This article first appeared in The Edge Malaysia Weekly on September 26, 2022 - October 2, 2022

AN independent non-executive director of Caely Holdings Bhd checked his mailbox one day in February 2022 and found a surprise: a package from an unknown sender. But he was more surprised when he opened the package to discover allegedly incriminating documents on several transactions involving the Perak-based lingerie and apparel manufacturer’s wholly-owned subsidiary Caely (M) Sdn Bhd (CMSB).

In April, Caely’s board of directors — then led by its executive chairman Datuk Wira Louis Ng Chun Hau — hired Virdos Lima Consultancy (M) Sdn Bhd to investigate the allegations of suspicious and irregular transactions in CMSB. But in less than two months, Virdos Lima said it was dropping the probe, citing the complexity of the accounting entries that had to be verified against supporting documents and the absence of key documents as well as various company electronic devices.

In that time, Caely saw a change to its board. The board, now chaired by its executive director (ED) Datuk Mike Loh Ming Choon, then made another attempt to look into the anonymous complaint. This time, the investigation revealed that founder and former ED Datin Fong Nyok Yoon and her husband Datuk Chuah Chin Lai, who was the group’s managing director from October 2002 to April 2021, allegedly misappropriated funds through CMSB and manipulated the two companies’ accounts.

Subsequently, Caely’s board filed a civil lawsuit on Aug 26 against Fong and Chuah — who collectively held 13.04% equity interest in Caely as at May 25, 2022 — as well as 10 other persons and groups.

The investigation’s findings show that Fong and Chuah “had used a number of nominees and companies as their manipulative devices to systematically misappropriate the funds from CMSB”, according to the lawsuit filed by Caely’s lawyers Messrs Bachan & Kartar in the Ipoh High Court.

The couple are alleged to have misappropriated RM30.55 million from CMSB through 10 questionable related-party transactions. For that, Caely intends to claw back the same amount from Fong and Chuah, as well as sue them for breaches of duty.

According to the 10-page statement of claim, among the transactions are payments totalling RM15.52 million made by CMSB to its former lorry driver Suhaimi Hussain and RM2.52 million to Chuah’s sister-in-law Ong Bee Ling.

Other suspicious transactions were RM4.19 million paid by CMSB to Perak-based property developer Mutiara Intra Timur Sdn Bhd and RM1.22 million to the latter’s company secretary Lim Yeng Poh; RM1.09 million to Baharuddin Ahmad, the personal driver of Fong and Chuah; and RM500,000 to Chuah’s friend Lee Yit Leong.

The statement of claim also lists transfers of funds amounting to RM3.69 million and RM867,000 to Fong and Chuah respectively; payment of RM328,000 to CMSB’s security guard Mohamad Hamdan Mokhtar; payment of RM316,000 to Norkhan Mat Isa, a manager at CMSB; as well as payment of RM317,000 to Compact Ecology Sdn Bhd, a company jointly owned by Fong and Chuah.

The suit further alleges that Fong and Chuah, with the help of 10 other individuals and groups, who collectively own 50.01% of Caely shares, also conspired to cover up the misappropriations and breaches of fiduciary duty, and obstruct the group’s further in-depth investigations by attempting to remove the current directors by calling for an extraordinary general meeting (EGM) and appointing their nominees to the board.

Those named in the suit as defendants are Penang-based businessman Datuk Seri Goh Choon Kim, who is Fong’s schoolmate; Chin Boon Long, who is well known in the investing fraternity; Datuk Chong Loong Men, who is ED of LKL International Bhd and Vizione Holdings Bhd; Leong Seng Wui; Kok Kwang Lim; Valhalla Capital Sdn Bhd; Hong Seng Capital Sdn Bhd; Goh Choon Heng; Luhur Sejahtera Sdn Bhd; and Zaidi Zainudin.

Caely and CMSB claim they have suffered losses as a result of the 12 defendants’ actions. Thus, the suit also seeks to recover damages incurred.

It is worth noting that Fong was reportedly the one who lodged a report with the Malaysian Anti-Corruption Commission (MACC) in April on the alleged wrongdoings conducted by a former director. However, the identity of the former director was not revealed.

This subsequently led to the anti-graft agency launching a probe into Caely and imposing an order to freeze all the bank accounts of the group.

Still, Caely’s woes didn’t start with the MACC probe. Back in August 2020, its external auditor Messrs PKF had expressed a qualified opinion on the group’s audited financial statement for the financial year ended March 31, 2020. This was in relation to CMSB’s trade receivables of RM11.995 million where PKF had flagged uncertainty of the full recovery of the trade receivables as a substantial amount of the completed constructions payments had not been received.

