Wednesday, May 7, 2008

Reform-NLFCS

Well, where do I start with this....

Let's start with what NLFCS (National Land Finance Cooperative Society) is about.

NLFCS was started by the late Tun Sambanthan out of concern for plantation workers working in fragmented plantations that were being sold by the British after Malaysia achieved independence. The idea was to pool capital from plantation workers so that they could buy out these plantations and amalgamate into larger groups. The plantation workers would own shares in the co-operative who would manage these larger holdings and provide benefits (both financial and social) to its members.

If anyone can give a better history of NLFCS please do...

After Tun Sambanthan, the chairman has been Tan Sri Somasundram (can't find dates for this, info on NLFCS is sparse).

I don't have much dealings with NLFCS, just what I hear. This is about my experience of working with Premium Nutrients and what I know. I want to remain anonymous because what I write will undoubtedly hurt people I know. It will be interspersed with things I have heard (but not directly experienced), but at the end of this piece, I hope to summarise the pertinent facts that could be checked.

Firstly to get it out of the way - the things I know about NLFCS and the questions they raise.

Tan Sri Somasundram has been there for decades (2 at least). Everyone who came to Premium Nutrients via NLFCS transformed from being strong supporters of NLFCS to being disillusionised.

As a co-operative, there is meant to be one vote per person, but challengers are not encouraged and I understand strong arm tactics are used. Like MIC, even thought a look at the rules would assume the party is democratic, the actual practice is not. A lot of feudalistic practises and hero worship really with a dash of nepotism.

Tan Sri Somasundram's son has been given a management position thought I have no idea what qualifications or experience he has or what kind of vetting process they have. From my experience in Premium Nutrients, there is no vetting process. All the orders come from the top, as I said a very feudal structure. (this is one fact that can be checked, on what basis did TSS's son get the position?)

Premium Nutrients

I will list things as I remember them and I hope they will form a cogent narrative.

Premium Nutrients was meant to be the flagship company of NLFCS. An example for people of Indian ethnic origin in Malaysia and for the co-operative concept/movement. It operates from an industrial area in Pasir Gudang and is a speciality fats (vegetable) company.

I worked in the accounts department of that company and had access to various documents during my time there.

The company has a very poor reputation. A lot of our raw materials (Palm Kernel etc) are only sold to us on an advance payment basis supply because of our poor reputation for payment (there were bankruptcy proceedings instigated by suppliers on the company when it was called Premium Vegetable Oils - this is another fact that can be checked). On the chemical side (various gases and other material we would need to run the chemical processes that would turn Crude Palm Kernel Oil into the end product) there would be a rotation of suppliers we would use, changing them when they asked for payment. The purchasing manager would promise payment to them when negotiating these supplies and then disappear and be uncontactable and the accounts department would have to deal with the resultant angry phone calls.

Most of the assets of the company of the company have covenants and liens on them and new machinery are acquired on a leasehold basis. I don't believe the company actually hold titles to any of its assets as there are first and second liens on almost everything.

While companies started in the area around the time has speed past and expanded. Premium Nutrients is in pretty much the same state it has since it started other than a minor expansion in the 1980's.

There has not been much thought into the long term future of the company and it has been run as is.

It is sad to see a company which had such potential and had such dedicated and committed personnel in the lower echelons being run into the ground. The ideals of NLFCS that I thought would permeate within the company hit the brick wall of higher management and their self interest

The company is (as far as I know, I can't vouch for the history of the co since it began) on its third set of Auditors, the last 2 having resigned. They had an EGM to vote on the new auditors recently and I am not surprised that nothing seemed to have been raised about this. For auditors to choose to resign, would basically indicate that they can no longer approve the company accounts.

