A FORENSIC review into the dealings of Trek 2000 International has uncovered some damning findings, from the fabrication of sham documents to fictitious sales with companies that do not appear to exist.
Trek 2000's former and current officers, including the inventor of the ThumbDrive Henn Tan, may have breached various Singapore laws against round-tripping, misappropriation, forgery and fraud, wrote forensic accountants from RSM Corporate Advisory in a report.
The report, completed last month and made public late on Monday, covers various suspicious transactions at Trek 2000 between 2007 and 2016. These came to light in May 2016, when various employees were called in for questioning by the Commercial Affairs Department (CAD).
The police confirmed on Tuesday that investigations are ongoing.
The RSM report was based on interviews with Trek 2000 staff and on documents seized by and which remain in the CAD's possession.
One eye-popping finding from RSM was that between 2011 and 2014, Trek HK recorded US$7.8 million in sales to a company suspected by RSM to be fictitious.
In fact, 73 per cent of the purchases made by this company could be traced to S-Com HK, a company incorporated in Hong Kong with strong links to Mr Tan, who is chairman and chief executive of Trek 2000, as well as other members of senior management.
Mr Tan has been the sole director of S-Com HK since April 2008, and its sole shareholder until July 2015, but claimed to have no knowledge of where S-Com HK operated from and its general and day-to-day operations, RSM wrote.
Mr Tan said he relied on former executive director Foo Kok Wah, who had "full control so he should know what is going on".
In all, RSM found five types of suspected round-tripping transactions involving S-Com HK between 2008 and 2014. S-Com HK made profits totalling US$266,647.45, which arose from transactions where its involvement was not properly or reasonably justified, RSM said.
RSM also uncovered evidence that raised serious doubts about the authenticity of sales and purchases done with the subsidiary of one Hong Kong-listed company.
Trek 2000 had fabricated two invoices which were purportedly issued by this Hong Kong company totalling US$1.15 million, and two invoices issued by Trek Singapore for the purported sale to this customer totalling US$1.15 million, RSM wrote.
It is also highly likely that the stocks in these transactions never physically moved, RSM added.
Separately, crucial facts relating to a US$3.2 million sale of UM1G chips to Indian sign manufacturer Colite Technology could not be established, because no one appears to have knowledge or was able to provide the details, RSM said. These include the actual composition of the UM1G chips, how and when these chips were delivered to Colite, and whether the goods were even delivered at all.
Bank advices amounting to US$250,000 and US$2.4 million received respectively from Mr Tan and S-Com HK were also digitally altered by Hengky Gunawan, Trek 2000's manager in the purchasing department, on the instruction of the former chief financial officer Gurcharan Singh, with strong indications that these alterations were performed to deceive and mislead the auditors, RSM said.
RSM also flagged possibly erroneous claims made by Trek 2000 under the Productivity and Innovation Credit (PIC) scheme.
Lead independent director Khor Peng Soon told The Business Times after Trek 2000's annual shareholders' meeting on Tuesday: "The board will discuss the report before we make any comments."
The company said Mr Henn Tan will not be removed from the board.
Mr Tan said of the report: "Were there document deficiencies and shortcomings in my management? Yes... I'm putting in a lot of effort to make sure there will not be a recurrence..."
A Singapore Exchange spokesman told BT: "We will be reviewing the findings (of the forensic accountant's report) and where appropriate, will take the necessary disciplinary action. Our enforcement powers include referral of the case to the independent Listings Disciplinary Committee."
One shareholder who declined to be named told The Business Times that she had bought shares at 24 Singapore cents recently because of the dividends, and because she had heard that the company was doing well. She had not heard of the news until she was at the annual general meeting (AGM), and was surprised.
"Maybe I'll cry on the bus later," she said, half in jest.
Trek 2000 requested a trading halt on Tuesday, with trading to resume on Wednesday. The counter last traded 2.17 per cent lower to close at 22.5 Singapore cents on Monday.
Trek 2000 unveiled its "ThumbDrive" storage device in 2000, the same year it was listed on Sesdaq, Singapore's then-junior board.
The ThumbDrive displaced the floppy disk, but the big boys quickly swarmed in and Trek 2000 spent years fighting multimillion-dollar lawsuits against various firms for infringing on its intellectual property (IP) rights.
All resolutions at the AGM were passed, except for the re-election of independent director Neo Gim Kiong. Independent director Lee Chuen Neng withdrew the offer to stand for re-election.
– Additional reporting by Kenneth Lim