However, a recent Kuala Lumpur High Court ruling looks to have thrown a spanner in the works of the lawsuit and handed the 12 defendants a potential lifeline.

Three days after the suit was filed, on Aug 29, the High Court upheld the resolutions carried out during the EGM on June 15, deeming them as valid and would take effect as of that date.

The ruling stems from an earlier legal case brought by three investors namely Leong, Kok and Valhalla Capital — who collectively hold no less than a 10% stake — against Caely to seek a declaration that the EGM, the agenda of which was to remove seven directors, was validly held and should not be adjourned.

Leong was former ED of Macpie Bhd, now known as XOX Networks Bhd, and former group chief operating officer of 1 Utopia Group. He is now the group ED of Green Packet Bhd.

At the EGM in June, shareholders of Caely had voted out all existing directors except for Fong. However, she tendered her resignation as independent non-ED on Sept 15, citing health issues.

As a result of the High Court ruling, the seven directors (who had initiated the lawsuit against the 12 defendants) — namely Loh; Datuk Seri Sin Hock Min; former executive vice-chairman Jessie Wong Siaw Puie; Koo Chen Yeng, the daughter of businessman Datuk Seri Tee Yam @ Koo Tee Yam, who has become the second single largest shareholder in Caely with a 19.12% stake; Datuk Mohamad Hanafiah Zakaria; Ng Mei Choo and Datuk Koh Mui Tee — suddenly found themselves out of the board.

In their place are Leong, Datuk Kang Chez Chiang, Ng Keok Chai and Krishnan Dorairaju.

Thus the most recent ruling has created some uncertainty about whether the new board will still continue to pursue the lawsuit against the 12 defendants. Will Caely leave no stone unturned in finding out if the allegations of misappropriation of funds are true? Have the husband-and-wife duo Chuah and Fong been wrongly accused? Will they be tried for those allegations and get a chance to fight the accusations made against them?

When contacted, Messrs Ong Kok Bin & Co’s Eric Tan, who led the legal team representing Leong, Kok and Valhalla Capital — the faction that wanted to remove the board members — says in cases where the lawsuits are filed by the previous board, they would “die a natural death”.

“They (former board) had instructed for the lawsuit (against the 12 defendants) to be commenced for Caely. So the question arises whether the lawyer (Bachan & Kartar) still has the mandate to even act for Caely now that the board members have all changed.

“Those cases that were filed on behalf of Caely and authorised by the previous directors would be invalid because the High Court order says the appointment of the new board of directors (that was approved during that EGM on June 15) would take effect as of that date. So any instructions given by the previous directors after that date would be invalid,” he tells The Edge.

In fact, the statement of claim had warned that in the event that the defendants were allowed to achieve their objective of removing the incumbent directors, it was highly probable that the investigations and complaints would be terminated and withdrawn.

Asked about the new board’s next move, Tan says managing Caely and putting its state of affairs in order are a top priority for his clients. Leong, Kok and Valhalla Capital held a 3.95%, 3.88% and 3.49% stake respectively in Caely as at May 25.

Nevertheless, the dust has not settled and the boardroom tussle continues.

Last Wednesday, Caely announced that five recently ousted directors — Loh, Wong, Sin, Mohamad Hanafiah and Koo — had instructed Bachan & Kartar to file a notice of appeal against the recent High Court ruling.

Caely, which is now under the new board, said it did not instruct Bachan & Kartar to do so and will be seeking legal advice on the legality of the move.

All eyes are now on the new board as to how it will take the group forward.

For starters, it redesignated ED Keok Chai, a retired senior police officer, as executive chairman effective Sept 29. Keok Chai was an assistant commissioner of police and his last held-position was that of principal assistant director in the forensic accounting investigation division of the Bukit Aman Commercial Crime Investigation Department.

Caely faces significant headwinds. For one, it is without a CEO as Lim Chee Pang had stepped down on Sept 1 after five months. Two CEOs have left Caely in the last 17 months. Gok Ching Hee was CEO and chief financial officer from April 2021 until March 1, before the crackdown by MACC.

MACC’s investigation is still ongoing, according to a source, who adds that MACC’s order to freeze all the bank accounts of Caely Group has remained in effect since April.

Interestingly, Caely’s share price climbed to its peak of 58 sen from 35 sen in the first four months of this year. The stock then took a beating after news of the MACC probe came out. It had lost half of its market capitalisation since April. At the close of 29 sen per share last Friday, its market cap was RM74.9 million.

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