Law Jenn Dong, a 51-year-old engineer who left Kuala Dimensi Sdn Bhd (KDSB) in September last year, claimed trial to the charges at the Sessions Court here.

He was handcuffed when led to the court by policemen. The charges were:
> nine counts of allegedly cheating the PKA between Sept 29, 2006 and June 5, 2007 to pay KDSB RM46,267,000 by making them believe that electrical infrastructure works for a 33kv system for the PKFZ in Pulau Indah had been completed as stated in the notice of payment, and

> 15 counts of allegedly cheating the PKA into paying a total of RM70,583,000 to KDSB by falsely stating in 15 notices of payments sent between June 30, 2006 and May 30, 2008 that electrical works for a 33kv system for Precinct 2 and Precinct 8 had been completed.

In submissions for bail, Law’s lawyer Tan Hock Chuan argued that the RM1 million bail offered by the prosecution led by Datuk Dzulkifli Ahmad should be reduced in line with that offered by the court to the three accused who were arrested and charged last Thursday.

He added that the aim of bail was not to punish but to ensure attendance of the accused for the trial, which he said Law had done willingly.

“He was out of Kuala Lumpur last Thursday when the others were charged. He called the investigating officer the next day and subjected himself to the legal process,”

Judge Yong Zarida Sazali set bail at RM250,000 and mention for Feb 4.

On Thursday, in the first indictsments by the authorities, former PKA general manager Datin Paduka O.C Phang, KDSB chief operating officer Steven Abok and KDSB consultant architect Bernard Tan Seng Swee of BTA Arkitek were charged a total of 31 counts of cheating and criminal breach of trust amounting to a total of RM380 million.

All three pleaded not guilty.

Tan was charged with jointly committing 24 offences with Law, as well as two more jointly with Abok.

Law was named in a press conference last Thursday by Attorney-General Tan Sri Abdul Gani Patail as being on the list of those who would be charged over the PKFZ development.

The development drew scrutiny when the development costs of the integrated cargo distribution hub and industrial park spiraled from RM2 billion to RM4.6 billion.

> Bernard Tan Seng Swee, 48, of project consultancy firm BKA Architects.

Faces 24 charges of making false claims to the Port Klang Authority (PKA) for electrical works involving a total sum of RM122.267 million.

The offences were allegedly committed between June 30, 2006 and May 30, 2008, with another who is still at large.

The charges were;

> nine counts of allegedly cheating the PKA between Sept 29, 2006 and Jun 5, 2007 to pay turnkey contractor Kuala Dimensi Sdn Bhd (KDSB) RM46,267,000 in believing that electrical infrastructure works for a 33kv system for the PKFZ works in Pulau Indah was completed as stated in the notice of payment, and

> 15 counts of allegedly cheating the PKA into paying a total of RM70,583,000 to KDSB by falsely stating in 15 notices of payments sent between Jun 30, 2006 and May 30, 2008 that electrical works for a 33kv system for Precinct 2 and Precinct 8 had been completed.

Bail set at RM250,000 with one surety for all the charges. Case to be mentioned on Feb 4.

Tan and KDSB chief operating officer Stephen Abok also jointly charged with two offences. They are:

> Cheating the PKA into believing that electrical works for a 33kv system for Precinct 2 and Precinct 8 of the PKFZ project worth RM4,080,000 were completed by KDSB in a notice of payment issued on July 31. 2007 and

> Cheating the PKA into believing that electrical works for a 33kv system for Precinct 2 and Precinct 8 of the PKFZ project worth RM1,337,000 were completed by KDSB in a notice of payment issued on Sept 28 2007.

Stephen Abok was released on a bail of RM250,000 with one surety for both charges. His mention was also set for Feb 4.

> Former PKA general manager Datin Paduka O.C Phang

She was charged with three counts of criminal breach of trust (CBT) of three bank accounts:

> between Oct 1, 2004 and Sept 5, 2005 at the PKA offices of RM98,700,000 of funds in a RHB bank account

> between Sept 30, 2005 May 9, 2006 at the PKA offices of RM21,600,000 of funds in a RHB bank account, and

> between Jun 1, 2005 and Jan 13, 2006, at the PKA offices of RM 134,550,000 in a RHB bank account.

The arrests of Tan, Abok and Phang yesterday mark the first in a series of five arrests to be undertaken by the police and the Malaysian Anti-Corruption Commission over the controversial PKFZ project which had been investigated by the parliamentary Public Accounts Committee.

The PAC had recommended that the Malaysian Anti-Corruption Commission and police investigate Phang and former Transport Minister Tan Sri Chan Kong Choy, who held the portfolio from 2003 to 2008, for criminal breach of trust over the scandal.

In its report, it had highlighted that certain procedures were carried out without the authorisation of the Finance Ministry.

The PKFZ controversy arose after the cost to develop the massive 1000-acre integrated cargo distribution hub and industrial park spiraled from RM2 billion to RM4.6 billion.

The other two were Steven Abok, chief operating officer of Kuala Dimensi Sdn Bhd, the project’s turnkey contractor, and architect Bernard Tan Seng Swee of BTA Architect, the project consultant. All three pleaded not guilty.

