Published August 12, 2009

Port Klang Authority goes to police over scandal

Task force finds possible fraud involving developer Kuala Dimensi

By PAULINE NG
IN KUALA LUMPUR

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THE scandal over Malaysia's Port Klang Free Zone (PKFZ) has gotten murkier.

The staggering amounts involved in the scandal - made worse by the poor 15 per cent occupancy rate at PKFZ and a lack of transparency and governance, have infuriated Malaysians.

In the latest twist, the owner-operator Port Klang Authority (PKA) yesterday lodged a police report against the port's developer Kuala Dimensi (KD) and project consultant BTA Architect over unsubstantiated claims and irregularities that could add up to as much as RM1 billion (S$413 million).

A task force set up to investigate the legal and financial aspects of the project - which ballooned to over three times its original RM1.9 billion cost - concluded that there was possible fraud, overcharging and unsubstantiated claims by KD.

Matters raised by the task force report include possible fraudulent claims on electrical infrastructure yet to be supplied, lack of supporting claim documents, lack of basis for variation claims and the lack of invoices and payment vouchers for 'professional fees' which it was not entitled in any event.

PKA chairman Lee Hwa Beng filed the police report yesterday following the damning findings by the task force, which are contained in a 370-page report with 2,500 appendices.

The Transport Ministry set up the task force - comprising lawyers, accountants, quantity surveyors and building cost consultants - to get to the bottom of the PKFZ fiasco after an audit report by PricewaterhouseCoopers said that the project was the subject of extremely poor oversight and governance.

That audit recommended that a RM4.6 billion government loan to PKFZ be restructured to match PKA's projected cashflow to avoid a default situation. However, restructuring the loan would swell interest costs by a massive RM5 billion.

The staggering amounts involved in the scandal - made worse by the poor 15 per cent occupancy rate at PKFZ and a lack of transparency and governance, have infuriated Malaysians, already fed-up with the enormous waste of public funds.

But more damaging details could lie ahead, with The Star newspaper saying yesterday that the task force report is just 'the tip of the iceberg'.

The PKA board is expected to discuss other issues in the coming days, including details of the land purchase, the conduct of former PKA general manager OC Phang, breach of statutory duties by former directors and legal conflict of interest, The Star said.

The involvement of Barisan Nasional politicians has turned the issue into a hot potato for Prime Minister Najib Razak, with many waiting to see if anyone would be prosecuted, given Mr Najib's promise to get tough on graft.

KD, the company at the centre of the scandal, has rejected the task force findings, saying that it was not asked to rebut or defend during the probe. In July, it filed a suit against PKA and PwC over the latter's report.

Although the PwC report did not pinpoint the people responsible for PKFZ, which was to serve as a regional hub for the export and transhipment of manufactured goods, it said that attention should be paid to certain politicians.

Attention so far has centred on Parliament Backbenchers' Club chairman and Bintulu lawmaker Tiong King Sing because of his interest in KD.

KD and listed Wijaya Baru Global are related through Mr Tiong who is a common shareholder and director. Wijaya Baru Global is also the parent company of Wijaya Baru, the main contractor for KD at PKFZ. Mr Tiong has said that he is done with talking on the allegations surrounding PKFZ and prefers to state his case in court.

The project dates back to the late 1990s. It has already snuffed out the political career of former transport minister Chan Kong Choy, who opted not to contest in the general election last year, citing 'health reasons'. A new board of directors and management now run PKA.