Le Temps, one of Switzerland’s premiere newspapers, has tonight (Friday) received confirmation from the Attorney General’s Office that an official investigation has now been launched into 1MDB.
It is a highly significant move, because it signals that international banking regulators and law enforcers are now engaging in the scandal, which has engulfed Malaysia for several months.
The statement confirms that the Attorney General’s office formally opened an investigation on 14th August into two companies and an unnamed individual, in connection with 1MDB and relating to money laundering of the proceeds of corruption against a foreign country.
Over recent weeks the Prime Minister of Malaysia has moved to close down the country’s own investigations into the matter, leaving many to wonder if 1MDB’s financial irregularities would pass unnoticed.
At the same time he sacked his Deputy Prime Minister, his Attorney General and several members of his cabinet, while also shutting the country’s premiere independent business newspaper and, of course, banned Sarawak Report.
However, with each high-handed move Najib Razak has engendered concern within the international financial community, which regards transparency and due legal process as a crucial pre-cursor to investment.
The ringgit has plunged by a quarter over the past few months and there are now fears of a free-fall if the Prime Minister’s refusal to abide by normal due processes continues.
Whistleblower in Thailand jailed for three years this week for revealing 1MDB’s secrets
Whistleblower, Xavier Justo, jailed for three years in Thailand this week for revealing 1MDB’s secrets
The Swiss press have been alerted to the story by the arrest and apparent vilification of a whistleblower into 1MDB, the Swiss national Xavier Justo.
Justo received a three year sentence in Thailand for allegedly blackmailing PetroSaudi International over his information about their conduct during the highly controversial joint venture with 1MDB, where US$1.19 billion appears to have been siphoned out via a company owned by Najib Razak’s proxy, businessman Jho Low.
Involved in these deals have been RBS Coutts, Zurich, JP Morgan and the Swiss private banks BSI and Falcon, which was bought by the 1MDB joint venture partner from Abu Dhabi, the Aabar sovereign wealth fund.
The Chairman of Aabar was sacked two months ago, following a spate of revelations about 1MDB followed by the CEO, sacked earlier this week.
Altogether, the various moves and declarations by the international finance community over 1MDB-related matters indicate a growing momentum of concern about the multi-billion dollar scandal in Malaysia, where the Prime Minister appears unable to answer the most basic questions.
Next weekend, as the international community has noted, the well renowned Bersih [Clean] movement has scheduled the 4th of a series of peaceful protest marches, calling for a clean up against corruption.
Bersih 4 is specifically directed against Najib Razak’s current failure to explain the arrival of US$681 million into his own bank account, which was believed by investigators to be linked to the 1MDB scandal – before their investigations were closed down
The last such march, held before the 2013 General Election and directed against cheating by the ruling party, rallied over 300,000 people.
Temperatures are said to be rising even higher now, following what was generally regarded as a bought result by the ruling party and this latest evidence of corruption. There are indications that intimidatory tactics against the marchers by ‘counter-groups’ and the police will reach new levels.
Government employees have also been warned they could lose their jobs if they participate in the march, which is a clear violation of their constitutional rights.
The notice to Le Temps from the Swiss Attorney General states:
“Regarding the state of affairs to which your request relates, we confirm that the MPC [Swiss Confederation] opened a criminal case against two 1MDB bodies, dated August 14, 2015, and against Unknown [an individual who is yet to be named] . The procedure is being conducted under the laws concerning the bribery of foreign public officials (art. 322septies CP), dishonest management of public interests (art. 314 CP) and money laundering (Art. 305bis CP). The opening of the criminal action follows two communications from the office for money laundering (MROS).[Translation]
It is the first key sign that the investigation into 1MDB has been globalised into the hands of other implicated regulatory authorities. As Malaysia abdicates its own leading role in the investigation the markets have markedly started to panic, as evidenced by the ongoing collapse of the Ringgit.
Other international regulators are clearly being forced to take action to ensure confidence for investors.
In 2012, 1Malaysia Development Bhd (1MDB), using subsidiaries, issued two bonds totalling US$3.5 billion (RM11.55 billion) bonds to finance the acquisition of power assets from Tanjong and the Genting Group.
