Archive for June, 2009

05
Jun
09

Queries directed at directors

Queries directed at directors
03 Jun 2009 – the Sun

THE files in the meeting room of the Port Klang Authority (PKA) headquarters are voluminous. They form the appendices to the report on the Port Klang Free Trade Zone (project) and if read together, they must be treated like catalogues of shame. Going through them, the over-used phrase “Malaysia boleh” comes to mind and one cannot be faulted for adding three other words – “Semua pun boleh”. How and why did the board of directors of the PKA and even the PKFZ watch with folded arms and remain silent as the plunder of public funds continued unabated?

Directors are appointed to jointly oversee the activities of a company or organisation. Their activities are determined by the powers, duties, and responsibilities delegated to them or conferred on them by the statute books and the memorandum of articles.

Their duties include ensuring the availability of adequate financial resources; approving annual budgets and most importantly, accounting to the stakeholders for the organisation’s performance.

Hence it comes as a shock that the directors never knew about the agreements, the supplementary agreements and other deals which were entered into. But ignorance is no defence. The directors have a fiduciary duty to protect PKA’s assets. They were appointed because of their knowledge, talent and skills and common law principles dictate that they must exercise “care as an ordinary man might be expected to take on his own behalf”. In short, they must look after the finances of PKA in the same manner as they would look after their personal finances.

Having said that, the inevitable question is: How did they allow the common seal to be used in various transactions? (The common seal has legal significance because the affixing of the seal signifies that the document was the act and deed of the company, whereas when a document was merely signed by a director, then that is deemed to be an act carried out on behalf of the company by its agents.)

The PKA board was in the dark when various professionals like lawyers and architects were appointed and variation order for costs were approved. The PricewaterhouseCoppers report states that 14 agreements and contracts were entered into using the common seal and authenticated by the general manager and the chairman or other employees of PKA. What is more shocking is that the auditor-general’s report of 2003 which was published a year later had already warned of the financial problems and implications and that the PKA would be insolvent in five years. Yet, the board did nothing to prevent the PKA from further committing itself to more than RM1 billion worth of contracts AFTER the auditor-general’s report was made public. Was it assumed that money was coming from a bottomless pit?
Continue reading ‘Queries directed at directors’

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04
Jun
09

Port Klang Authority at the deep end

Port Klang Authority at the deep end
by Tan Sri Ramon Navaratnam
2 June 2009 – the Edge

WHAT a shock it was for the public to learn of the Port Klang Free Zone (PKFZ) scandal that has put the Port Klang Authority (PKA) at the deep end!

It is therefore appreciated that Prime Minister Datuk Seri Najib Razak and his cabinet have made  public the PricewaterhouseCoopers (PwC) report on the project. It would have been unacceptable to have the sordid affair kept under wraps.

As Malaysia slips into recession, with the economy likely to register negative growth rates of -4% to -5% this year, we are greatly saddened to think that some of our trusted  leaders and officials have betrayed the public trust so badly. Why should we have to face the burden of PKA’s loss due to the RM4.6 billion soft loan from the Ministry of Finance (MoF)?

Worse still, we are informed in PwC’s 45-page report that this huge loss could increase to RM7.4 billion with interest payments and even up to RM12.4 billion if PKA defaults on its repayments to the MoF for its soft loan, since PKA is expected to be cash flow negative until 2041.

The initial cost was only RM1.9 billion but was altered to RM3.522 billion (excluding interest costs) due to variation orders. This means that the original tender was awarded at a low price but the contractors managed to negotiate for increases that almost doubled the original cost. Why was this allowed to happen? Was the approval to vary the tender cost approved by the Treasury and was the basis for the variation in the tender price justified?

Experience has shown that even in an open tender exercise, a contractor can undercut the other tenderers and win a contract but then pay under-the-counter to get a higher price for the contract. This would amount to a serious breach of good governance and a major abuse of the tender system.

