February (SINGAPORE) An independent review conducted by KPMG Forensics of JEL Corporation has found manipulation of

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1 February 2008 KPMG Finds Irregularities In JEL Accounts Infosys Fines CEO And Independent Director For Violating Insider Trading Rules Tougher Rules Proposed For Foreign Firms Listing In UK Former CEOs Of Brocade And Monster Fined For Options Backdating FTSE 350 Companies Still Lagging In Compliance With Combined Code: Study Andersen Partners Settle Charges On Enron SEC Advisory Panel Approves Recommendations To Change U.S. Accounting Former HIH Chairman Released From Prison Amidst Victim Anger KPMG Finds Irregularities In JEL Accounts (SINGAPORE) An independent review conducted by KPMG Forensics of JEL Corporation has found manipulation of accounts leading to group profit overstatements totalling $11.84 million for FY2006 and the first half of JEL s audit committee had appointed KPMG after it was informed by the Singapore Exchange that it was in receipt of certain information relating to the company's financial affairs. The company, whose shares have been suspended from trading since late September last year, had also announced that the Commercial Affairs Department had asked for information. According to the KPMG report, JEL s profits for FY2006 had been stated as $8.03 million, whereas it should have been $1.92 million. For 1H07, the company had recorded a net profit of $4.35 million, which should have been a loss of $1.38 million instead. In order to inflate its accounts, the company had created invoices and accounting documents and manipulated the accounting system. In FY2006, the inflated transactions were worth $4.83 million and for 1H07, the company had prematurely recognised revenue of $4.69 million and recorded what KPMG described as an unusual one-off sale transaction, overstating its profits. JEL had also breached listing rules by failing to announce dealings with trade partners and by not obtaining shareholders' approval for these trades. The company had also breached section 162 of the Companies Act, by having made cash advances of about $1.6 million to former chairman Eric Tan from Jan 1, 2006 to June 30, 2007, for his personal use. Although the advances have been repaid entirely, they were not disclosed in the company's financial statements nor did they fall within the statutory exceptions, said KPMG. The company has said it is studying the conclusions of KPMG s report and will be seeking legal and other professional advice before taking further action in the matter. ~ Adapted from KPMG finds manipulation of JEL accounts, Business Times Singapore, 10

2 January Tougher Rules Proposed For Foreign Firms Listing In UK (LONDON) In a review of UK s listing regime, the Financial Services Authority (FSA) has said it is considering bringing in tougher corporate governance rules for overseas firms seeking to list in London. In a discussion paper on listing rules, the FSA is seeking industry views on whether it should require listed overseas companies to comply with the Combined Code for corporate governance or explain why they did not. Currently, foreign companies are only required to disclose whether they comply with their local corporate governance regimes and how those differ from the UK code. The change would fall into line with the FTSE Group that takes into consideration overseas companies compliance with the UK Combined Code, Takeover Code and other shareholder rights before deciding whether or not to include these companies in the FTSE UK indices. The discussion paper is also seeking views on removing the current restriction on UK companies being limited to a primary listing so as to create a level playing field with foreign businesses which can choose between a primary or secondary listing. The FSA is seeking comments on its discussion paper by April 14, with a feedback statement to be published in the third quarter of the year, after which the planned changes will be detailed in a consultation document. ~ Adapted from Tougher governance rules eyed for foreign firms, 14 January 2008; FSA wants reform of listing rules, 16 January FTSE 350 Companies Still Lagging In Compliance With Combined Code: Study (UK) The sixth annual Grant Thornton Corporate Governance Review, which assessed the corporate governance disclosure of 306 FTSE 350 companies against the terms of UK s Combined Code and associated guidance, has found that only four in 10 companies claim full compliance with the Code. However, the number of companies aspiring to be fully compliant with the provisions of the Code has increased to 41%, compared to 34% in Of the 125 companies that claim full compliance, only 11 had fulfilled the disclosure requirements of the Code. On the positive side, 110 of the companies that did not claim compliance had embraced the Code's principle of comply or explain by providing robust explanations. 4 per cent gave no explanation and 34 per cent only a minimum. There were also fewer incidences of boilerplating, where companies merely repeat the same statement each year rather than reflect on changed circumstances, as compared to On the face of it, 2007 has seen an improvement with 42% making some change to their 2006 explanations. However, on closer inspection we consider only about half of these updates to be no more than superficial, said Simon Lowe, Head of Grant Thornton's Business Risk Services practice. ~ Adapted from Almost six in every 10 FTSE 350 compnaies still do not claim full compliance with the combined code but corporate responsibility reporting becomes mainstream says new Grant Thornton research, 21 January 2008; FTSE 350 'slow' on corporate governance, com, 21 January 2008.

