(Updated)

Prasarana finds breach of fiduciary duty by former management over Makkah Metro Southern Line project, to lodge reports with MACC and SSM

Prasarana finds breach of fiduciary duty by former management over Makkah Metro Southern Line project, to lodge reports with MACC and SSM
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The audit and risk committee (ARC) advised members of the board that there are strong grounds for Prasarana to take this matter up with the authorities for proper investigations to commence.

PETALING JAYA (Feb 4): Prasarana Malaysia Bhd has found elements of negligence, failure to discharge fiduciary duty and abuse of power by its former management regarding its involvement in the operations and maintenance of the Al Mashaaer Al Mugaddassah Makkah Metro Southern Line (MMMSL) between 2015 and 2018, which caused the agency to lose 417 million Saudi riyals (RM450.8 million) for the financial year ended Dec 31, 2019 (FY19).

Speaking to members of the press today, Prasarana chairman Datuk Seri Tajuddin Abdul Rahman said that the agency had conducted an 18-month audit and forensic investigation together with PricewaterhouseCoopers Advisory Services on the project.

The results of the investigation were tabled to the board of directors of Prasarana on Sept 18 last year.

“We are very concerned about these losses, almost coming to half a billion of ringgit, which belong to the public, taxpayers. We are a government-linked company (GLC); the money that was made available to us for the project — they are public money. So the company is accountable to the public.

“And because of that, with a clear conscience, the board discussed the matter this morning and deliberated with the legal counsel. In this meeting, the audit and risk committee (ARC) advised members of the board that there are strong grounds for Prasarana to take this matter up with the authorities for proper investigations to commence,” said Tajuddin.

Prasarana will lodge reports with the Malaysian Anti-Corruption Commission (MACC) and the Companies Commission of Malaysia (SSM).

On April 16, 2015, Prasarana, through its subsidiary Prasarana Integrated Management and Engineering Services Sdn Bhd (PRIME), was awarded a three-year contract to operate and maintain the line between the Arafat 1 station and Jamarat station in north Makkah, taking over from China Railway Construction Consortium.

However, after finding that the project had caused considerable losses to the group from year to year, Prasarana embarked on an internal audit of the project at the conclusion of the contract in 2018, followed by a forensic investigation to review all aspects of the MMMSL’s pre- and post-tender award processes.

A preliminary audit report was tabled to the ARC, comprising some of the board members. The ARC found that there were certain grave issues requiring further scrutiny and instructed for a full forensic investigation.

“Two main areas of the investigation were the overall execution of Prasarana and PRIME’s contractual obligations in the MMMSL project, and Prasarana and PRIME’s maintenance repairs and overhaul issues pertaining to the spare parts of the project,” said Tajuddin.

The completed findings of the investigation were tabled on Sept 18, 2020 to the ARC. The findings were subsequently handed over to Prasarana’s external legal counsel for their scrutiny and advice on what appropriate course of action that the agency should take regarding the findings.

When asked by theedgemarkets.com what really happened with the project and how Prasarana lost 417 million Saudi riyals from the project, Prasarana declined to divulge any details as it would like to let the authorities conduct their investigations over the matter.

Prasarana also declined to name members of the top management of the agency between 2015 and 2018.

“This was a challenging investigation as many of the key officers who were involved in the MMMSL project had left Prasarana and/or PRIME and/or Rapid Rail. The long-distance nature of the project meant that the investigation required the cooperation and assistance of previous subcontractors and consultants based overseas.

“Additionally, the investigators also needed to sieve through massive amounts of documents, transferred from Saudi Arabia to Malaysia,” explained Tajuddin.

Prasarana gave assurance that it will give the authorities its full support and cooperation in their investigations and related legal action. It hopes that the outcome of the investigations will enable Prasarana to chart its next course of action, including embarking on legal action where appropriate.

To recap, in July 2017, then Pandan Member of Parliament (MP) Rafizi Ramli alerted that Prasarana had made a huge financial loss in the deal to operate and maintain the metro line. He then estimated that Prasarana would have made losses to the tune of RM142 million from 2015 through to May 2018.

Lam Jian Wyn