They co used to play a lot of tricks. They would have a tank of sludge (waste material that is a cost since you would have to pay to get rid of it/make it less pollutant) and have a layer of expensive oil on top. So when it came to value the oil in the tank, only the top level of oil would be used for analysis and hey presto, a cost would turn into a 5m dollar asset and this would in turn lower the cost of goods sold (which would affect the management fee, more on that later). I am not sure how this was down. For an analysis, they usually take samples from pretty deep in the tank, so doing the above would usually not be possible but this was what I was informed had happened during the year end audit process and is something I can't personally verify.
The other thing that I personally witnessed that was practised (and many companies do this)
is to push sales on products that fail their quality test. This is to "book" higher sales for the quarter by raising an invoice and then financing on the back of the invoice (bill discounting). The product would inevitably be returned by the customer but in the next quarter (with the associated cost of return borne by the company) but by then the company would have already booked the sale and the management company would get the resulting management fees (I will talk more about the management fees below)


The personal impression I got was that the company was not profitable at all. That the profits were simply paper or accounting profits. The constant cashflow constraints, the pumping in of money from NLFCS every few years, the increasing debt that the company has taken over time would seem to prove my impression, whatever the annual accounts might indicate. A healthy profitable company that is not expanding, not increasing capital expenditure, does not need more debt and more money pumped in simply to run its operations. This would imply a deeper malaise. I am not sure what oversight there is in NLFCS's investment in Premium Nutrients, and how the cash infusions have been approved. Tan Sri Somasundram (TSS) is also a big shareholder in the company (the 2nd largest holder with 43.5m shares – 12.93%, he bought 6.6m more on the 21/06/07 for approximately 1.8m ringgit). Therefore there is a clear conflict of interest in being the Chairman of NLFCS which is the biggest shareholder in the company and his personal shareholdings. If you have shares in a company, would you not as a chairman of its biggest shareholder, pump more money in so it would not fail? irrespective of your primary (and only) duty to NLFCS members.

There are a couple of conflicts of interest between the management of Premium Nutrients when I was there, and Tan Sri Somasundram and NLFCS.

Lets start with the management co. Before its floatation, Premium Nutrients was managed by a management company incorporated (I believe) in Singapore. I have been reliably told that this management company, 7 M (Seven M) Management, has as one of its beneficiary TSS, so another humongous conflict (to those with the know-how, please check to see who 7 M's ultimate beneficiaries are). The management fee (20% (I believe - my memory may not be so good)which is a huge chunk of cash to take before all other expenses are paid) was based on the gross profit. As explained above, the accounting gross profit is easily manipulated, and calculating a management fee based on the gross profit provides absolutely no incentive to keep cost down. As you can see very poor corporate governance. What I witnessed was a company being leveraged to pay dividends and management fee to a few, while money was being pumped in from NLFCS to keep it afloat (my personal opinion, but please check the facts yourself).

The co. obviously has a very high turnover among staff. I understand they had brought new senior management recently.

Let's go through the company announcements, just to see the hanky-panky going on.

Announcement released 03/05/05

The audited and unaudited accounts had a 2.04m ringgit difference! In the unaudited accounts the company posted a 8m ringgit profit and the audited accounts showed a 6m profit!

Announcement released 02/05/06

Group Financial Controller and some of the senior staff have resigned, therefore the annual audited accounts will be delayed

Announcement released 02/06/06

Annual audited accounts could not be completed in time because the auditors resigned! Jeez, auditors want their fees, if they resign, it's basically saying things (accounting-wise) are so bad they would rather forgo their fees than audit the company's accounts and agree with it.

Announcement released 26/06/06

32m listing status cost previously written off, to be reinstated as an asset retrospectively? Why on earth do this?

Announcement released 26/10/07

Sells part of Malim Sawit (its plantation arm and crown jewel) for 22m to Revenue Direction Sdn Bhd. Who is Revenue Direction Sdn Bhd? Who are the ultimate beneficiaries? This could be legitimate of course, but after all the shenanigans I have witnessed, I have to be doubtful.

06/05/08 - Annual accounts.