3 SEC Advisory Panel Approves Recommendations To Change U.S. Accounting (WASHINGTON) A Securities and Exchange Commission (SEC) advisory group has voted to approve recommendations for wholesale changes in U.S. accounting and financial reporting. Among the changes approved by the panel are: base U.S. accounting rules on transactions and activities to avoid special treatment for various industries; limit corporate financial restatements to meaningful mistakes; and provide more protections from lawsuits or SEC enforcement actions for companies and auditors exercising reasonable professional judgment. The recommendation to move away from industry-specific accounting is intended to reduce complexity and make corporate results more comparable from industry to industry. On shielding companies and auditors from lawsuits, the panel has urged the SEC to issue a policy statement or a legal safe harbor protecting firms and auditors from enforcement action or legal challenge provided they acted in good faith and made a reasoned evaluation based on relevant information available to them at the time. To reduce the number of restatements, the advisory group has called for companies to correct errors when they are discovered and issue restatements only for material items. The group also has suggested that during a dark period, after a company announces that it has found a material error but before it issues a restatement of prior financial results, companies should describe the error, the periods that might be affected and that are under review, and give an estimated range of the error s size, any impact it might have and what management plans to do to prevent such errors in the future. ~ Adapted from SEC Advisory Panel Recommends Wholesale Changes in U.S. Accounting, Dow Jones Newswires on 14 January Infosys Fines CEO And Independent Director For Violating Insider Trading Rules (BANGALORE) India s Infosys Technologies has fined its chief executive officer S Gopalakrishnan for failing to report on time a change in his share ownership after he had inherited 12,800 shares from his mother on Dec. 24. In a filing with the U.S. Securities and Exchange Commission, the company said its audit committee had imposed a fine of 500,000 rupees on Gopalakrishnan for inadvertently failing to notify the company within one business day following the change in his shareholding as per its insider trading rules. The company said it had advised the fine to be paid to a charity and the CEO has complied. Infosys had also fined its independent director Jeffrey Sean Lehman US$2000 for failing to correctly follow the procedure on sale of shares and that amount too has been given to charity. ~ Adapted from Infosys board fines CEO and director for insider trading, asiainfocus.html, 24 January 2008; Infosys fines its CEO for violating insider trading rules, com/, 24 January 2008; India's Infosys says fines CEO for breaking rule, 22 January Former CEOs Of Brocade And Monster Fined For Options Backdating

4 (US) Gregory Reyes, former chief executive of Brocade Communications Corp., has been ordered to pay a $15 million fine and sentenced to 21 months in prison for his role in an stock-options backdating scheme at the technology firm. He was convicted in August 2007 on a number of charges, including fraud, conspiracy and filing false documents with the Securities and Exchange Commission (SEC). The SEC complaint had also alleged that Reyes had benefited from the backdating scheme. Brocade had agreed to pay a $7 million penalty to settle the options-backdating case, without admitting or denying the charges in the SEC s lawsuit. In a separate case, former Monster Inc CEO Andrew McKelvey has agreed to pay $275, in penalties to settle charges with federal regulators concerning his involvement in a multi-year scheme to backdate employee stock options at the online job-search company. The settlement also calls for McKelvey to be barred from serving as an officer or director of a public company. McKelvey, who agreed to the settlement without admitting or denying any wrongdoing, has also resolved charges brought against him by Monster by agreeing to pay the company $8 million and convert his stock holdings in the company so his voting power will be reduced from about 31 percent to 7 percent. The agreement is subject to court approval. Separately, McKelvey has entered into a deferred prosecution agreement with the SEC as he is suffering from a terminal illness. The case will be dropped after 12 months if McKelvey abides by the terms of the pact, prosecutors said. ~ Adapted from Ex-Brocade CEO sentenced to 21 months, 16 January 2008; Ex-Monster CEO settles options backdating case, www. workforce.com, 23 January 2008; Ex-Monster CEO to avoid prison time in options case, 23 January Andersen Partners Settle Charges On Enron (WASHINGTON) David Duncan, the former head of the one-time Big Five auditing firm Arthur Andersen's Enron accounting team, has settled allegations that he violated securities laws when he signed audit reports that were materially false and misleading, the U.S. Securities and Exchange Commission said. Duncan, who did not admit to or deny the allegations, failed to exercise due professional care and the necessary skepticism required to ensure that financial statements for Enron conformed to U.S. accounting rules, the SEC said. According to the settlement, Duncan has been barred from practising as an accountant in a role that involves signing a public company's financial statements, such as a chief accounting officer. But he can be a company director or another kind of officer and no fines have been levied against him. Three other Andersen partners - Thomas Bauer, Michael Lowther and Michael Odom also settled SEC allegations that they had each engaged in improper professional conduct in connection with their Enron work. The trio, who did not admit to or deny the allegations, has agreed not to appear or practise before the SEC as an accountant but they can petition for reinstatement after two to three years. ~ Adapted from Former Anderson Partners Settle with SEC on Enron, 28 January 2008; Andersen figure settles charges, 28 January 2008.

