By Shazwan Mustafa Kamal
July 29, 2010
KUALA LUMPUR, July 29 — PKR demanded today that the Najib Administration review its decision ordering Port Klang Authority (PKA) to pay Port Klang Free Zone (PKFZ) bondholders until the on-going civil suits involving PKA and turnkey contractor Kuala Dimensi Sdn Bhd (KDSB) are settled.
PKR treasurer William Leong claimed that the government’s decision will send a wrong signal and would only drive away investors in the near future.
“I call on the government to review its decision and act in the interests of the people by withholding payment until the Court decides on the civil suits otherwise it sends a wrong signal that crime does pay in Malaysia. This decision will not instill confidence in the foreign or local investors but will only lead to further erosion of FDI. Confidence arises in the respect for the laws. In this case it is by withholding payments when there is no legal requirement to pay.
“The Najib Administration’s decision (is) far from showing that the Government is committed to the sanctity of contract and respect for laws, on the contrary sends a signal to the capital markets, investors and the public that in Malaysia crime does pay. It is decisions like this that has eroded FDI by 81 per cent and has reduced our country’s competitiveness behind Thailand, Vietnam and the Philippines,” said Leong in statement today.
The Selayang MP said that the government’s move showed that it was giving preference to the interests of “private bondholders and KDSB” instead of protecting taxpayer’s monies and maintaining accountability.
Leong pointed out that since the PKA board had lodged police reports and was currently embroiled in civil suits against KDSB for fraud, overpayment and breach of contract, there was no legal obligation whatsoever to complete the payments to the bondholders pending the outcome of the said civil suits.
“The government’s reason that this is because of the government’s commitment to bondholders is not acceptable. The statement serves instead to confirm that the whole truth behind the PKFZ scandal has not been revealed. The Najib Administration’s decision amounts to a volte-face or a complete turnaround from the position announced by the Badawi Administration. The previous Transport Minister, Datuk Seri Ong Tee Keat informed Parliament that the letters issued by the former Transport Minister were not guarantees.
“He stated in the Parliament and it was recorded in the Hansard that the letters were letters of support. It means that they were mere statements of intent that the Government will ensure PKFZ shall have sufficient funds to meet its contractual obligations. If this statement given in the Parliament is true then there is no legal requirement for PKFZ to pay KDSB when KDSB did not comply with and breached its contractual obligations,” said Leong.
Leong added that if the government insisted on paying the bondholders irrespective of whether or not KDSB had complied with its obligations under the contract with PKFZ, then the letters issued by the former Minister of Transport Dato’ Chan Kong Choy were not “mere letters of support as claimed but are indeed guarantees.”
“As such these letters of guarantees were issued in violation of Section 14 of the Financial Procedure Act 1957 and offences have been committed. In such circumstances, the failure to act according to the Public Accounts Committee’s recommendation to investigate and charge Dato’ Chan Kong Choy and all those involved (other than subordinates and lower echelon officers) for criminal breach of trust and other offences in this scandal sends a signal that there is a shocking lack of political will to enforce the laws and regulations by the authorities under the present administration.
“If, on the other hand, the Badawi Administration and Datuk Seri Ong Tee Keat are correct then there is no legal obligation to pay. The present administration’s decision to pay cannot be not due any legal commitment. It is thus an extra-legal payment made for the benefit of these private interests. The Najib Administration in seeking to protect the interest of bondholders and KDSB has failed to protect the interests of Malaysians,” said the PKR man.
Pakatan Rakyat (PR) have attacked the Najib Administration ”bailing out” the culprits by ordering the Port Klang Authority (PKA) to pay its Port Klang Free Zone (PKFZ) bond obligation of RM222.58 million to Freezone Capital Bhd (FZCB).
The Barisan Nasional (BN) government had announced yesterday of the order for PKA to honour its final bond obligation despite the board’s ongoing suit against turnkey contractor Kuala Dimensi Sdn Bhd (KDSB).
The Transport Ministry said yesterday that PKA would have to make payment to special-purpose vehicles as set out in the payment schedule.
Kong had said that the ministry would stick to the original schedule set before, which stipulates that the board had an obligation to fulfil a final payment of RM372 million, a second part of the RM723 million repayment due to bondholders this year.
Of the total, PKA is obliged to pay RM222.58 million to FZCB and the remaining RM150 million to Special Port Vehicle (SPVB) by July 31 this year.
It was reported that the PKA board had decided to hold back on its final payment to FZCB, one of the four special-purpose vehicles (SPVs) that was established by KDSB, the turnkey contractor for the troubled PKFZ project.
KDSB is now facing a suit of RM1.4 billion by the PKA for, among other things, allegations that it had made bloated claims for work done on the project.
The board had last month disbursed some RM350 million to Transshipment Megahub Bhd (TMB) and Valid Ventures Bhd (VVB).
It is due to make more payments to three other SPVs besides FZCB up until 2017.
Last month, former Transport Minister Datuk Seri Ong Tee Keat had called for a freeze on all repayments pending the outcome of the PKA’s lawsuit against KDSB.
He claimed that further payments would jeopardise the existing legal action by PKA, noting that freezing them was a more favourable position than later having to recover monies already paid.
In an interview with The Malaysian Insider last night, Ong reiterated his stand, saying that the government should “consider the reasons” for not fulfilling the bond obligation.
The former transport minister said the government should ask PKA about its refusal to pay instead of forcing the payment by the deadline this Saturday.
“We must look at both sides of the story — the justifications, the rationale — given by PKA as to why they chose to defer payment,” Ong told The Malaysian Insider last night.
The former MCA president said one factor influencing PKA’s decision to hold back monies was the outstanding allegations of fraudulent claims made on projects, especially new additional development work, where no work had been carried out.
“Do you think that you’d still want to pay them? That explains why the panel that I formed to probe into the possible wrongdoings and the 20 points raised by PwC (PricewaterhouseCoopers) in the review report made such a recommendation to the PKA board [to defer payment],” Ong said.
Sources in PKA told The Malaysian Insider that the directors of PKA risk being held liable for hundreds of millions of ringgit after being asked to pay bondholders of the controversial PKFZ project, despite ongoing legal disputes over the amounts owed.
The sources said that the directors were advised that should PKA win their lawsuit against KDSB but fail to recover any money, the directors could be held responsible for money already paid out.
“The directors could be held liable for failing to discharge their fiduciary duty” said the sources.
“That is the crux of the issue.”
In Parliament on June 29, Deputy Transport Minister Datuk Abdul Rahim Bakri had said that the government would not stop the payments to bondholders for it had a “commitment” to them.
He had said this following a question by Ipoh Timor MP Lim Kit Siang who asked whether the government through PKA should not pay KDSB since PKA was in a legal dispute with KDSB, and instead set up a (escrow) third-party account to hold the money.
Pua later pointed out to Abdul Rahim that PKA’s commitment was not to KDSB’s bondholders, but KDSB itself as the main contractor for PKFZ.
He also predicted that the government would eventually have to bail out KDSB from its financial woes.