Have a look at pg 53. That is a page full of conflicts of interest.

Of course everything could be managed for the best now, but with so little oversight in the past and in the present, people tend to take advantage.

I hope something is done so that such blatant abuse of trust and governance is a thing of the past in Malaysia and those who have enriched and continue to enrich themselves on the back of others know they no longer have carte-blanche.

15 comments:

naga~ said...

Hey I have blogrolled you.. plz blogroll me as well. I have posted your article in my blog and linked, also I will be posting it at hindraf.org.

Thanks and welcome to the blogging world !

YennaMike said...

Bro, permission to republish this article in my blog.

Regards

YennaMike...

rishaa said...

good effort.

NLFCS realy needs a surprise third party audit.

I hope Sambathan sir's daughter would make this happen.

Reform NLFCS said...

I have reposted a comment about this from another forum. I hope the commentator does not mind

http://littleindia.net.my/ftopicp-66307.html#66307

Posted: Tue May 13, 2008 1:23 am Post subject:

--------------------------------------------------------------------------------

i heard some stuff about this

the way i heard it, the top management is killing the company.

mine are just stories and i've never been there myself.
but from what i hear, money is spent like idiots.

expense control is highly dissapointing and
it seems only the entertainment expense is considered as expense.
_________________
You are given the power to think n free-will
use it n ur Karma will b ur Judge

Rishantiniiiii

Anonymous said...

Well, it seems like you dont' know about NLFCS and the history behind it. It is the only Indian organization that has benefited thousands of indians. Its sad to note that an Indian has to kill or downgrade their own kind. If it was mismanaged it would not have received accolades from the Government and the Prime Minister's Department.

If you know NLFCS, benefits received by their members matches no other cooperative in the country. In the era of NEP, NLFCS has survived without a helping hand from the government and this should be attributed to the management team. I would suggest that you check your facts beforehand. I suggest members who have benefited from the NLFCS to state their comment by setting the record straight. To the blogger, be useful to your community don't waste time spreading rumours. We should be proud that we have an organization such as NLFCS. 'VALGAI KOOTURUVU"

Thava said...

I am never a blogger nor do I pay attention to blogs. It is only by shear accident I stumbled on this blog on NLFCS. Normally I would not waste my precious time on commenting on statements which is neither honest nor fair. In fact it is very damaging and insulting to the entire Indian community.
As a member of NLFCS for the last five years I owe it to the Indian community to defend such irresponsible statements made by the blogger. I will forgive him for he has admitted himself that he “doesn't have much dealings with NLFCS” and his statements are made on what he has heard. Since he has invited comments from people in the know I shall put the facts straight.
1) As a member (more importantly as an Indian) it gives me great pleasure to drive pass Wisma Tun Sambanthan with tamil words giving recognition to the founder of NLFCS. I cannot think of any other building 27 storey’s high owned by an Indian organization which is so majestic and so proud of its success. The blogger obviously is not aware of the immense contribution made by all under the leadership of Tan Sri Somasundram.
2) The Blogger also stated that challenges are not encouraged and often strong arm tactics are employed in the appointment of NLFCS office bearers. As a member I cannot agree with this statement. I have attended regional elections where the office bearers were elected in an orderly and cordial manner with representatives from the Cooperative dept. present. I am pleased to say no one asked me to vote for anyone in particular and certainly not arm twisted. Brother you are wrong here too!
3) My experience in the last five years of NLFCS membership showed that they are not only a caring cooperative but also a responsible one too. Dividends and bonus shares declared beats all other investments I have. Also NLFCS boasts of scholarship grants, educational loan schemes, senior members assistance scheme, small business loans, assistance for widows etc. etc. It is no surprise to me for NLFCs winning the “ Anugerah Perdana” – for being the best co-operative in Malaysia!!. If my memory is correct, winning awards for excellence is not alien to NLFCS. Hey Brother, when all other races are envious of the work and the team TSS have built at NLFCS………. You chose to discredit him.WHY?????????????? . Be proud man.
4) I do not understand your statement calling for surprise audit by Tun Sambanthan’s daughter. For your information Co-operative bodies are audited not only by a firm of chartered accountants but also by the ministry of Entrepreneur and Co-operative Development. Let me assure you that if there is mismanagement it would be highly unlikely for NLFCS to win the national awards. Furthermore, please do not underestimate or insult the directors who spend considerable time in ensuring the success of NLFCS. Some of the directors are eminent people and leaders in their own area of expertise.
5) The latest accounts of NLFCS s show a growth of approximately 10%. This was achieved despite giving generous payouts to its members. You will be pleased to know that members’ funds stood at a whacking 380 million ringgits as at 31st December 2007. I am sure this does not reflect the true picture of NLFCs assets. I won’t be surprised that with proper valuation the assets, members funds will top 1 billion ringgits! Surely this cannot be by accident. It must be through hard work and dedication and certainly NOT by mismanagement.
6) As a great leader, TSS is conscious of the fact that NLFCS should continue their progress well into the 21st century. He has identified an able person in Dato Sahadevan to lead them in the coming years. Sign of a good leader I would say.
7) Brother, You have published words publicly and should be responsible. Your words certainly hurt me.
Before I part let me conclude with Thiruvalluvars words..