Newsmen had parked themselves at the court since morning to wait for the trio, who were brought to the court at 1.55 pm with Phang wearing a turqoise-coloured dress while Abok and Tan wore face masks. They were not handcuffed.

Phang faced three charges of CBT amounting to RM254.85 million and was granted RM350,000 bail with one surety.

Abok and Tan were jointly charged with two counts of making false claims involving a total sum of RM5.417 million.

Tan is also charged together with another person still at large with 24 counts of making false claims involving a total sum of RM122.267 million.

The PKFZ became controversial after the cost to develop the massive 400-hectare integrated cargo distribution hub spiralled from RM2 billion to RM4.6 billion.

Phang, a former civil servant, was the first woman to head the PKA. She helmed the authority from 2001 until last year.

A parliamentary probe by the Public Accounts Committee last month had recommended that the Malaysian Anti-Corruption Commission and police investigate Phang and former Transport Minister Tan Sri Chan Kong Choy, who held the portfolio from 2003 to 2008, for criminal breach of trust over the scandal.

The PAC probe also highlighted that certain procedures were carried out without the authorisation of the Finance Ministry.

The report said the PAC was informed by the Attorney-General that three support letters issued by Chan and three letters of undertaking issued by Phang were implicitly a form of guarantee from the government to ensure that there would be allocations for PKA to enable it to meet its obligations under the development agreement.

PKA has since filed over a billion ringgit worth of suits against Kuala Dimensi Sdn Bhd and BTA Architects and also sued Phang for breach of duties.

Police have frozen several bank accounts of Kuala Dimensi Sdn Bhd.

The government has also set up an 11-member special taskforce headed by Chief Secretary to the Government Tan Sri Mohd Sidek Hassan to determine misconduct and to ensure the project becomes profitable.

Meanwhile, Attorney-General Tan Sri Gani Patail told a press conference today that the prosecution of the three people “is certainly not the end of the matter but just the beginning”.

He said the prosecution of other individuals will be done “in stages”, adding that a KDSB engineer Low Jenn Dong will be charged soon in connection with this case.

He said his office and the Malaysian Anti-Corruption Commission (MACC) and the police had been on this probe for several months now and that there were “lots of issues involved both legal and factual which are not only complex but require substantial amount of manhours of evidence gathering”.

He said he decided to prosecute the three individuals today as he could not wait for the authorities to complete their investigations into the whole scheme as that would take a long time.

Both Inspector-General of Police Tan Sri Musa Hassan and MACC deputy commissioner Abu Kassim Mohamed were present at the press conference.

“TI-M hopes that the public will support the legal defence fund, so that we will not be hampered or deterred in its crucial work,” said TI-M secretary general C I Ngooi in a press release today,.

Ngooi added that the fund had been “overwhelmingly” supported in a TI-M Emergency General Meeting on Nov 7 this year to back the controversial 2009 Global Corruption Report and Low.

Low, who was elected as TI-M president in March this year was forced to quit his post on Oct 6 after receiving heavy criticism over the TI-M report which highlighted the RM4.6 billion Port Klang Free Zone (PKFZ) scandal.

Tiong, who is also the Chief Executive Officer of PKFZ turnkey developer Kuala Dimensi Sendirian Berhad had earlier announced his intentions to sue Low and TI-M over the report which he alleged was “irresponsible”.

Low, who resigned on his own free will, told the media at the time that he had resigned over his failure to consult the TI-M executive committee before releasing the report. Low was also apppointed on June 10 to head the PKFZ Port Klang Authority Ad Hoc Committee on Governance, a post which he still retains.

However, TI-M re-elected him as President on Nov 7.

Ngooi said the suit which was received by Low at his firm today did not specify a specific amount of damages, but sought aggravated and exemplary damages, adding that the suit cited passages from the report, as well as articles published by theSun and the online portal Malaysiakini which referred to the report and PKFZ.

Asked when the fund would be opened to the public, Ngooi said TI-M had yet to set up the fund, adding that it was “moving quickly” to determine what legal requirements are needed before asking the public for help.

“We have not set up the fund yet, but we will be looking at all the legal requirements before setting it up soon,” said Ngooi.

” There may be such possible requirements as ROS approval. We have to move quickly, at present we have legal disbursements and deposits to pay,” he added.

TI-M president Datuk Paul Low said Malaysia’s ranking had slipped to 56th position this year from 47th last year, out of 180 countries surveyed.

However, Prime Minister Datuk Seri Najib Razak’s moves to initiate reforms in some institutions, especially the judiciary, and the setting up of the Malaysian Anti-Corruption Commission, to make them more independent, transparent and accountable, was the way forward for the country, he said at a press conference to announce Malaysia’s position in the Transparency International Corruption Perceptions Index 2009, today.

He said Transparency International Malaysia believed that the way forward for the country was to seriously combat corruption and to make government decisions and transactions more visible and transparent.

Low, however, suggested that the government should be more transparent in its procurement process by implementing “integrity agreement” with vendors to act as preventive measures to curb corruption.

