A forensic review into the dealings of Trek 2000 International has revealed some damning findings, including fabricated documents and fictitious sales with companies that do not appear to exist.
Trek 2000's former and current officers, including thumb drive inventor Henn Tan, may have breached various laws against misappropriation, forgery and fraud, accountants from RSM Corporate Advisory wrote in a report.
The report, completed last month and made public late on Monday night, investigates various suspicious transactions at Trek 2000 between 2007 and 2016.
These came to light in May 2016, when employees were questioned by the Commercial Affairs Department (CAD). The police confirmed that investigations are ongoing.
The RSM report was based on interviews with Trek 2000 staff as well as documentsin the CAD's possession. One eye-popping finding was that between 2011 and 2014, Trek HK recorded US$7.8 million (S$10 million) in sales to a firm that RSM suspected to be fictitious.
In fact, 73 per cent of the purchases made by this company could be traced to S-Com HK, a firm incorporated in Hong Kong with strong links to Mr Tan, who is Trek 2000's chairman and chief executive, as well as other senior management.
Amount that Trek HK was found to have recorded in sales between 2011 and 2014 to a firm that RSM suspected to be fictitious.
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 it operated from and the general and day-to-day operations of the company, 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 a Hong Kong-listed company. Trek 2000 had fabricated two invoices 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.
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 chips to an Indian firmcould not be established as no one appears to have knowledge of the details, RSM said.
Bank advices amounting to US$250,000 and US$2.4 million received from Mr Tan and S-Com HK, respectively, were also digitally altered, with strong indications that this was done to mislead the auditors, RSM said.
Mr Tan will not be removed from the board, Trek 2000 said. "The board will discuss the report before (making) any comments," lead independent director Khor Peng Soon said after the company's annual shareholder meeting yesterday.
Mr Tan said: "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."
Shareholder Ang Hao Yao said: "I was surprised at the timing of the release of the report just the night before the AGM. I left the meeting with the impression that the worst was behind us."
Trek 2000 International requested a trading halt yesterday, with trading to resume today.
The counter closed down 2.17 per cent at 22.5 cents on Monday.