In the PKFZ case, the first issue that the Malaysian Anti-Corruption Commission (MACC) must investigate is whether the contract for the project was awarded in accordance with good governance practices.

The government has to be commended for commissioning the PwC report. But consistent with this spirit of transparency, the government should also reveal all the officials who were involved in the approval and implementation process and investigate them for any wrongdoings. The tax-paying public and indeed all Malaysians have to be made aware of who these persons are and how the wrongdoers will be punished.

The potential loss of RM12.4 billion means that the amount would be denied to the rakyat for development and anti-poverty measures. Why should they have to bear the brunt of these irregularities and wastage of public funds? The public will be waiting to see what the government, the MACC and the Public Accounts Committee will do to net the big fish who may be corrupt and to punish them severely.

Any sign of protection of important persons or attempt to placate the public will be seen as the condoning of wrongdoing, that could undermine the confidence of the public and voters in the government’s aim of combating corruption and promoting good governance.

Indeed, the cause of this huge loss is, as the PwC report says, bad governance. The report has specified at least 20 issues of mismanagement, neglect and poor supervision by the PKA board and management.

Continue reading ‘Port Klang Authority at the deep end’

03
Jun
09

Now, get back what belongs to us

Now, get back what belongs to us
1 Jun 2009 – the Sun

IT was a trip to be remembered. The 40-minute drive in mid-2004 to Southern Park in Klang was at the invitation of neighbours of a Klang High School mate – Krishnan Tan – a man with a passion for sports, especially rugby. In his neighbourhood, someone had plonked a brick building on a playing field which residents used for sports and recreational activities under the pretext of providing a Rukun Tetangga base. Residents objected but no one would listen. The political force over-rode the people’s will. Appeals were dismissed summarily and only a court order prevented its completion. Today, the uncompleted structure is a standing monument which does justice to the political tsunami of March 8. It was at this meeting that someone whispered about the “Port Klang Free Trade Zone (PKFZ)”.

While the stalemate on the building was the subject of my column and since it involved land, there was a small rejoinder at the bottom on how land meant for the PKFZ was “traded” by some well-known local politicians and their families. And that was the first time Malaysians ever knew about what has now become the “RM12 billion scandal” dwarfing the Bumiptra Malaysia Finance fiasco which cost taxpayers a whopping RM3 billion in the Eighties.

In the following months, theSun’s investigative team kept its focus on the PKFZ while exposing other irregularities including the infamous Zakaria’s palace in Port Klang. In between, I had written about the deals that had taken place and implications to the taxpayer. In August 2005, the first signs of the humongous problems that lay uncovered in the archives of the Klang Port Authority (KPA) were made public. We managed to lay our hands on the auditor-general’s report, which among others, touched on the precarious position it was in.

I wrote: The Port Klang Authority (PKA) could be heading for financial trouble. If government funding is not forthcoming, it could be wound up by parties it entered into agreements with, as it does not have the necessary funds to go through with projects costing in excess of RM2 billion. Well, that’s not my view but that of the auditor-general (AG), in his report contained in the authority’s 2003 annual report.

The AG’s report, it says that the agreement states that PKA paid a 10% advance amounting to RM108.85 million and the balance of RM1.7 billion is to be paid over 10 years from 2007 until 2017, with annual payments of between RM130 million and RM179 million. This is not the only troubled transaction. According to the AG, the PKA signed another agreement in 2003 with the same company to develop the project for RM519 million.

Here’s the clincher from the AG’s report: In early 2004, the PKA again signed a supplementary agreement with the same company. Through this agreement, the project development cost has increased to RM1.3 billion.
Continue reading ‘Now, get back what belongs to us’




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All that is necessary
for the triumph of evil
is for good men
to do nothing.

- Edmund Burke
When the people
fears their government,
there is TYRANNY;
when the government
fears the people,
there is LIBERTY.

- Thomas Jefferson
Do you hear the people sing?

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