Low said Malaysia’s decline in ranking in CPI 2009 of 0.6, from 5.1 in 2008 to 4.5 this year, “may be attributed to the perception of little progress in combating corruption, and lack of political will in implementing effective anti-corruption measures”.

Examples giving rise to the concern were the Port Klang Free Zone (PKFZ) fiasco and the auditor-general’s annual report highlighting extraordinary public procurement abuses, he said.

“However, there are positive signs. The PKFZ fiasco is being actively and vigorously investigated, police reports have been made and suits have been taken against certain parties, and corrective measures have been taken.

“The United Nations Convention Against Corruption (UNCAC) was ratified in September 2008. Integrity is a Key Result Area for the government, with the CPI as a key productivity index. The prime minister has formed a high-level task force to study and make recommendations for action to be taken on the auditor-general’s 2008 report,” he said.

Meanwhile, DAP veteran and Ipoh Timur Member of Parliament Lim Kit Siang views Malaysia’s drop in ranking as a national shame.

“I have no doubt that the death of DAP political aide Teoh Beng Hock on July 16 at the building housing the Malaysian Anti-Corruption Commission building in Shah Alam and the MACC’s targeting Pakatan Rakyat representatives as major factors for Malaysia’s worst-ever TI CPI ranking and score,” he said in a statement.

DATUK Zaharah Shaari was Transport Ministry (MOT) secretary-general from June 1999 to July 2005. She was already serving in the ministry before her promotion to secretary-general. Before her posting to the ministry, she served in the Treasury for 10 years. She appeared before the committee on Aug 13 from 10am to 12.20pm.

On the land acquisition
Zaharah said she was only notified about the PKFZ project during the land acquisition phase. She was informed that the government agreed to buy the 999.5 acres (399.8ha) from a developer named Kuala Dimensi Sdn Bhd (KDSB) for the purpose of having a distribution park to support Port Klang as a load centre.

Zaharah said she felt the government should have acquired the land through the National Land Acquisition Act, adding she found KDSB’s asking price high and ought to be scrutinised because it was much higher than what was offered by the valuation department.

“However, the decision to buy the land in principle was made by the government before I was made secretary-general. At that time, the land offered was about half the portion of the total area. Subsequently, the company offered the balance of the land to the government for the purpose of (building a) distribution hub,” said Zaharah.

She did not mention the price of the original evaluation but it was reported that Port Klang Authority (PKA), which comes under the purview of the MOT, insisted to buy the land at RM25, instead of RM10.

Zaharah told PAC that after she retired in 2005, she was not directly involved in the project but admitted that she would intervene on the request of the then Transport Minister (Tan Sri Chan Kong Choy).

“I would be asked to intervene when there are problems pertaining to policies but I was not informed of all the sequence of events. The actions taken by MOT and PKA were dealt directly by the desk officer as it (also involved) the maritime (department to make the) decisions. Bottom line is, I got involved when my help was required. I only monitored it in general,” she said.

Zaharah claimed during her tenure as the MOT’s secretary-general, there were no reports from the ministry’s representatives on the PKFZ project.

“When I became the secretary-general, I did send notes to my officers to report and update me on what was discussed in the meetings but not all officers did that and it was difficult to monitor them.

“I was only informed by the desk officers from the maritime department. When I found out the problems (the land acquisition), I took the initiative to find out what the problem was,” she added.

Ledang (BN-Umno) MP Hamim Shaari then asked whether the issue was discussed during post-cabinet meetings. Zaharah said: “It was not. But from time-to-time, there were mentions about this project. Once the cabinet decides, the minister will take it up in Cabinet meetings on the decisions and the implementations.”

PJ Utara (DAP) MP Tony Pua asked whether she was involved in the discussions with the Valuation and Property Service Department as the valuations given by the department differed.

The first valuation priced the land at RM10 per sq ft, second valuation at RM21 per sq ft and the third at RM25 per sq ft.

He also asked whether Zaharah, apart from suggesting that the government acquired the land through the Land Acquisition Act, recommended other measures to protect the interest of the government.

Zaharah reiterated that she felt the best way for the government to acquire the land was through the Land Acquisition Act and felt KDSB’s asking price was high as it was much higher than what was offered by the valuation department.

“However, I was later informed that the government agreed with the pricing and negotiation was being done with the company (KDSB), subjected to Treasury approval,” said Zaharah, adding the sale and purchase agreement of the land was signed between 2001 and 2002.

Zaharah also said the proposal to use the Land Acquisition Act did not go through as the Selangor government did not agree to it.

“I am also not aware of the details of the agreement signed. I thought the price of RM25 per sq ft was inclusive of the infrastructural cost,” she said.

On the letters of support
Zaharah said she was given the first letter by the then minister Tun Dr Ling Liong Sik. He apparently had asked her to examine the letter to ensure there were no financial implications involving the ministry or the government.

“Tun Dr Ling Liong Sik did receive a draft letter for him to sign and a special officer in his office handed it to me after a post-cabinet meeting and informed me that the minister suggested sending a letter of support,” said Zaharah.

However, she said she advised the minister not to send the letter in the original form as the minister did not have the right to sign a letter of guarantee.

