Story Of The Year: PKFZ: The headline-grabbing scandal

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The Port Klang Free Zone (PKFZ) scandal has a storyline fit for the silver screen, what with its political intrigue, mismanagement of public funds and with a few of the “main actors” now brought to trial.

While whiffs of PKFZ’s mismanagement and abuse of public funds first emerged several years ago, public attention was piqued again when The Edge published a story in early April saying the cost of the project could have escalated to RM8 billion from the initial RM2.3 billion when it was mooted in 2000.

The next chapter opened when a PricewaterhouseCoopers’ (PwC) position review commissioned by the Port Klang Authority (PKA) was released. Although the report was ready in February, it was not until the end of May that it was made public, after clearing several technical hurdles. The report confirmed mismanagement, among other things — where decisions were made without consultation — and conflicts of interest. The likelihood of the cost ballooning to RM12.6 billion, if the PKA did not take necessary steps to restructure its RM4.6 billion loan from the government, was very high.

The central figures of the scandal include former transport ministers Tun Dr Ling Liong Sik and Tan Sri Chan Kong Choy, former PKA general manager Datin Paduka O C Phang and Kuala Dimensi Sdn Bhd (KDSB) CEO Datuk Seri Tiong King Sing, who is also the MP for Bintulu and chairman of the Barisan Nasional Backbenchers Club.

Events took a dramatic turn when news broke that Transport Minister Datuk Seri Ong Tee Keat took rides in Tiong’s private jets. Tiong alleged that Ong never paid for the rides on five occasions, totalling over RM120,000, but Ong retorted that his office was never billed.

Then Tiong alleged that he had “donated” RM10 million to Ong during the run-up to the MCA party election in 2008 to be used for party activities. Ong, in turn, filed a RM500 million defamation suit against Tiong and a hearing is scheduled for next February.

The opposition, with Lim Kit Siang leading the pack, was relentless in its pursuit of the issue from day one and turned the heat on Ong and his ministry. Once the PwC report was made public, Lim went through it with a fine-toothed comb and started bombarding Ong with three questions per day in press conferences and on his blog. He finally stopped at question No 108, with many of the questions unanswered.

The opposition MPs also kicked up a fuss when they did not get copies of the report and appendices, as promised by Ong. They got their copies with the Public Accounts Committee (PAC) report in November.

The parliamentarians took the government to task for releasing some RM660 million to KDSB pending investigations into the scandal after PKA had decided to hold payments.

A number of task forces were also created by PKA upon the release of the report. Three  were set up to look into the actions that could be taken against those responsible for misconduct, to enhance corporate governance and to focus on business development for the free zone respectively. In September, Prime Minister Datuk Seri Najib Razak announced that Chief Secretary to the Government Tan Sri Mohd Sidek Hassan will head a super task force to look into the PKFZ scandal.

PKA, on the advice of its special task force, has lodged reports with the police and the Malaysian Anti-Corruption Commission and filed a series of lawsuits against Phang and KDSB.

The PAC devoted most of the parliamentary hiatus between July and September to probe the scandal. Star witnesses who appeared before the PAC include Ling, Chan, Phang, KDSB’s CEO Datuk Faisal Abdullah and former PKA chairmen Tan Sri Ting Chew Peh and Datuk Yap Pian Hon.

The PAC report, which was tabled in Parliament in November, recommended that Chan and Phang be investigated for criminal breach of trust (CBT) for their role in the PKFZ fiasco. It also found that the issuance of bonds was not in accordance with proper procedures and resulted in the government incurring massive losses because the funds that were obtained through government guarantee were not fully utilised for the implementation of the project.

The PAC asked the finance ministry to look into redeeming the bonds early because the papers issued by KDSB through its special vehicles carried a 7.5% interest rate compared to the usual rate of 4% for government-issued bonds. The PAC also recommended that the chief secretary to the government take action against the civil ser­vants on the PKA board because they failed to carry out their duties.

To date, the authorities have charged Phang with CBT totalling RM254.85 million while KDSB’s COO Stephen Abok and Bernard Tan of BTA Architects have been jointly charged with two counts of cheating PKA, involving RM4.8 million and RM1.337 million respectively. The fourth accused, Law Jenn Dong, a former KDSB employee, was jointly charged with Tan on nine counts of cheating PKA into endorsing a RM46.1 million payment.

Although Attorney-General Tan Sri Gani Patail has given the assurance that more people, including “big fish”, will be charged, at the time of writing, only four have been brought to court.

The PKFZ saga will continue in the new year when trials begin for the four accused. Whether new insights into the scandal will emerge during the trial remains to be seen.

This article appeared in Corporate page of The Edge Malaysia, Issue 787, Dec 28, 2009 – Jan 10, 2010.