" Speak only such words as are worth saying; refrain from profitless and worthless words"

Gunasegaran said...

Dear blogger,

I would certainly agree with Thava's statement on the success of NLFCs. You should see their success achieved and not to speculate what they could have achieved.

As far as I know NLFCS have delivered the goods in championing for indians in a rather quite and passive way. They have built state of art tamil schools with no fuss or fanfare.What return are they expecting when they spent millions on schools? And what more when the plantaion house was about to be auctioned they came to the rescue. THey purchased it and put it into good use and kept the historic building within Indian hands. My friend this require forsight and to keep the wishes of Tun Sambanthan intact.

Can you pls join me to wish them well......unless,of course you want to destroy the success just the same way as what happened to the dream of another great leader -Dato Kularajah( MCIS)

Be responsible pls.

Sivam said...

Thava and Gunasegaran
Please stick to facts. Should this blog be a platform for open discussion or defence?
One question is whether NLFCS progress is optimal or just so. You need more info than you have now to justify the assertion which you make. Please check on the assets , the ROI and the monies spent on bad investment which could have been better utilised. Please check on how the estates are actually managed, the ones left. Please check on the sale of prime assets. Please compare the growth of other plantation companies started about the same time as NLFCS. PLease check on the early days of the reginal meetings and also on how people who seemed to be against TSS were treated. Please check on how NLFCS companies managed by 7M ran. Please check how much 7M were paid.Please find out wheu=ther Premium paid for Board members to be flown to India for a board meeting which happened to be at the same time as the MD's daughter's wedding.

Thank you.

Anonymous said...

dear blogger,

Dont worry about the negative comments, these are from TSS's cronies.

There are alot of things going wrong in nlfcs, and everything leads back to TSS. He is the head and MUST be held accountable.

TSS has forgotten that he is running a cooperative and not a 'family' business. Time has come to face the music and when it is highlighted at the correct time and place, they wont be able to buy their way out of it.

pls dont talk about the members benefits, it is an eyewash, look carefully at the accounts, look dont blab, get it interpreted and see who is actually making and spending (like nobodys business) the money???????

keep up the good work, a wave has already started and it is gathering strength amd headed in the right direction.

Vaaga Makkal

Ian said...