Kepong (DAP) MP Dr Tan Seng Giaw then asked if she was aware that the first letter sent and signed by the minister was regarded by the Malaysian Rating Corporation Berhad (MARC) as a guarantee.

“It was my sincere belief at that point of time that it was not a form of guarantee because the letter went through our legal officer,” said Zaharah.

“But in actual fact, it was a guarantee, did you know that,” asked Tan.

Zaharah reiterated that she was advised to revise the letter so it would not carry any guarantee or financial implications to the government.

She also said she was not informed that MARC regarded the letter as a guarantee.

Zaharah explained she had never seen any other letters until she was called to face PAC, adding she was unsure about the reports in the media regarding three support letters.
“I was only given one letter, the letter which Tun Dr Ling Liong Sik sent. That letter which was filtered by me after I had discussions with legal officers and senior officers in my ministry,” she added.

Zaharah said she only found out about the second letter sent by former Transport Minister Tan Sri Chan Kong Choy when she was informed she would be called by PAC. She said the ministry only gave her one copy of the letter dated in 2004.

“I did ask if other officers received the letters because I am curious to know since it was (during) my time but I was informed by the ministry that even other officers did not know about the letters,” said Zaharah.

On the financial problems faced by PKA
Zaharah acknowledged that PKA did not have the financial resources to support the project based on the Auditor-General (A-G)’s report in 2004. When asked if a special committee was formed by the ministry to discuss the outcome of the A-G’s report, Zaharah agreed but explained she did not chair the meeting.

“According to the procedure, the deputy secretary-general is the one who should chair the meeting and not the secretary-general. Every minutes of the meeting on the report is sent to the secretary-general but I can’t recall how the issue was discussed in the meetings,” said Zaharah.

Initially, Ong was scheduled to appear before Ling but due to unavoidable circumstances, Ong’s appearance before the committee was moved to a later time.

>> On land acquisition
Ling refuted claims that his ministry had direct involvement in the valuation and final pricing of the land embroiled in the Port Klang Free Zone (PKFZ) scandal. DAP’s PJ Utara MP Tony Pua asked why the Port Klang Authority (PKA), which is under Ministry of Transport (MOT), insisted on buying the 999.5 acres (399.8ha) at RM25 per sq ft, instead of RM10.

It also appears that the Attorney-General’s (A-G) Chambers and the Ministry of Finance (MoF) had strongly recommended the Land Acquisition Act to be used to acquire the plot of land.

“You were actually recommended by the valuation department supported by the (MoF) as well as the A-G. Is there a reason why the higher price was supported,” asked PAC member Pua.

To this, Ling said it was hindsight.

“After the whole thing blew up, we all try to refresh our memories as to what happened … yes, A-G said buy it out of land acquisition at RM10.60 or something like that. Then the Selangor state government said no because there is already a Development Order on that piece of land,” said Ling.

“You cannot use the Acquisition Act to acquire a piece of land which has a Development Order on it.

These are the sort of the things we read about but those are technical things which we do not know which are right or wrong,” he added.

When probed further on MOT’s level of involvement in the acquisition of land, Ling maintained his stand by saying neither MOT nor the minister (then Ling) were involved in the final approval of the pricing of the land at RM25 per sq ft.

“As far as (I’m) concerned, no. The minister is not involved. The main agency would be Treasury. They are the ones who are in charge,” said Ling.

>> On the bonds
Ling claims he does not remember if there were other options to finance the land acquisition process.
According to a PricewaterhouseCoopers (PWC) Report in 2001, the cabinet decided that the project would have to be self-financed and that PKA is supposed to issue the government guaranteed bonds but it was subsequently changed to PKA buying from Kuala Dimensi Sdn Bhd (KDSB) on a deferred payment and pay interest.

“Was it during my time, did I sign anything to approve that action? Because whatever we approve must have gone through due process,” said Ling.

PWC reported that on June 12, 2001, MoF directed that the land should be compulsorily acquired and recommended the development cost be funded by PKA issuing government guaranteed bonds.

However, in the end, the land was bought without the compulsory acquisition, which means the land was bought directly and the funding was from the seller at a higher interest rate of 7.5% instead of government-issued bond at an interest rate of 4.2%.

PKA had paid RM1.09 billion for the land to be settled via deferred payments over 15 years on the basis that PKA was supposedly backed by a government guarantee.

Based on the supposedly government guarantee, KDSB sold bonds worth RM1.31 billion. KDSB was then awarded the contract by PKA to develop the land, leading KDSB to issue bonds amounting to RM1.4 billion.

Two more (batches of) bonds worth more than RM1 billion were issued to finance the construction.

>> On KDSB being awarded the contract KDSB, a company owned by Datuk Seri Tiong King Sing who is the current Parliament’s Backbenchers’ Club chairman, was first awarded the contract in February 2007. PKA signed a development agreement with KDSB to develop the first 400 acres of PKFZ. When asked the reasons why KDSB was chosen without opening competitive bids, Ling did not comment as he said he could not recall the exact details of the entire process and was not prepared to comment on the matter.

When asked if he had heard of KDSB before he left the ministry, Ling said “I may have heard about it”.

He also said he did not remember using the services of KDSB’s group of companies, such as Wijaya Baru Sdn Bhd.

