This article first appeared in The Edge Financial Daily on June 14, 2017

KUALA LUMPUR: The tussle between the management and board of directors of Felda Global Ventures Holdings Bhd (FGV) over irregular business dealings escalated yesterday as the board moved to serve show-cause letters on its group president and chief executive officer (CEO) Datuk Zakaria Arshad and group chief financial officer (CFO) Ahmad Tifli Mohd Talha.

The board issued the show-cause notice to the duo over the long outstanding debt that Dubai-based Safitex Trading LLC owed to Delima Oil Products Sdn Bhd, a subsidiary of FGV.

In a filing with Bursa Malaysia yesterday, FGV said Zakaria and Ahmad Tifli have been given seven days from yesterday to provide a written reply pertaining to the allegations mentioned in the show-cause letters. They will continue to be on leave of absence until further notice from the board, it added.

Safitex — which brings FGV’s products into Afghanistan — is at the centre of alleged accounting irregularities in the plantation giant. FGV’s board had said Safitex’s outstanding debt had swelled to US$11.7 million (RM49.26 million) as at April 30, 2017, and had “exceeded the allocated credit limit per its external auditor PricewaterhouseCoopers’ statutory financial audit” for the financial year ended Dec 31, 2016 (FY16).

The board members include non-executive chairman Tan Sri Mohd Isa Samad, Datuk Dr Omar Salim, Datuk Yahaya Abd Jabar, Datuk Noor Ehsanuddin Mohd Harun Narrashid, Tan Sri Dr Sulaiman Mahbob, Datuk Mohd Zafer Mohd Hashim, Datuk Mohamed Suffian Awang and Datuk Siti Zauyah Md Desa.

In the show-cause letter dated June 13, 2017 seen by The Edge Financial Daily yesterday, Zakaria was asked to explain why he had offered Safitex a credit limit of US$1 million on Sept 13, 2013 with credit terms of 60 days without any evidence of evaluation of the financial standing in approving the credit limit, and especially without any evaluation by a credit control committee. He was also asked to explain why the credit limit was granted without securing any form of security to cover the credit limit, and “thus contravened the limit of 30 days allowable credit period for external companies under the Felda Holding Group Finance Policies and Procedures”.

The board also questioned Zakaria for allowing the continuation of sales to Safitex despite the latter breaching the credit limit of US$1 million from March 2014 to July 2014. Zakaria was also asked to explain why he had, in April 2017, approved a proposal to increase the credit limit to Safitex to US$9.52 million based on a proposal dated April 11, 2016 without any evidence of evaluation of the financial standing in approving the credit limit.

“As a result of your approvals in your capacities related to Delima Oil, sales had been allowed in contravention of the FGV board-approved policies,” the show-cause letter read.

The letter went on to say if Zakaria fails to give a written explanation on his actions within seven days, disciplinary action amounting to dismissal may be taken against him without further reference.

In a surprise move last Tuesday, Zakaria, Ahmad Tifli and two FGV subsidiaries’ heads — Delima Oil Products Sdn Bhd senior general manager Kamarzaman Abd Karim and FGV Trading Sdn Bhd CEO Ahmad Salman Omar — were given leave of absence with immediate effect pending investigations into certain transactions under Delima Oil. The matter also caught the Malaysian Anti-Corruption Commission’s attention. It had seized a trolley-full of evidence after an eight-hour search at FGV’s headquarters last week.

Zakaria, appointed to his current position on April 1, 2016, has denied any wrongdoing and refused to step down given that his contract is valid for three years.