (ponzi scheme) are some of the
The research was supported by the ARI HICOE research grant of the Ministry of Higher
Education Malaysia.
The current issue and full text archive of this journal is available on Emerald Insight at:
crimes in
Journalof Financial Crime
Vol.23 No. 2, 2016
©Emerald Group Publishing Limited
DOI 10.1108/JFC-05-2014-0020
famous cases involved in corporate crimes. Closer to home, there are Transmile Group
Berhad and Megan Media Holdings Berhad.
Enron corporation (2001)
Enron is the rst case that had startled the investors. This is the case that sparked huge
phenomena of the fraudulent nancial reporting. Enron corporation, a giant leading
energy company in the world which is considered as one of the most innovative and
reliable companies in the USA, had to le for bankruptcy because of nancial fraud
which involves the creation of ctitious entities to conceal the losses it suffered. The
share price had dropped sharply because of this incident, and it had a huge effect
towards the investors and the worst part was that the employees were terminated from
their employment, and simultaneously, they lost their savings and pensions (McLean
et al., 2005).
WorldCom inc. (2002)
Another nancial scandal involves the nation’s second largest long-distance
telecommunications company. On June 25, 2002, WorldCom announced that it had
overstated earnings in 2001 and in the rst quarter of 2002 by more than US$3.8bn and
manipulated its reserves account in recent years, affecting additional US$3.8bn. This
announcement surprised both the analysts and investors. The same external auditor of
Enron, Arthur Andersen was criticized for their inability to detect the wrongdoings in
WorldCom. The company led for bankruptcy protection on July 21, 2002 (Lyke and
Jickling, 2002).
Bernad Madoff
Bernard Madoff is an example of an individual who misrepresented himself and his
company to commit corporate crime known as Ponzi scheme. It is a type corporate crime
that lures investment funds from victims and then pays those victims a premium or
interest from the money that is paid by subsequent investors. Without any intervention,
Ponzi schemes will continue to grow until new recruits become unavailable, at which
time the scam is broken down and discovered (Bhattacharya, 2003). Ponzi scheme is also
known as pyramid scheme and called “Skim Pak Man Telor” in Malaysia.
Transmile Group Berhad (2007)
Malaysia also received the same attention when some of the public listed companies
committed nancial fraud (Securities Commission, 2013). Transmile and Megan Media
had shocked the investors in Malaysia because of corporate scandals (Krishnan, 2011;
Mohd-Sulaiman, 2008). Transmile Group Berhad is controlled by Robert Kuok, a
billionaire in Malaysia. It was incorporated in Malaysia on January 13, 1996 and was
listed in Bursa Malaysia on June 27, 1997 but was later delisted on May 24, 2011 because
of overstatement of their prots of RM75m and RM158m for two consecutive years of
2005 and 2006, respectively, because in fact, they were experiencing huge losses (Li,
2007;Omar, 2012).
Megan Media holdings Berhad (2007)
Megan Media was established in early 1994. In 2000, it was listed on the second board of
Bursa Malaysia, and in 2002, it was listed to Main Board. In 2008, it was delisted from
Bursa Malaysia because of its two subsidiaries, Memory Tech and MJC Pte Ltd, which

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