The subsidiaries were 1MDB Energy Ltd and 1MDB Energy (Langat) Sdn Bhd. The total proceeds after netting off expenses and fees to Goldman Sachs and other intermediaries was US$3.1 billion (RM9.3billion).
The two bonds were co-guaranteed by 1MDB and Abu Dhabi’s International Petroleum Investment Company (Ipic). The Ipic guarantee came at a very heavy price because 1MDB agreed to the following:
1) Ipic got to keep RM4.25 billion – 45% of the net proceeds of RM9.3 billion or 37% of its gross debt of RM11.55 billion – as refundable security for the guarantee.
2) Ipic was given a 10-year option to subscribe for up to 49% of the future listing of the power assets. Ipic transferred the option to its subsidiary Aabar Investments and hence, it is called the Aabar options.
As we have argued many times previously, 1MDB’s style of borrowing is an extremely expensive one. It is ridiculous that a company gets to keep only 37% of the RM11.55 billion it borrowed.
It is like borrowing money from Ah Longs (illegal moneylenders)!
If that was not bad enough, 1MDB also agreed to share 49% of any upside on the power plants it bought via the Aabar options.
Just like the money it poured into its aborted joint-venture with Saudi Petroleum took a few twist and turns, the same appears to have happen with the Aabar options.
In its Full Year March 31, 2014 accounts (which was submitted to the Companies Commission of Malaysia only in November) 1MDB made the following disclosures under the Significant Events Subsequent To The End of The Reporting Period:
First, it said that a substantial sum of the US$1.22 billion (RM4.03 billion) redeemed from Cayman Islands was used for debt servicing, working capital and payments to Aabar as “refundable deposits” pursuant to an agreement to extinguish the options. It did not reveal the amount of the refundable deposits but we can assume it was the bulk of the US$1.22 billion.
Second, it said that in May, 2014 it had taken a bridging loan facility of up to US$250 million to finance the acquisition of the options granted to Aabar Investment.
Third, it was also revealed that on May 22, 2014, 1MDB and Aabar had signed a settlement agreement to terminate the options. No details were given except that the final settlement will depend on the final valuation of the IPO.
Lastly, 1MDB revealed that on September 2, 2014, Aabar had written to inform 1MDB that it did not wish to exercise the options and the company had “agreed to compensate (Aabar) at a consideration agreed under the terms and conditions” of the May 22 settlement agreement.
What 1MDB did not disclose was that on September 1, 2014, a day before it received the notification from Aabar, it took a US$975 million loan from Deutsche Bank. Was it also to pay Aabar?
There are two questions to ask about this chain of events that happened during the May to September period.
1) What was the total amount 1MDB had paid to Aabar? If you add the bridging loan of US$250 million plus a substantial amount of the US$1.22 billion redeemed from Cayman and the US$975 million loan from Deutsche Bank, it is a lot of money that 1MDB raised during that 5-month period. How much went to Aabar?
2) Why was there a need to sign the May 22, 2014 settlement agreement? Was there not such a termination clause under the original option agreement signed in 2012 as is normally the case in such agreements? Or is the May 22 termination agreement a revised settlement agreement?
In the name of transparency, good governance and to clear doubts about the utilisation of the Caymans money and the payment to Aabar, 1MDB must reveal details of the original agreement with Aabar and also the May 22, 2014 settlement agreement.
1MDB must also disclose how much money has been paid to Aabar thus far to terminate the options and justify why it had agreed to the amount and went ahead to pay Aabar given that the IPO of its power assets is facing headwinds.
We can already hear Arul Kanda citing “legal and commercial confidentiality” for not answering questions he wants to avoid. But those are the questions the public want an answer to. – The Edge Malaysia, March 2, 2015.
Did 1MDB pay Aabar US$1 billion to terminate options?
BY THE EDGE MALAYSIA
2 March 2015
Sarawak Report blog details how deeply a flamboyant financier and friend of PM Najib actually ran the fund
In December of last year, the controversial investment fund 1Malaysia Development Bhd abruptly called in all of its computers, employee laptops and servers and wiped them clean of all emails.