“I have very vague memory of KDSB, to say I never (have) heard of KDSB would be untrue but to say that I remember what they were doing is not true,” said Ling.

>> On PKA former general manager Datin Paduka O.C.Phang Ling admitted that Phang was a reliable officer but refuted claims that most of the decisions on PKFZ was made by Phang and by-passed Ling.

“I would not choose to make any comment on something I’m not sure of. That is too serious,” said Ling, adding that he met Phang every week during post cabinet meetings.

Ling, however, agreed that the management of PKFZ and PKA was largely left to its boards.

“Yes, there was a board of PKFZ, there was a board of PKA and there were all the other ministries and agencies represented were also knowledgeable on financial matters. A lot of these things have been done by them,” he said.

>> Questions to which Ling’s response was: “I don’t remember/know/recall”

Datuk Seri Azmi Khalid
PAC chairman Datuk Seri Azmi Khalid: Would you recall … There was a point where it was mentioned that even RM25 (per sq ft); it was still viable in terms of …?

Ling: It is a little complicated … To pinpoint exactly when, where, how and why, I think it is a little bit difficult.

Selayang (PKR) MP William Leong Jee Keen: Tun, just for clarification. You were saying that you identified 1,000 acres and that you need to have it … Are you saying that this is the only 1,000 acres in Pulau Indah or were there also other available pieces of land if the price is too high …?

Ling: What I meant was this was one piece that was offered to us. Whether there were other pieces, I really do not know.

Kapit (BN-PBB) MP Alexander Nanta Linggi: … can you remember at what stage the project was implemented up to the point when you left the ministry?

Ling: … it was May. That’s the last thing I remember of that project because you (I) have nothing else more to do with it.

Azmi Khalid: At that stage when you left, what stage was the development? …

Ling: I really wouldn’t know.

Leong: Tun, according to the PriceWaterhouseCoopers Report in 2001, the cabinet decided that the project would have to be self-financing … Wouldn’t it be cheaper for PKA to have gone through the process of their government guaranteed bond?

Ling: Was it during my time? Did I sign anything to approve that action? (Ling reiterated that the approvals for the land acquisition had to go through the right processes and the right agencies.)

Leong: That is my point, in the due process, when it came to your ministry’s table for you to also make a decision, do you recall this issue?

Ling: Is there evidence that it came and that happened?

Kota Belud (BN-Umno) MP Datuk Abd. Rahman Dahlan: Tun, are you aware that there were other options to finance the land acquisitions. Are you aware that there was a cheaper way of doing things?

Ling: I can’t remember.

Azmi Khalid: KDSB as the developer only needed a capital to develop the site and it could have been raised either through the government guaranteed bonds or through their own channel. My question is, was the ministry informed of any of the decisions?

Ling: I really can’t remember.

Kepong (DAP) MP Dr Tan Seng Giaw: Tun, can you confirm that the idea (PKFZ) was conceived actually before 1999 …?

Ling: I am not sure.

Tan: You’re not sure huh?

Ling: I am not sure because I became a minister in 1986 and anything that happened after 1986, of course like you (I) cannot be sure (to) pinpoint (if) it is 1987, 1988, no, I must apologise, I cannot remember.

Tan: Leading to the time on May 28, your last day, you said that a letter was handed, who wrote that letter for you?

Ling: I can’t remember but I remember I signed the letter that was passed to me.

PJ Utara (DAP) MP Tony Pua: Why were there no competitive bid (apart from KDSB) and what was the strength of KDSB …?

Ling: Frankly, I cannot remember those details. I would like to know myself but there must have been certain grounds.

Pua: Tun, is it the usual process to award to a single contractor or is it (usual) to have a competitive open tender? …

Ling: I am not prepared to comment because I really cannot remember the circumstances.

Tan: How many times did you visit Jebel Ali?

Ling: You know, I cannot remember but I visited Jebel Ali at least once.

Pua: As a matter of record, are there any benefits which under KDSB and its owner Datuk Seri Tiong King Sing and the group of companies like Wijaya Baru Sdn Bhd … which you have taken? Example flights or entertainment?

Ling: Nothing at all that I can remember.

Tan: Tun, you said you have heard of KDSB. During your time, was there any attempt by KDSB to develop the infrastructure of Pulau Indah?

Ling: I cannot remember.

Tan: Tun, did you know that the bonds would be issued?

Ling: I may have heard of it but…

Tan: You could not recall.

Ling: No. No.

Azmi Khalid: The bond was issued after your time. Am I right?

Ling: The only possible connection was through that Letter of Support which we gave a reply after due consultation with the secretary general and legal officers.

Tan: Were you aware that in 1999, the cabinet made the decision that it (PKFZ) should be self-financed when they approved that RM1.9 billion (loan) for that project?

Ling: Did they ever approve that RM1.9 billion?

Pua, who made the call following the release of the PAC report on the fiasco last week, said Ling had displayed “selective memory loss” during his testimony to the committee.

He said the former MCA leader had answered “I cannot remember” or its equivalent at least 11 times when posed with certain key questions regarding the project, which raised doubts as to the veracity of his replies.

