Red Files unfold yet another scandal involving RM9.4 bln

KUALA LUMPUR: The ‘Red Files’ has unfolded yet another scandal, to the tune of RM9.4 billion, believed to have taken place under the previous government, the Ministry of Finance disclosed yesterday.

Finance Minister Lim Guan Eng said Suria Strategic Energy Resources Sdn Bhd (SSER), a wholly- owned subsidiary of MoF, is involved in the RM9.4 billion scandal that is linked to the MultiProduct Pipeline ( MPP) and the Trans-Sabah Gas Pipeline (TSGP) projects, approved by the Cabinet on July 27, 2016.

“The RM9.4 billion scandal, where payment were made based on timing milestone and not progressive work done, resulted in RM8.3 billion being paid or 88 per cent of total project value despite only 13 per cent work completion,” he said in a statement yesterday.

This scandal was found in the “Red Files” and suspected to be linked with 1Malaysia Development Bhd.

The ‘ Red Files’ were only accessible to certain parties and impeded officials and auditors from carrying out the responsibilities with integrity.

Hence, the government, if necessary, would seek the assistance of the China government to help trace the flow of funds in China, in order to investigate the possibility of money laundering, said Lim.

To recap, the MPP involved a 600km multi-product petroleum pipeline connecting Melaka and Port Dickson to Jitra, Kedah, costing CNY4.53 billion and RM2.53 billion, or about RM5.35 billion.

The TSGP, on the other hand, was to build a 662km gas pipeline from Kimanis Gas Terminal to Sandakan and Tawau, costing CNY3.08 billion and RM2.14 billion, or approximately RM4.06 billion.

Both projects amounting to RM9.41 billion were awarded to China Petroleum Pipeline Bureau (CPPB) on Nov 1, 2016. The agreements were signed by the then Treasurer- General, Tan Sri Irwan Serigar Abdullah, who was also the chairman of SSER. Tan Sri Irwan resigned on May 23, 2018.

SSER successfully secured funding from China EXIM Bank amounting to 85 per cent of the project value on March 22, 2017. The balance 15 per cent of funds required were to be raised via sukuk issuance. Both the China EXIM Bank borrowings and the sukuk were secured with Federal Government Guarantees.

During a briefing provided to Treasury officials on May 28, 2018, SSER reported that the 3-year projects had commenced in April 2017, said MOF.

As at the end of March 2018 or exactly a year later, the MPP and TSGP projects had achieved only 14.5 per cent and 11.4 per cent progress completion, respectively. However, the completion rates have yet to be verified or audited.

“However, we were shocked to discover that the amounts of RM4.71 billion and RM3.54 billion for the MPP and TSGP projects had already been drawn down and paid to CPPB,” Lim added.

The total sum paid of RM8.25 billion constitutes a staggering 87.7 per cent of the total project value.

This is despite an average completion rate of only 13 per cent, with another two years of the contracts to go.

The above does not yet include two other consultancy agreements signed for the same projects above worth approximately RM312 million and RM213 million, and a maintenance agreement worth RM476 million, awarded to companies from China, totalling an additional RM1 billion, Lim said.

The contracts were negotiated by the Prime Minister’s Department, without involving Treasury officials. The Attorney General’s Chambers have also confirmed that these contracts were signed despite numerous unanswered questions and red flags raised.

“I have been informed by Treasury officials that SSER is an offshoot by the same people behind SRC International, a former subsidiary of 1MDB,” Lim said.

The contracts for SSER were also signed at the same time as the contracts for the East Coast Rail Link project by Tan Sri Irwan Serigar Abdullah, and financed by China EXIM Bank.

The president of SSER is Datuk Mohammed Azhar bin Osman Khairuddin, who is also a director of Putrajaya Perdana Sdn Bhd, a company linked directly with Low Taek Jho.

“Based on the highly suspicious transactions above, I have instructed my officers to file a report with the Malaysian AntiCorruption Commission last week,” Lim added. In addition, the MoF, as the sole shareholder of SSER will take steps to take control of the company pending investigation, said the minister. — Bernama