(Read: Controversial Malaysian Investment Fund’s Computer Records Wiped Off)
It was too late. The reason has come embarrassingly clear with a report by Clare Rewcastle Brown, the indefatigable blogger who edits The Sarawak Report. Rewcastle Brown had already obtained thousands of emails and documents before the shutdown, detailing that transactions by the fund were actually run by Taek Jho Low, a close friend of the family of Prime Minister Najib Tun Razak. There were times when the CEO of 1MDB, Shahrol Halmi, and his Malaysian colleagues had no idea what was going on.
Jho Low has repeatedly told the media that he has had nothing to do with 1MDB’s investment activities, and that he has received no money or benefits. But the emails allegedly show that he orchestrated a 2009 joint venture between 1MDB, as the fund is known, and a fledgling oil exploration firm called PetroSaudi International, which was little more than a shell.
Although money provided by 1MDB was putatively going into oil exploration, Sarawak Report’s emails indicate that Jho Low siphoned off US$700 million and channeled the money to a firm he owned called Good Star Ltd. The emails and other documents show that money was then used to purchase UBG bank in Sarawak, owned by the former Chief Minister, Abdul Taib Mahmud, “at a very advantageous price for the chief minister and his family, who had been failing to get a deal on the open market.”
1MDB has denied any money has been lost and in fact on Feb. 21 it claimed that the PetroSaudi JV had turned a profit of US$488 million. 1MDB president Arul Kanda Kandasamy said on 1MDB’s website that that the money it had invested in the venture had been converted into Murabaha notes, an Islamic financing structure.
That assertion remains to be proven. But whether the fund earned money or not, the extent to which a private citizen and friend of the Prime Minister used 1MDB’s influence and apparently in his own business deals is highly irregular.
PetroSaudi, for instance, agreed to act as a “front” for Jho Low on such deals, according to the documents, and it was a subsidiary of PetroSaudi International registered in the Seychelles, which bought UBG, using money siphoned from 1MDB.
The extent to which Jho Low was using 1MD for his own purposes may go beyond just the PetroSaudi deal. Documents on file in London indicate that the young tycoon attempted to use Malaysia’s sovereign credit via 1MDB in his vain attempt to buy three exclusive London hotels including Claridge’s. Lawyers in Los Angeles have charged that money to fund the film The Wolf of Wall Street also may have been guaranteed by 1MDB. That deal was ultimately settled out of court and the lawyers refuse comment.
The revelations are certain to add to the precarious state of Najib’s premiership. As finance minister, he put together the arrangement that uses the Finance Ministry to back 1MDB. He is also its chief economic adviser. He is under intense fire over 1MDB both from the opposition and from former Prime Minister Mahathir Mohamad, who said on Feb. 10 that “something is rotten in Malaysia” and demanded that Najib step down. The prime minister’s popularity has fallen to 44 percent and seems likely to descend further. Revelations about the 2006 death of the late Mongolian translator and party girl Altantuya Shaariibuu are also coming closer to him. His own brothers have published formal statements questioning his comments that the sources of his wealth were his family.
The article, titled “Heist of the Century, displays documents that show an initial meeting took place in New York on Sept. 8, 2009, between Jho Low, then the head of Wynton Capital, a UK-based businessman named Patrick Mahony, who had been introduced a few days earlier by PetroSaudi’s CEO, Tarek Obaid. In addition to being CEO, Obaid is a friend of PetroSaudi’s owner, Prince Turki bin Abdullah, one of the sons of the then King of Saudi Arabia. Mahony worked for the investment group Ashmore, which was funding PetroSaudi’s main operation, an oil well in Argentina.
Also at the meeting were two of Jho Low’s close colleagues, Li Lin Seet and a UBG bank lawyer, Tiffany Heah.In an email written to “Jho, Seet and Tiffany” the following day, Mahony made clear on behalf of PetroSaudi that the company was very willing to become involved in a series of deals proposed by Jho Low, which were expected to involve 1MDB and Petronas, Malaysia’s national energy firm. In that email, Mahony said he also understood that Jho Low wanted “to use PetroSaudi International as a front” for certain deals and he said that “we would be happy to do that.”
1MB officials apparently only became aware of the PetroSaudi transaction about 10 days before the initial billion-dollar deal was signed. The emails show that Jho Low initiated formal written introductions between 1MDB and PetroSaudi just days before the transaction was signed. There is no evidence that the Malaysian fund concluded any due diligence into PetroSaudi at all.