I believe your idea is that now that Makkal Sakthi was able to bring down a strong political party why dont use the same steam to hit NLFCS.
Well I just dont believe you guys. So what happens next bring down all Indian Organisation doesnt matter if we kill ourself in the process.
We have started to blame others for our downfall but what we fail to see is that it is we who choose to stand in the same circle.
Why not compare NLFCS with other organisation of Indian Communities interest like some Holding company or cooperatives.
On how regional meetings were run those days, well i believe Toh Puan was there and also Tun's brother and not forgetting Tun's daughter. Wasn't this family run at that times.
Just because TSS over the 50 years of working life has managed to get some decent savings and investment that went well, you guys are questioning him.
I believe if he was not in NLFCS he would have been a more sucessfull businessman(much bigger than some of the current richest people in Malaysia).
I suggest like me do some research find out how TSS was before NLFCS especially during his times in Kedah.
All I can say is dont slay the goose which is laying golden eggs.

Anonymous said...

I notice from Ian's Thava's and Gunasagaran's comments, that they seem to be focused on defending or protecting TSS. Not sure why. If they are well wishers of the NLFCS, the idea is to look into how best to improve the organisation more especially as at TSS' age, anything can happen anytime, and it is a personality centric organisation in a politically dynamic environment. Not looking into these issues would be to slay the goose....

I am talking to old timers to find out more facts rather than make unverified contributions. I do not think that this blog is to kill the organisation and the mere fact that contributors are running to TSS defence with opinions and statements makes me wonder why.

I would like to encourage more factual contributions on how to improve a pioneer Indian organisation in the light of things which have not gone optimally, and in the light of there being no real succession, rather than just give opinions.

What say the rest of you?

Reform NLFCS said...

I would definitely welcome more information and there has to be some serious thinking on how to structure NLFCs so that it stands the test of time, if I project 100 years into the future I cannot see how it will get there, there is no vision to get there, nothng at all, even 20-30 years down the line, it is diffult to project where NLFCS will be simply because it has been run as is without an over-reaching plan/strategy. As you said it is a personally-centric organisation which means that responsibility is centred on one person. This responsibility needs to be dispersed and the board needs to play a more active role as they were meant to do. There also needs to be clear performance benchmarks/indicators so each division can be measured, so well informed decisions can be made.

And we musn't forget, we are doing this so the members can continue to enjoy their benefits well into the future.

Thank you for your contribution and I welcome any information you have.

Regards

Reform NLFCS

Thava said...

gg
Dear Blogger,Lets look what you have published.
1)You said you are an idealist.
You are no idealist!
Idealists have conviction in what they believe is right. By failing to identify yourself, you downgrade yourself to one of the many “flying letters” issued by jealous people. Look at Raja Petra, he was prepared to go to jail in what he believes in. He can rightly claim to be an idealist. In your case you rather hide behind a blog and publish anonymous letters accusing people of wrongdoing. As an idealist you should be prepared to be wrong and pay a price for being wrong or alternatively be rewarded if you are right. Your type of idealism will not succeed, especially when your idealism is founded on some kind of false information or just plain loony reasoning. So please refrain from calling yourself an idealist.
2) You published your thoughts on ROI purportly in response to a comment from Sivam.
What ROI are you referring to when substantial sum of NFLCS money was spent on helping members in owning houses. Hundreds of Malaysians have benefited from house ownership schemes introduced by NLFCS. Most of the purchasers have no chance of owning one in the commercial world. For your information, this initiative by NLFCS has been praised by ILO, a United Nation body and several NGOs for their success. In fact, big companies like Sime Darby have been criticized openly for not following NLFCS example. Are you disputing this fact? You must be if you are insisting on NLFCS to be compared with commercial organizations. I would also like to know what ROI you are referring to when NLFCS spent millions on school which you acknowledged but choose to keep silent. What ROI you are referring to when they have spent substantial sum of money promoting tamil language and literary works, some of which I have personally attended in Dewan Soma. What ROI you are referring to when NLFCS gave scholarship and financial awards to thousands of Indian children. In spite of all this, NLFCS have maintained good payouts to its members. I agree with you it could have done better.

