INDONESIA - The board of Federal International (2000) lodged a police report last Friday over alleged misconduct by two key employees of its subsidiaries.
The duo, who were not named, were key management personnel at Alton International Resources and PT Alton International Resources, which are responsible for the group's resources business in Indonesia. This included sales and mining of coal and other natural resources.
The business, which started in 2007, incurred operating losses from 2009 to 2011.
Federal International suspended all operations of the resource segment in July 2011 and subsequently ordered a detailed audit on the subsidiaries.
From that audit, a picture of suspected alleged misconduct by the two employees emerged.
They included approval of questionable payments to third parties, involvement in questionable transactions leading to various coal trading losses and involvement in questionable advance payments and deposits.
The audit committee in May last year engaged Ernst & Young Advisory to validate the findings.
In its report last Friday, EY Advisory said it was unable to completely and adequately validate the suspected allegations due to limited information.
But it identified several red flags and concerns which may suggest some veracity in the allegations. The total amount involved was about $1.49 million.
There was also a separate sum totalling $2.3 million with respect to other allegations that EY Advisory was not able to adequately validate due to a lack of documentation.
One of the employees tendered her resignation in March 2011 and no longer works in the subsidiary. The other manager remains under employment of the group but is suspended.
"As the losses associated with the suspected allegations had already been recognised in the consolidated financial statements of the group in prior financial years, the company has been advised that there is no impact on the group's operating results in the current financial year," said Federal International.
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