Jho Low repeatedly insinuated that he represented Malaysia’s highest authorities, in this case the “YAB PM” – Najib – directly, in the matter. He focused on playing up PetroSaudi’s owner Prince Turki’s royal connection, insinuating that the negotiations were officially connected to “furthering Saudi-Malaysia bi-lateral ties,” although there was nothing to suggest bilateral ties had anything to do with the matter.
“There is no evidence to suggest that this ‘loan’ was anything apart from an entirely contrived transaction between two arms of PetroSaudi, a company with very little working capital,.” Sarawak Report said. “The US$700 million was repaid by 1MDB alone, as PetroSaudi had brought in “zero cash” into the joint venture and had only committed the valuation of its assets.”
In fact, according to Sarawak Report, “Jho Low crafted the whole Joint Venture deal before either PetroSaudi or 1MDB saw what was in the plan. These same emails provide the equally telling information that the first draft copy of the Joint Venture deal to be negotiated with 1MDB was drawn up by Jho Low’s own office.”
Two days before negotiations were due to start on the billion dollar deal, “that draft was still being eagerly anticipated by Low’s contacts at PetroSaudi,” the story notes. In an email from Mahony on Sept. 21, he said “ETA for first draft of agreement is still in a few hours…?
Mahony suggested that his lawyers and Jho Low’s lawyers should first liaise with each other, before they contacted 1MDB’s lawyers about the content of the proposed JV document being drawn up by Jho Low’s team in New York.
“I also need to get the 1mdb lawyer and my lawyer in touch asap,” Mahony wrote. “I will wait until you send the jva but what i suggest is that when you send me the jva, you introduce me to your lawyers by email and then i will forward the jva to my lawyers and introduce my lawyers to your lawyers. Thanks.”
“The inescapable conclusion is that the jetlagged team, arriving from Malaysia the next day, had acted as little more than onlookers in the drawing up of this ‘joint venture’, for which only they would be putting up any cash, on behalf of the Malaysian public,” the report added. “According to the contract about to be placed on the table in front of them USD$1 billion was due on day one, with further drawing rights available of up to USD$5 billion.”
Emails Blow Malaysia’s 1MDB Fund Wide Open
March 1, 2015 – Asia Sentinel
Businessman Jho Low orchestrated the 2009 joint venture between 1Malaysia Development Berhad (1MDB) and PetroSaudi International to allegedly siphon off US$700 million from the strategic development fund, whistleblower website Sarawak Report has claimed.
The UK-based website revealed that the 1MDB PetroSaudi joint venture company’s US$700 million loan repayment to PetroSaudi in 2009 was a front and the funds channelled to a firm allegedly owned by Low, called Good Star Limited.
The US$700 million loan repayment provision was part of the joint venture contract between Petro Saudi International and 1MDB, Sarawak Report said, citing documents it had obtained. It also published those documents with its report.
“What that evidence goes on to show is that critical manoeuvres for transferring the USD$700 million ‘loan’ cum ‘premium’ into the control of Jho Low took place straight after the signing of the agreement (between PetroSaudi and 1MDB) on September 29 – that and Jho Low was involved and copied in on every step,” Sarawak Report said.
According to copies of the PetroSaudi loan agreement obtained by Sarawak Report, the US$700 million had been loaned from PetroSaudi Caymans Holdings to the 1MDB PetroSaudi joint venture company on September 25, 2009.
“However, there is no evidence to suggest that this ‘loan’ was anything apart from an entirely contrived transaction between two arms of PetroSaudi, a company with very little working capital.
“Three days later, 1MDB was committed to pay it back in hard currency,” it said.
On September 29, 2009, PetroSaudi CEO Tarek Obaid issued a letter of demand to 1MDB PetroSaudi Limited for US$700 million be credited to account number 11116073, at RBS Coutts Bank Ltd in Zurich, Switzerland.
Sarawak Report claimed that the account was registered under a company called Good Star Limited, which was controlled by Low.
“This means that the money, which was stated as having been paid back to PetroSaudi as part of the joint venture agreement, was in fact signed over by Tarek Obaid to an entirely separate third party, Good Star Limited.”