3) Thanks to you, I found out a piece of information I didn’t know.Its from an article published in Bolehland, a BLOG affiliated to your site.
,,,,,In the same year, Sambanthan and K.R. Somasundram worked closely to purchase their first estate, a 1,200ha Bukit Sidim Estate in Kulim. It was bought for RM3 million from its British owner without any government assistance.

It also concludes by saying

NLFCS is a success story because it was managed professionally by principled leaders.

You may dismiss this as one man’s view. Let me assure you that this is not a one man’s view, you can add me to the list too.

4) You have accused TSS guilty of Nepotism.

If TSS is guilty of promoting his son in the NLFCS hierarchy, it is no different to Lim Kit Siangs son assuming the chief Ministers post in Penang, Anwar’s daughter taking the Lembah Keramt seat, Lee Kuan Yew’s son taking over the leadership in Singapore. In all these cases I do not hear anyone crying foul or saying that their children are not worthy of the position they hold. In fact in TSS’s case he has taken pain to ensure that Dato Sahadevan takes over from him and not his son, although Raj Somasundram has a Masters qualification in Business.

5) To my earlier comment on Wisma Tun Sambanthan. I reproduced below:

As a member (more importantly as an Indian) it gives me great pleasure to drive pass Wisma Tun Sambanthan with tamil words giving recognition to the founder of NLFCS. I cannot think of any other building 27 storey’s high owned by an Indian organization which is so majestic and so proud of its success. The blogger obviously is not aware of the immense contribution made by all under the leadership of Tan Sri Somasundram.

You merely replied that………….
This is not a fact. These are your feelings so I can't comment on this.
Can I ask you which is not a fact?
- That it is 27 story high?
- That it is built by NLFCS under the leadership of TSS.?
- That there are tamil signage on the building
- That the building makes every Indian proud.

6) You attached Page 53 of the Annual accounts of Premium Nutrients on Related Party Transactions to imply there is conflict of interests between TSS and the transactions disclosed. Readers not familiar with annual accounts would believe that TSS has profited from all these transactions.
You know very well this is not true but you deliberately try to mislead innocent readers.

Ian said...

In the first posting the host himself identified Dato Saha as the succesor but now he claims there is no proper sucession plan.
I also find your posting is filled with "I have no idea",statements on NLFCS is based on hearsay as you dont have first hand information or experience.So you yourself do not have much idea about NLFCS.
I suggest that if you need to know more why dont you go to NLFCS office and find out yourself, I think they would gladly let you know or if you are a member then you can raise this questions at the Regional Meetings.
The way you put down TSS's son is also wrong, you yourself are not sure of his qualification or experiences but you are questioning his existence in the organisation.
Even the Goverment can only project as far as 20-30 years but you are able to project 100 years into the future, you are definately an asset.
When you state that the Board do not play an active role in the decision making at NLFCS, is this also based on hearsay.
On the audited accounts of Premium, there are many organisations which would be looking into it like Securities Commission, Public Trustees,Bankers, ROC,the shareholders and on top of all the external auditors as such if there is any mismanagement or any related party (in your assumption TSS) have benefitted from the company any one of the above would highlight it.

On the comment that it is the "cronies' who are posting the defensive comments, well the blogger was also a crony as he also came through NLFCS to Premium. But he chose to come out and release his frustration by blogging rather than stay and correct whatever is wrong in Premium.
I definately agree with Thava that
the blogger is not an idealist as he is a mere petition writer.

Reform NLFCS said...

Mr. Ian you are simply regurgitating the same things. I have very carefully not made this personal but you seem to have no qualms about doing that.

I am not questioning anyone's existence in the organisation but answering Mr. Thava's point. Please do not put words in my mouth. What I say is pretty clear and please quote me verbatiim rather than intrepreting what I say for your owm benefit.

The Auditors of Premium Nutrients resigned Mr. Ian after all that happened as I have detailed in that posting. I think that is statement enought.