LINEAR CORP: under investigation by SC

It is learnt that Linear Corp had paid out almost all of its cash to a company in Seychelles.

The Securities Commission (SC) is believed to have started an investigation of Linear Corp Bhd (9504) after it was learnt that the company had paid out almost all of its cash to a company in Seychelles.

An industry source told Business Times yesterday that the authorities intended to find out what had actually occurred in the company.

"They (SC) are gathering all the facts now," he said.

As at March 31 2009, Linear had RM37 milion in cash, according to its unaudited accounts.
Last Friday, Linear told Bursa Malaysia Bhd that it had advanced RM36 million to Global Investment Group Inc (GIG) as a performance consideration to build a RM1.66 billion cooling tower in Manjung, Perak.

"The advance was effected solely by a director of the company at the material time in an autocratic manner," Linear told the stock exchange.

According to information obtained from Linear's latest annual report, as many as three directors quit the company this year.

They included independent and non-executive director Datuk Thangarajo A. Subramaniam, non-independent and non-executive director Alan Rajendram and Singaporean non-executive director Eswaramoorthy Pillay Amuther.

Rajendram and his partner, Eswaramoorthy, had sold a total of 14.37 million shares, or 19 per cent of the company, in April.

They were, however, not the only sellers of Linear shares.

Linear itself sold in batches some 2.6 million shares, or 3.5 per cent of the company, for RM1.95 million.

The proceeds are about 9.4 per cent of Linear's current market capitalisation of RM18.4 million.

Linear also said that it was in discussions with the four banks which had granted unsecured banking facilities.

"All of these facilities are in default and the total outstanding amount as at May 31 this year was about RM20.8 million. In addition, Linear has defaulted on a secured term loan with an outstanding amount of about RM16.7 million as at May 31," the company said.

Linear is seeking to recover the RM36 million advance paid for the project in Perak, which was awarded by GIG to its unit, LCI Global Sdn Bhd.

The two companies were supposed to seal a formal contract within 180 days of the letter of award but that did not materialise.

The cooling plant was to supply chilled water for the air-conditioning system of a big project, called King Dome, developed by GIG.

King Dome was touted to become the world's largest dome structure with a diameter of 1,600 metres. It would house an indoor city with retail, leisure, resort, food and beverage facilities.- Business Time