It added that the US$700 million was repaid by 1MDB alone, as PetroSaudi had brought in “zero cash” into the joint venture and had only committed the valuation of its assets.
Good Star then paid Tarek Obraid a “broker fee of US$85 million” on the same day the letter of demand was written, it said.
Sarawak Report claimed that the entire 1MDB-PetroSaudi joint venture deal had been initiated by Low and his team on September 8, 2009 – less than a month before the deal was signed.
Those involved in the initial meeting were Low, UK businessman Patrick Mahony, and Low’s colleagues Seet Li Lin and lawyer Tiffany Heah.
Mahoney worked for an investment group called Ashmore, which was funding PetroSaudi’s omain operation, while Seet is the chief investment Officer of Good Star Limited, and the vice-president of Low’s company Jynwel Capital, said Sarawak Report.
The website said it managed to contact Seet to ask about his role at Good Star, but he denied knowing anything and then “turned off his phone”.
In an email transaction between Low and Mahony, the latter said he understood Low wanted “to use PetroSaudi International as a front for certain deals” and that “we would be happy to do that”.
Sarawak Report said 1MDB’s CEO, Shahrol Halmi, and his Malaysian colleagues were only involved in the proceedings in September 15, on the initiative of Low, who organised the conference call between the parties.
The website also furnished an email, purportedly written by Shahrol, which it said showed that 1MDB was still in the dark about the actual business of PetroSaudi International, as Shahrol had yet to receive the company’s profile days before signing the joint venture.
On February 21, 2015, 1MDB claimed that its joint venture with PetroSaudi had earned it a profit of US$488 million.
In a statement on the company’s website, 1MDB president Arul Kanda Kandasamy also claimed that the money it had invested in the venture had been converted into Murabaha notes when the plan did not go through.
“In 2009, 1MDB entered into a joint venture with PetroSaudi, which was set up to undertake investments in certain projects.
“Both parties eventually decided not to proceed with the joint venture and our investment was converted into Murabaha notes.
“These Murabaha notes were paid back in full, with 1MDB earning a profit of US$488 million, in 2013,” Arul said in the statement. – March 1, 2015.
Jho Low allegedly siphoned off US$700 million from 1MDB, says website
1 March 2015 – Malaysian Insider
Together with London’s Sunday Times newspaper, Sarawak Report has completed an in-depth investigation into the trail of the missing billions at the heart of Malaysia’s 1MDB (One Malaysia Development Berhad) financial scandal.
We have obtained access to thousands of documents and emails relating to transactions by 1MDB, including its initial joint venture with the little known oil company PetroSaudi International from 2009.
What the documents establish is that, in spite of copious official denials, the entire joint venture project was conceived, managed and driven through by the Prime Minister’s associate and family friend the party-loving billionaire tycoon, Jho Low.
The documents also prove that the USD$700 million so-called “loan” that was supposedly repaid to PetroSaudi as part of the joint venture agreement, was in fact directed into the Swiss bank account of a company called Good Star, which is controlled by Jho Low.
That money was then partly used to buy out Taib Mahmud’s UBG bank in Sarawak at a very advantageous price for the chief minister and his family, who had been failing to get a deal on the open market.
PetroSaudi had agreed to act as “a front” for Jho Low on such deals, according to the documents, and it was a subsidiary of PetroSaudi International registered in the Seychelles, which bought UBG, using money siphoned from 1MDB.
How Jho Low managed the 1MDB PetroSaudi Joint Venture deal
Among the email exchanges obtained by Sarawak Report are documents from an initial meeting that took place in New York on September 8th 2009, between the then Wynton Capital head, Jho Low and the UK businessman Patrick Mahony, who had been introduced a few days earlier by PetroSaudi’s CEO, Tarek Obaid.
Mahony worked for the investment group Ashmore, which was funding PetroSaudi’s main operation, an oil well in Argentina.
A4 scanner – RM14,670 each
A3 scanner – RM20,630 each
Clock – RM3,810 each
Building acoustic measuring system – RM597,330
How much can an A4 size scanner cost? Nowadays it is not so difficult to get an estimate. Just do a search online and you can get the ballpark price.
