MACC investigates Sime Darby’s huge losses

My colleague Farrah Naz Karim and boss Shahriman Johari write.

PUTRAJAYA: The Malaysian Anti-Corruption Commission (MACC) has taken a proactive step by initiating investigations into the massive losses suffered by Sime Darby.

Investigations will start with a probe focusing on the internal inquiry being carried out by the conglomerate. The company’s internal investigation, believed to have started some eight months ago, is to determine the real extent of the losses in its energy and utilities division and whether they were anything beyond just making bad investment calls.

There may also be probes into other divisions and projects. MACC investigations director Mustafar Ali confirmed that the commission had started investigations.

“We will be identifying areas that have elements of corruption, misappropriation and abuse of power. Like all cases, we’ll deal with this one with urgency, not only because this probably involves billions of ringgit but also the interests of the people,” he told the New Straits Times yesterday.

MACC had last week offered Sime Darby its expertise in detecting elements of graft but the country’s oldest and largest conglomerate had to date not approached the antigraft body for help in facilitating its investigation.

Until last week, MACC said it would let Sime Darby complete its investigation and would only open an investigation file into the financial affairs of the government-linked company if any element of corruption was suspected in its massive losses.

Sime Darby recently confirmed the market’s worst fears when it announced that it would have to post massive losses suffered in projects in the Middle East as well as the Bakun hydroelectric dam project in Sarawak.

It is expected to post close to RM1 billion losses in its third quarter results, which are expected to be released tomorrow. Sime Darby is also expected to disclose tomorrow the findings of the task force set up to investigate its energy and utilities operations.

The cost overruns were discovered by a board work-group formed in October last year to “assess the corporate governance and performance” of Sime Darby’s energy and utilities division."

The work-group members are Datuk Seri Andrew Sheng, a member of the National Economic Advisory Council, Tan Sri Wan Mohd Zahid Mohd Noordin and Datin Paduka Zaitoon Othman.

In announcing the losses, Sime Darby also ordered its group chief executive, Datuk Seri Ahmad Zubir Murshid, to take leave of absence. The company has appointed Datuk Azhar Abdul Hamid acting group CEO for the interim period, while the government has assured transparency in any investigation into the company.

This is not the first time the anti-graft body started an investigation into a GLC. In 1996, MACC, which was then known as Anti-Corruption Agency, launched investigations into Perwaja Steel after it was declared insolvent, with debts and losses totalling RM10 billion.

This led to the arrest of its managing director, the late Tan Sri Eric Chia, in February the same year, where he was charged with embezzlement. He was acquitted in 2007 after the Sessions Court ruled that the prosecution had failed to establish a prima facie case against him.
 
Meanwhile, the Securities Commission (SC) is studying the developments at Sime Darby, which is carrying out a probe after cost overruns of almost RM1 billion for this year alone.
 
"We are assessing the developments at Sime Darby Bhd. At this stage, the SC prefers not to comment any further," an SC spokesperson said.
 
Just two weeks ago, Sime Darby asked its chief executive officer (CEO) to leave as it looked set to book losses of almost RM1 billion for the second half of this year on cost overruns in its energy and utilities division. It made a net profit of RM1 billion in the first half.
 
Acting CEO Azhar Abdul Hamid indicated in a news report last weekend that there could be more provisioning as it probes further.

Leave a Reply