Case 3 Flight Of Funds

C A S E 3

Asian Journal of Case
Research
4(S): 27 – 44 (2011)

Flight of Funds
MOHD NOOR ABU BAKARa, MARIATI NORHASHIMb*
AND ABDUL HAMID MOHAMED GHOWSc

ABSTRACT
In 2006, Malaysian Travels Sdn Bhd, a subsidiary of a public listed company, purchased 40% equity in Turkistan Global Services Sdn
Bhd on the basis of a project paper which outlined a potential travel business to exploit opportunities in Turkistan. Turkistan Global
Services Sdn Bhd purported to have acquired the opportunity through a Memorandum of Understanding (MoU) signed by a Malaysian
Minister with a Turkistan Minister for exclusive rights to handle logistic arrangements for the promotion of businesses between the two countries. However, other than the shares contract, no …show more content…

However, he realised that, as a CEO, he could not spend his time scrutinising every single detail. Instead, he should focus on the bottom line and cash flow of the organisation. He knew that, in doing so, he could quickly get to the truth of the company. His first strategy would be to call for a meeting among the senior management staff and ask them to brief him on the organisation to discover the current state of affairs. He had been well aware that the team was going to want to make things look good. So, he had to be vigilant for any sign of weakness.
He always had a particular concern about ‘relationship based’ transactions, which he knew was quite prevalent in Malaysia. Transactions between “friends’,
“connected” or “favoured” persons sometimes lacked commercial justification
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that led to undesirable consequences. He noted that the organisational chart of
TIH showed several investments by a subsidiary which indicated to him that, to ensure accountability, he had to watch out for any evidence of issues that had been swept under the carpet and any possible lack of proper procedural practice.
During the first briefing by the senior staff, he noticed that there had been an investment made by a subsidiary, Malaysian Travels Sdn Bhd (MTSB), in 2006, which had shown no movement since. He asked for an explanation from the senior management team, but was met by hushed murmurs. As they discussed