In the Auditor-General’s Report 2012 it is reported that RTM (under the Information, Communications and Culture Ministry) purchased three A4 scanners for RM14,670 each!! And this is despite the fact that RTM itself had estimated a price of only RM200 each. This means an increase of 7,235% from the estimated price!
It also need some bigger A3 scanners too which were estimated to cost RM1,000 each. RTM ended up buying 5 of these scanners at RM20,630 each!
(Source: Auditor General’s Report 2012)
RTM also bought 20 wall clocks. It estimated that each clock would cost RM100 – quite reasonable. But the successful supplier charged RM3,810 each! That is 38 times the estimated price and they happily went ahead to by these clocks at this exorbitant price. Hopefully the clocks are still working. Wonder what brand are these clocks.
A Building Acoustic Measuring System was estimated to cost RM100,000 but in the end RTM ended up purchasing a system more than 5 times the estimate at RM597,330!
(Source: Auditor General’s Report 2012)
What is worse is that some of these expensive items were found not being used even after 3 years! They were purchased in 2009. In 2012 items delivered but not used includes one of the expensive A4 scanners. The reason? They did not know that it was in the store! How about the super clocks? 6 of these were delivered in May 2010 and in 2012 they were still not in use!
(Source: Auditor General’s Report 2012)
The government faces the risk of footing heavy losses because the agreements it has signed for the double-tracking project limits the compensation that can be claimed from contractors who fail to meet deadlines.
“An audit found that the cap on liability borne by the contractor… for the Ipoh to Padang Besar (double-tracking) project is fixed at 10 percent of the contract value or RM1.25 billion,” notes the Auditor-General’s Report 2011.
This, it explains, does not bode well because an exact cap for the Rawang to Ipoh segment of the project forced the government to pay RM882.01 million in compensation.
Elaborating on this, the report states: “In 2000, the electric double-tracking project between Rawang and Ipoh was carried out by the (Transport) Ministry. The audit done in 2008 found that the government suffered an estimated lost of RM1.14 billion when the contractor failed to complete the project.
“However, the full amount could not be claimed from the contractor because, according to the (terms and) conditions, the maximum liability that can be claimed is limited to 10 percent of the contract value or RM257.99 million only.”
The more recent contract signed with MMC Gamuda Joint Venture Sdn Bhd (MGJV) has similarly failed to protect the interest of the government, states the report.
“The cap on the maximum liability does not take care of the government’s interests because (it) will be forced to bear the losses if the contractor fails to complete the project according to the schedule.”
The report further questions the 0.15 percent processing fee imposed on the government by the project’s lead lender, Bank Pembangunan Malaysia Bhd (BPMB). This amounts to RM10.05 million for interim payments made to MGJV.
“The audit is unable to determine the justification for the fee amounting to RM10.05 million (for BPMB) to process interim payments which were in fact handled by the project consultant, Keretapi Tanah Melayu Bhd and the (Transport) Ministry,” it said.
It also notes that the deadline for the project, which is to be completed by Jan 7, 2013, has been extended to Nov 7, 2014, and that this is likely to incur additional costs.
To date, the RM12.485 billion project has cost already cost an additional RM3.608 billion due, among other reasons, to land acquisition and compensation for squatter relocation.
The Sarawak Public Works Department (JKR) had proposed the construction of the RM20.43 million Batang Strap Bridge in Sri Aman Sarawak, forgetting a link road to nearby villages, according to the Auditor-General Report 2011.
The result – a 182.4 metre concrete bridge that connects the nearby town Pekan Pantu to shrubs on the other side of the river.
“An audit survey on Dec 17, 2011 of the project site at Pantu, Sri Aman found that the concrete bridge project worth RM20.43 million could not fully stimulate the local economy after completion as the 10km road across the river to link the long houses and schools there had not been built,” the report reads.
Without the 10km road, it adds, some 23 long houses with a population of 3,000 and four schools have no access to the bridge and beyond to Pekan Pantu.
In a March 7 reply, the department said it will propose the construction of the road, estimated to cost RM50 million in the third rolling plan under the Tenth Malaysian Plan.
“As a temporary measure, JKR proposed to construct a 500m dirt road to connect to the logging road to the Batang Strap bridge at an estimated cost of RM500,000,” it said.
This was among several projects under a special RM1 billion allocation from the federal government for road upgrades and construction in Sarawak.
