Politically well-connected Nasioncom - the high-flying telecommunications service provider best known for its discounted phone calls - has kicked off the new year under a storm of controversy.

Three days before Chinese New Year, the Securities Commission (SC) rapped Nasioncom - which is partly controlled by Alfian Mohamed Basir, 33-year-old son of cabinet minister Rafidah Aziz - for submitting inflated revenue figures in its 2005 financial statements.

According to the regulator, Nasioncom had provided false information to the SC, considered as a serious breach of law.

Nasioncom had reported that its revenue for 2005 was close to RM200 million when about two-thirds of that comprised non-existence sales.

"The SC's investigation revealed that Nasioncom's group revenue of RM194,984,186 as reflected in its 2005 financial statements contained a total of RM143,109,727 sales that were not transacted," said the regulator in a strongly worded statement on Feb 15.

The SC, whose main job is to protect investors, subsequently ordered the company to explain the inflated figures and rectify its 2005 financial statement. It gave Nasioncom until March 15 to do so.

SC had described the false information given by Nasioncom as a "very serious breach" and warned that its investigation on the matter was "on-going".

Under the securities law, those found guilty could be slapped with a fine "not exceeding RM3 million or to imprisonment for a term not exceeding 10 years or both".

Doubts sowed

This week, an opposition politician has sowed doubts in the financial statements made by Nasioncom before 2005, in particular the three years leading to its initial public offering (IPO).

"If Nasioncom can falsify its financial accounts for 2005, are its previous financial accounts equally suspect?" said DAP leader Lim Guan Eng.

"For this reason, SC must launch a full investigation on all its previous financial year statements, especially in the years prior to its IPO and listing in 2005."

Incorporated in 1993, Nasioncom claimed year-end revenue of RM63 million in 2002, RM76.8 million in 2003 and RM156.2 million in 2004.

Lim, who is a trained accountant, questioned the figures provided. "What guarantees are there to say that these figures are reliable?"

Generally, a company planning to go for an IPO must show profit for three consecutive years.

Lim added that Nasioncom's auditors - Deloitte KassimChan - should also be investigated and required to explain publicly how they could "approve" such false financial accounts containing RM143.11 million of non-existent sales transactions.

"The Malaysian capital industry can only benefit if SC can root out sloppy or dishonest accountants and ensure that only reliable and professional accountants are allowed to operate, including those who are not so easily cheated into trusting non-existing sales revenue or transactions," said Lim.

SC officials culpable?

A Nasioncom investor told malaysiakini that should there be problems with the company's pre-IPO financial statements, then SC officials themselves may be hauled up as they had given the green light for the telecommunication firm to be listed in Mesdaq.

"As a Malaysian, I'm greatly felt sad not only in terms of my own investment but the integrity of the whole system and the integrity of this company," he said.

"As a investor who suffered losses due to misrepresentation of the information given, can we bring legal action to this company?"

NasionCom has responded to the controversy by telling the stock exchange that "the company will appeal on the SC's decision and will make necessary announcement to Bursa Malaysia in due course".