“The situation even reached a point of incredulity when PAC deputy chairman Dr Tan Seng Giaw (DAP-Kepong) asked: ‘Tun, did you know of Kuala Dimensi Sdn Bhd or KDSB (the PKFZ turnkey developer), before you left the ministry?’ and Ling responded with ‘I may have heard about it’.”

“We felt a bit bizarre over his answers,” Pua told reporters at the parliament lobby.

He said a thorough investigation must be conducted on the role that Ling played in the project.

Ling had denied that the ministry had any role in the finalisation of the land purchase agreement with KDSB, and placed the responsibility on the Finance Ministry which was headed by former prime minister Tun Dr Mahathir Mohamad in 2001 and 2002.

But the testimonies of government officers and the letters by the Valuation and Property Services Department contradicted this.

They had confirmed it was the Transport Ministry which had repeatedly asked for the value of the land to be revised from RM17 to RM25 a sq ft without interest when, in fact, the Treasury had not authorised for any revision in purchase price, he said.

“The ministry under Ling had (allegedly) either defied a Treasury order dated June 12, 2001 and advice from the attorney-general (AG) for the land to be acquired compulsorily or strongly argued against doing so in securing the cabinet approval for the project,” Pua said, adding that Ling must explain the matter.

He said Ling had issued a letter of support for the project in 2003. Attorney-General Tan Sri Abdul Gani Patail had informed the PAC that the word of the government was worth its weight in gold, hence even if the letter did not specifically contain elements of guarantees, the government was obliged to honour its words.

“Therefore, Ling had also committed the government to bearing the (alleged) cost of the project amounting to RM1.31 billion,” he said.

“There were many other instances of wrongdoings which were highlighted in the PAC report that occurred during the time that Ling was the transport minister and it defies belief that he had little knowledge or could not remember at all what took place during that period.”

Phang said the purchase of the land was made during the tenure of the other transport minister Tun Ling Liong Sik. Phang further said the ministers acted so upon the advice and suggestions by the Jebel Ali Free Zone International (JAFZA).

According to Phang, in the initial plan, PKFZ was to be developed in two phases. The first phase was to involve 500 acres and PKA was supposed to develop the first 500 and later the rest in Phase Two. Nevertheless, the then PM and transport minister (Abdullah and Chan) gave orders to PKA on March 3 2004 to develop 1,000 acres.

Throughout the proceedings, Phang said all the ministries involved knew of this, and the cabinet had in fact agreed to approve the purchase of 1,000 acres on a “willing seller willing buyer” basis with Kuala Dimensi Sdn Bhd owned by Datuk Seri Tiong King Sing.

“Is it fair to say that I failed to alert the government? The government knew all the way about it. MOT (Ministry of Transport) s aware, MOF (Ministry of Finance) is aware, central agency … aware that there is financial implications,” she said.

“The thing is as first said, just like aware of the financial buat sahajalah. I think I am so powerful, I buat sahajalah! I’m quite annoyed because I have been keeping quiet all this while because you know they say now I’m retired…but this land acquisition leveled at me, I think I have a right to be annoyed. So I’m trying to make it clear that this is not the real thing, okay.” she said.

The Finance Ministry had instructed that the land be bought under the Land Acquisition Act which would be much cheaper, but PKA bought the land at RM25 per square feet, — double the price KDSB paid for it.

“When (the) cabinet approved RM25 per square foot on a willing seller, willing buyer basis, the agreement that we have was based on RM25 with a financial cost of 7.5%.

“Initially they asked for 8.5% because that time the cost was I said no, this is 7.5%, we worked it out and then 15 years defered payment longer than the normal of 10 years under the Jabatan Valuation, the net present value comes down to RM20.58 per square foot.”

Phang explained that the purchase by PKA was made on receiving a letter from then transport minister Tun Ling Liong Sik.

>>Explaining her position

From the very beginning of the proceedings, Phang had a tough time trying to explain her position and duties in PKA and what her role was supposed to be in PKFZ.

Asked what her duties exactly were, Phang could not say for sure, and ended by saying she was a “a port regulator”.

A graduate from Universiti of Malaya, Phang revealed that she had also been sent to Cranfield School of Development, UK by the government, to prove to the Public Accounts Committee (PAC) panel that she had management expertise.

She stated that there were between five and nine members of the board at PKA.

Although she worked for 10 years at PKA, she said that it was “very tough to answer” whether any of her board members throughout her tenure, understood the aspects of planning, strategising, and trade facilitating.

According to her, “by and large” the board would just agree to whatever she said.

To a suggestion by the PAC panel that PKFZ should have been self-financing, Phang said she had presented to the board the need to jump start and it was agreed, explaining that normally the processes of the meetings were such that, no one asked questions and everybody just agreed (with her).

>>Relationship with Tiong of KDSB

Phang was grilled on her relationship with Tiong of KDSB.

And she was cornered by the PAC panel when they made her admit there was indeed no detailed proposal for the deal with KDSB, despite it being worth RM1 billion ringgit.

She also admitted that no one did any research on the background of KDSB.

KDSB which owns the land had offered to be the contractor of the land, even though under the law, the owner of the land is discouraged to be the contractor.