5 Former HIH Chairman Released From Prison Amidst Victim Anger (SYDNEY) Ray Williams, former chairman of insurance giant HIH, has been released from prison two years and nine months after pleading guilty to misleading shareholders about HIH's financial position, being reckless and failing in his duties as a director. He was sentenced to four year and a half years jail in 2005, with a non-parole period of two years and nine months. Thousands of people lost money when HIH collapsed with debts of 5.3 billion dollars in March During hearings of a royal commission inquiry into the collapse, Williams was accused of handing out millions of dollars in bonuses for senior executives just months before the company went under and was criticised for extravagant spending, which included giving out 10,000 dollar gold watches as gifts and installing a marble and gold bathroom in his office. His release has sparked outrage from those who suffered in the wake of the HIH collapse, particularly as Williams had reportedly transferred much of his fortune into his wife Rita's account before his conviction. The transfer is said to have included a $4 million home, a $12 million Mosman mansion, a $5 million Lake Macquarie retreat and a Gold Coast unit. Quite a lot of people who lost their houses through the default of HIH probably won't have the same opportunity, said Grey Whitbourne, one of many victims. It doesn't seem fair because his retirement is assured and it's certainly not the case for a lot of the victims of the collapse, he told commercial radio. Williams has denied transferring the assets to his wife. ~ Adapted from Head of Australia's biggest corporate collapse freed from jail, 13 January 2008; HIH boss Ray Williams free but suffering goes on, heraldsun/, 15 January 2008; Williams denies moving assets to wife, 17 January This newsletter is prepared by the Corporate Governance & Financial Reporting Centre, NUS Business School, National University of Singapore and sponsored by Federal Insurance Company (FIC), Singapore. Federal Insurance Company is the largest writing company of the Chubb Group of Insurance Companies, and as at 1st April 2004, carries a financial rating of AA by S&P and A++ by AM Best. Federal Insurance Company is a leading insurer for Directors and Officers Liability Insurance. For more information, please contact their insurance broker or agent or Federal Insurance Company,18 Cross Street, #11-08 China Square Central, Singapore Telephone: +(65) , Facsimile: +(65) To unsubscribe from this newsletter service, please send us an stating your address at which this e-newsletter was sent. The news summaries are based on original reports in various media including newspapers, publications, websites and other sources. The views, opinions and content expressed herein are those of the authors and do not necessarily represent the views of National University of Singapore, NUS Business School, Corporate Governance and Financial Reporting Centre, or any insurer within the Chubb Group of Insurance Companies. The information should not be relied on as legal or other professional advice or a definitive statement of the law in any jurisdiction. For such advice, an applicant, insured, listener or reader should consult their own legal counsel or other professional adviser. It is not our intention to infringe on any copyrights in any way. Should we have done so unintentionally, please let us know by with the necessary guidelines. Thank you. Corporate Governance and Financial Reporting Centre, NUS Business School, 1 Business Link, Singapore Telephone: +(65) , Fax: +(65) , cgfrc@nus.edu.sg