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This article first appeared in The Edge Financial Daily on June 20, 2017

KUALA LUMPUR: As Prime Minister Datuk Seri Najib Razak’s office (PMO) revealed that there are reasonable grounds for Felda Global Ventures Holdings Bhd (FGV) to initiate disciplinary proceedings against its chief executive officer (CEO) and chief financial officer (CFO) over alleged management improprieties, FGV chairman Tan Sri Mohd Isa Abdul Samad volunteered to take himself out of the picture while Najib directed the plantation giant to continue its probe into the actions of the duo.

According to a Bernama report, Najib said Mohd Isa voluntarily relinquished his position in FGV after Najib met him with former minister in the Prime Minister’s Department, Datuk Seri Idris Jala, to discuss FGV’s future and Mohd Isa’s role.

“Mohd Isa voluntarily agreed to relinquish his position as FGV chairman. In appreciation of Mohd Isa’s role, I agreed to appoint him the acting SPAD (the Land Public Transport Commission) chairman,” he said after attending an event yesterday.

The news came after the PMO released a statement that Mohd Isa has been appointed to head SPAD, while Tan Sri Dr Sulaiman Mahbob will take on the role of acting chairman at FGV “to uphold the integrity, spirit of impartiality of the ongoing inquiry, and ensuring proper corporate governance of FGV and DOP (Delima Oil Products Sdn Bhd)”.

Asked why Sulaiman was chosen as acting chairman, Najib said: “This is until we make a final decision. We needed a quick change. If a new person is appointed by the board, it will take a while. We want FGV to operate uninterrupted.” Sulaiman, 68, is an independent non-executive director of FGV as well as chairman of Telekom Malaysia Bhd.

DOP, a subsidiary of FGV, is at the centre of alleged accounting irregularities at FGV in relation to the extension of a larger credit limit at a longer repayment period than was normal to its customer, Dubai-based Safitex Trading LLC.

The PMO said an independent report prepared by Idris showed there were sufficient facts and reasonable grounds warranting FGV’s board to initiate disciplinary proceedings against CEO Datuk Zakaria Arshad and CFO Ahmad Tifli Mohd Talha, as well as DOP senior general manager Kamarzaman Abd Karim and FGV Trading Sdn Bhd CEO Ahmad Salman Omar.

“As such, FGV should continue with its ongoing disciplinary proceedings. It should be highlighted that no one is guilty of any wrongdoing at this juncture unless proven by the impending domestic inquiries. During the domestic inquiries, the four management officials will be able to defend themselves in line with the laws of natural justice,” it said.

The four are currently suspended from duty after being told to go on leave on June 6, following a probe by the company’s internal audit committee involving the unapproved extension of credit limit by DOP to Safitex. Last Tuesday, FGV issued show-cause letters to both Zakaria and Ahmad Tifli to explain the allegations against them via a written reply. The duo have until 4.30pm today to do so.

In response to the PMO’s directive, Zakaria issued a statement saying he would abide by the recommendations from Idris’ report — which included FGV setting up a “governance quantum leap” team to help the company improve corporate governance and business controls.

“With regard to the domestic inquiry which was initiated by Tan Sri Mohd Isa Samad, I am confident I shall be proven innocent and henceforth, I have engaged Tan Sri Muhammad Shafee Abdullah to be my legal counsel to attend to the matter,” he added.

The internal probe allegedly showed the extension of credit limit line by DOP to Safitex was approved by Zakaria, which resulted in Safitex’ debt to DOP ballooning to US$11.7 million (RM49.99 million). Zakaria had previously said Safitex will pay off the debt by the end of this month.

Meanwhile, the PMO acknowledged the need for a comprehensive business review in both FGV and its largest shareholder Federal Land Development Authority (Felda) amid the decline in financial performance in both entities.

“Indeed, such a review had already started late last year. Both FGV and Felda should continue and complete this work with urgency. Once completed, it will put in place the right platform to position both FGV and Felda to become successful companies now and in the future. This platform includes the right leadership, strategies, business and operating model,” it said.

Hence, apart from undertaking the normal roles and responsibilities of the chairman, Sulaiman “will immediately take action to oversee the implementation of the above way forward”, the PMO said.

On quitting FGV, Mohd Isa also gave up his chairmanship at FGV’s sugar manufacturing unit MSM Malaysia Holdings Bhd. MSM director Datuk Rosini Abdul Samad, 62, will take over as chairman in the interim, according to MSM’s bourse filing.

Further, the PMO clarified that the decisions by the government and FGV are separate from the ongoing investigation by the Malaysian Anti-Corruption Commission (MACC) into the company. “Their investigation is still underway and the outcome will be revealed by them only after the MACC has completed their work,” the PMO added.

The anti-graft body announced on June 9 that it had initiated an investigation into FGV following complaints of irregularities at the company. Last Friday, the MACC said the investigation into the scandal-ridden oil palm giant is 60% complete.

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