She could not state for sure how the figure for the RM1 billion contract awarded to KDSB came about, saying only that it was estimated earlier by JAFZA, and at that time there was no quantity surveyor (QS) despite that being the norm in mega projects.

Phang could also not answer when asked why a quantity surveyor was only appointed as an afterthought for a big project worth billions of ringgit.

She claimed that it was not an afterthought but something done when there was too much to handle. She also had a tough time explaining how the QS was chosen.

>>Letters

On the letter of support by Tun Ling and three letters of guarantee by Chan Kong Choy, Phang was adamant that she was not involved in the letters at all and apparently did not know about any letters from PKA or Tun Ling until the orders came from Chief Secretary to investigate the letters from PKA.

She stated that an investigation was done to only ensure that PKA was not involved.

>>Bonds

Questioned on the bond issued by PKA, she stated that the bond is not within the purview of the PKA. She also claim she did not know how many bonds were issued and to whom they were issued. This was despite a letter that she received from the Secretary General of Treasury that the development of the PKFZ project could be financed by long term PKA bonds.

Thoughout this period she maintained that she was only “aware” of the bonds and nothing more.

Phang also claimed she does not remember much about the bond which was the biggest financial undertaking by PKA because “it seems to be outside what I am doing and monitoring this entire project. That is all.”

>>Management lessons

The PAC panel took the time to grill Phang on her management knowledge throughout the he entire four and a half hours of questioning as she claimed she was unaware of many things, and merely followed legal advice given to her, adding that the PKA board agreed with her all the time.

“Honestly I did not ask except to get the legal advisor to tell me it is okay and is it proper to sign. Certain legal things and certain technical things I don’t have capacity to do that, I will just ask my boys or girls to advise me.”

Asked whether development agreement accounts were signed off by her, she said,”I did not sign any of these things.

“As I said when we receive all these notices, it is acknowledged by the technical officer and then the QS all will work on it and see whether there is anything for the technical commitee to evaluate. And then finally, the whole thing will come up and that is only one time I have seen that coming up and went to the board,” said Phang.

She was also very evasive in her answers and at many times she asked the PAC panel to repeat the questions or reword the questions. She also claimed that she was not hands on in many of the matters of PKA and that she was just “a port regulator”.

>>>>>Soft Loan

Phang said the RM4.6 billion worth of soft loan was to service the project cost. She said the rating agency OSK came to see her to request her to direct payment to special vehicles and to get assurance that PKA would not divert the money to other projects.

She claimed she wasnot aware of the letters purportedly signed by Ling and Chan Kong Choy, the two transport ministers. She claimed she was not aware of the RM3.6 billion worth of bond issued by PKA and many other things costing hundreds of millions of ringgit. Likewise about payments to KDSB worth RM254 million for works which they were apparently not entitled to and RM55 millions for works which have yet to commence.

Phang also claimed that payments to KDSB were all past her time and that the people from JAFZA were not to her expectations.

Footnote:

THE Port Klang Authority (PKA) had embarked on the Port Klang Free Zone (PKFZ) project in 2003, envisioning it as a trans-shipment hub complete with a convention centre and a four-star hotel.

The Public Accounts Commiittee (PAC) recommended that the Malaysian Anti-Corruption Commission (MACC) or the police investigate former transport minister Tan Sri Chan Kong Choy and former PKA general manager Datin Paduka O.C. Phang for criminal breach of trust in the PKFZ project.

The report also said issuance of bonds was also improper as it had resulted in the government suffering huge losses as the funds acquired under the government’s guarantee was not fully utilised to implement the project.

Last month, PKA filed a suit against Phang for breaches in her fiduciary, contractual and common law duties to the organisation.

Among those called to testify were former transport ministers Tun Dr Ling Liong Sik and Tan Sri Chan Kong Choy, former Port Klang Authority general manager Datin Paduka OC Phang,

Attorney-General Tan Sri Gani Patail and former and serving senior government servants.

The PAC tabled its 26-page report in the Dewan Rakyat on Wednesday, plus a thick volume of verbatim minutes of the inquiry sessions.

theSun will publish a series of reports based on these closed-door sessions.

We kick off with Chan who issued three letters of support to secure private funding for the project and later got a RM4.5 billion soft loan from the government as the PKA was in no position to pay the instalments.

>> CHAN, who helmed Transport Ministry from July 1, 2003 to March 18, 2008, appeared before the PAC from 11am to 2pm on July 29, 2009.

He was unwell at that time, holding a week-long medical certificate from the Sungai Buloh Hospital, and at the beginning of the meeting he said he was having some hearing problems.

He came with his lawyer Wang Ming Way upon the advice of PAC chairman Datuk Seri Azmi Khalid. This is what he said on:

> The three letters of support issued in 2004, 2005 and 2006:
Chan repeatedly stressed and insisted the letters were meant to assist a credit rating agency in rating the bond to be raised by developer Kuala Dimensi Sdn Bhd (KDSB) to finance the PKFZ project.