An audit at the federal level had rated the 175 projects as “less than satisfactory” due to delays and poor quality .
Meanwhile, in Johor, the Auditor-General’s Report 2011 found that state government property had mysteriously found themselves as new furnishing for private homes.
The total of 39 items worth RM55,360 supplied by the Johor Menteri Besar’s Office were intended for the premises of associations and organisations in Muar, Kluang and Ledang.
Other than furnitures and electronic gadgets, the other items include:
BOB-KA-9000 professional digital echo mixing amplifier (RM2000)Air conditioners (RM3,000);
Laptops and desktops (RM1,700 – RM5,000);
Elecreolux range hood: E11-15024 & electrolux uilt-in hub: E-10-42299 (RM4,500);
Kitchen cabinet full high (23’x108′) (RM5,000); and,
Steamer 26″ CNI (RM1,550)
“This is against the issued guidelines and therefore the targeted groups could not benefit from these equipment,” states the report.
A Defence Ministry contract to build living quarters for married military personnel has not only incurred a bill of RM3.21 billion, but has seen the delivery of shoddy units.
The cost for the 38 projects comprising 9,455 units of quarters ranging from flats to bungalows was initially estimated at RM1.74 billion but ballooned to RM3.21 billion – an 84 percent cost overrun, the Auditor-General’s Report 2011 notes.
The Auditor-General’s Office had audited 12 of these projects, finding that these had contributed to RM1.3 billion of the cost overrun stemming from, among others, delays of up to 1,240 days for delivery.
It found that only one of the audited projects, which were part of the 9th Malaysia Plan, had been awarded through an open tender, while the rest were by direct negotiation, limited tender or by obtaining quotations.
Six of these projects are located in the Klang Valley and were awarded to Syarikat USL, a joint venture by the Finance Ministry-owned Syarikat Perumahan Negara Bhd and the Armed Forces Fund Board Sdn Bhd.
According to the audit report, Syarikat SUL was found to be “inexperienced” and “technically incompetent” to complete the projects.
It was fined RM87.12 million for the delays, but payment was later waived by the Finance Ministry following an application by the Defence Ministry.
“The exemption of the fine … caused losses and undermined the government’s interests …,” the audit report states.
“The Defence Ministry should not have accepted the final products as it had many construction faults and damages, forcing armed personnel to stay in poor quality dwellings.”
It also recommended that the contractor should be “blacklisted” for performance failure.
Photographs appended to the audit report showed ceiling boards which had rotted through due to leaks in the roof. Leaks were also found in bungalows for higher ranking personnel.
It also found that the office unit at the Jalan U Thant quarters in Kuala Lumpur had a “bad stench” due to a “leak in the sewerage system” .
Up to 2,085 complaints of damage were made for projects constructed by Syarikat SUL, but the company did not address these.
“As such, the Defence Ministry had to appoint a third-party contractor to deal with it at an extra cost of RM1.84 million,” reads the report.
Of the 38 projects, only the one in Kinabatangan, Sabah has yet to be completed.
However, in December 2011, the audit staff found that the captain’s quarters there was being inhabited by “foreign workers and their families”.
To this, the ministry responded that the contractor has been fined RM13,314.86 for each day’s delay and that project is – as at April this year – 91 percent compete.
The audit further noted that Syarikat USL-built airforce quarters in Subang that were completed in 2006 were in poor shape. Although the USL was responsible for repairs up to July 2008, these were not undertaken.
Despite this, the ministry had issued a ‘certificate of making good defects’ (CMGD) in February 2009, to indicate that repairs had been completed.
As at January last year, the ministry estimated the cost of repairs for the Subang quarters alone to be RM5 million.
“However, the bank guarantee of RM8.56 million by Syarikat USL to the ministry lapsed in January 2009,” reads the report.
“The ministry should have seized this bank guarantee as Syarikat SUL had failed to fulfill its responsibilities.”
Furniture provided was also of poor quality. Bed frames, chairs and tables were made of “easily-broken, low quality, thin plywood”, while some could not fit into the rooms as the items did not meet specifications.
A photograph of a “new unit” at the Kementah camp dated January 2012 showed furniture which could not be used due to “disintegration as these could not withstand a termite attack”.