DMX sues Deloitte & Touche for negligence

In its suit against Deloitte, DMX said that its former auditor issued clean opinions from 2001 to 2013 when they should have been able to obtain all requisite confirmation from parties such as suppliers and end users.
In its suit against Deloitte, DMX said that its former auditor issued clean opinions from 2001 to 2013 when they should have been able to obtain all requisite confirmation from parties such as suppliers and end users.PHOTO: REUTERS

Lawsuit stems from contentious transactions that surfaced after new auditor was appointed

DMX Technologies Group is claiming damages from former auditor Deloitte & Touche as a result of what it claims was professional negligence.

The lawsuit filed in the High Court in Singapore on Thursday stems from events that began in 2015 when mainboard-listed DMX fired chief executive Jismyl Teo, chief financial officer Skip Tang and executive chairman Emmy Wu over allegations of serious misconduct and negligence in performing their duties.

Their dismissal related to a series of "transactions in question".

These contentious transactions and their accounting surfaced only after DMX appointed PricewaterhouseCoopers Singapore as its auditor in 2014 to replace Deloitte & Touche, which had been DMX's auditor since its incorporation in October 2001.

The "transactions in question" had been executed by the former management.

In its suit against Deloitte, DMX said that its former auditor issued clean opinions from 2001 to 2013 when they should have been able to obtain all requisite confirmation from parties such as suppliers and end users.

During a dialogue session with shareholders in August, DMX, a digital media and software provider, gave a chronological explanation of the steps it had taken since the new auditor took over.

It had called for a trading halt and trading suspension on March 25, 2015, to prevent erosion of shareholder value.

The suspension is still in place. DMX also said it had streamlined operations to ensure the survival of the business, enhanced internal control and improved cash flow management.

The firm added that it had suspended the former management from all executive duties for an indefinite period and engaged an independent investigation team under the audit committee to look into the issues.

It had also filed a report to the Hong Kong police based on the investigation's findings, which led to the sacking of the management.

DMX said once these transactions were excluded from the revenue and profits, cumulative losses of more than US$90 million (S$123 million) were incurred and more than US$130 million in cash was drained from the company over the financial years 2010 to 2015.

DMX has also tried to recover the money that was paid out in relation to the transactions. It requested the import and export firms involved to provide supporting data relating to the transactions.

A version of this article appeared in the print edition of The Straits Times on October 07, 2017, with the headline 'DMX sues Deloitte & Touche for negligence'. Print Edition | Subscribe