“The letter was issued by the (Transport) minister to a rating agency because KDSB through a SPV (special purpose vehicle) will issue a bond to finance the PKFZ project,” he said, reading from a reply given by former Deputy Finance Minister Datuk Dr Awang Adek Hussein in parliament.

Despite what auditors Pricewaterhouse Coopers (PwC) believed, Chan maintained they had no implied or expressed elements of guarantee, as there was a paragraph in the letters which said so and he has received a written advice from the Queen’s Counsel on this.

However, despite suggestion by PAC that the letters were upon request by KDSB, Chan could not determine who requested for them as he said the request was brought to him by his senior private secretary, a Mr Leong.

Chan also could not say for sure where the letters were addressed to as initially, he thought they were for Rating Agency Malaysia Bhd (RAM) but later, PAC pointed out that they were address to the Malaysian Rating Corp Bhd (MARC).

Azmi said the PAC would request for the Auditor-General’s Department to check where the letters were sent to as it was found out that in the end, it was RAM who did the rating for the bond.

To a question from the PAC, Chan said he was in no position to explain the difference between a letter of support and letter of comfort and admitted he did not know his letters were different from those issued by previous minister Ling.

> Land acquisition:
Chan did not want to comment on whether he was aware the land for the PKFZ project was acquired by PKA from KDSB for RM25 per square foot despite original valuation at RM10 because it was made before his time.

> The government soft loan:
Chan said he agreed to help PKA in getting the loan when he realised the project was having problems in its later stage.

However, in the meeting, both Chan and PAC constantly quoted different figures for the loan, namely RM4.5 billion and RM4.6 billion interchangeably.

Chan said he was advised by PKA to estimate the loan at RM4.5 billion and PKA had told him that the loan would be paid back from the income PKFZ derives from its businesses.

Chan could not recall whether in 2003, it was raised during a cabinet meeting that the PKFZ project must be self-financing.

Chan also said he was not aware of the Treasury advice to raise funds by government bonds to pay for the project instead of paying via installment with an interest rate of 7.5% to the developer.

> Viability of PKFZ project
Chan said he had full confidence in the project, saying it was a good project which could bring a lot of benefits to the country, create 20,000 job opportunities for Malaysians and enhance Port Klang as one of the major ports in the world.

When PAC pointed out Chan “could have done better” to make the project viable as the ministry had lagged in its supervisory role because he trusted his officers to do their work diligently, Chan said the statement was unfair.

However, Chan admitted he was not aware of certain details as he did not get involved in most of the things he considered “operational matters”.

> PKA’s capability to run business being a regulatory body Chan refused to comment whether PKA has the right skills or expertise to go into business as the decision was made by the cabinet before his time.

On whether he knew the competency level of the ministry officers appointed to sit in the PKFZ board, he said since he was not involved in operational matters, he took good faith in the regular briefings they gave him.

When pointed out that appointment of ministry officers should be the responsibility of minister and not an operational matter and they had displayed weak project governance and management, Chan refused to comment.

However, Chan insisted when he became aware of the problems in PKFZ, the ministry formed a task force – jointly chaired by him and ministry secretary-general – to find ways to move forward.
He also claimed he was not aware that Jebel Ali Free Zone International (Jafzi) had agreed to cooperate with PKA but refused to have KPI on the future targets, as claimed by Phang.

While agreeing with PAC that he did not micro manage the PKFZ project, Chan refused to comment whether PKA had deliberately misinformed or misled him in the process.

> KDSB’s capability
Chan could not recall when he was highlighted about the financial problems faced by KDSB despite PAC pointing out that the Auditor-General had repeatedly stated in its annual report they did not have the financial capability.

“At the later stage, yes. That’s why I assisted them to get a soft loan from the government,” he said when Azmi asked whether the ministry officers raised the matter with him.

“I can’t remember, but honestly, it is at a later stage,” he said when asked whether it was in 2004, 2005 or 2006.

Azmi said: “This reflected that at the ministry level, they should have done better than to wait for the last minute to advise the minister.”

> Jafzi’s participation in the project
Chan said Jafzi was involved as project adviser, and together with PKA, it had briefed him on the project in several meetings.

He said Jafzi also had a part when he requested for the soft loan as it has given him an understanding that RM4.6 billion was enough to fund for everything.
“Jebel Ali took several years to grow into its present size and PKFZ will take five years to have 80% occupancy. If according to that schedule, it will be enough for them to generate enough income to pay back the government,,” he told the PAC based on the briefing from Jafzi.
Chan said Jafzi was also instrumental in recommending that because of economies of scale, development of the 1,000-acre land should be “done at one go”.

“Jebel Ali started with about 20,000 or 40,000 acres at one go,” he added.

He said he did not hesitate about developing 1,000 acres because “Jafzi has a very good reputation and a lot of success stories to tell”.

When asked about the termination of Jafzi in July 2007, Chan said he understood it to be a withdrawal, not termination, as Jafzi had a change in policy whereby it only managed free trade zones which it has a stake in.

He admitted knowledge of the strained relationship between senior officers and personalities of both PKFZ and Jafzi but did not want to quote names.

He said after Jafzi’s departure, the government took several measures to ensure PKFZ moved forward, namely by setting-up a one stop agency and enhancing promotions for the project.