Rheinmetall Group had more say than majority shareholder BHIC

PETALING JAYA: A foreign partner, Rheinmetall Group, which held a 49% share in the two main contractors involved in the littoral combat ship (LCS) building project, ended up having more power and authority than the majority shareholder – Boustead Heavy Industries Corporation (BHIC).

The two companies were Contraves Advanced Devices Sdn Bhd (CAD) and Contraves Electrodynamics Shd Bhd (CED).

Forensic auditor Alliance IFA (M) Sdn Bhd’s Prabhat Kumar questioned why more power and authority was given to Rheinmetall, saying the agreement was lopsided.

“The board of directors of BHIC, (chairman) Tan Sri Che Lodin Wok Kamaruddin, agreed to this decision which jeopardised the interest of BHIC,’’ he said, adding “that agreement had given absolute power to RAD (Rheinmetall Air Defence) to run this company (CAD)”.

Prabhat told the Public Accounts Committee (PAC) that the firm had difficulties gaining access to the information needed to understand the details of the operation of CAD and to conduct an internal audit.

“They did not even have a copy of the board of directors (BOD) meeting. Very surprising. You are spending millions of dollars and you are totally at the mercy of a foreign company who is virtually a supplier.

“You have no technical control; you have no technical expertise in that area, and you are blindly depending on someone who is here to do a business.

“Certainly, he will extract the cream to the maximum of his ability and that was exactly what happened,” he said.

Prabhat, who has over 20 years of experience in forensic accounting, also brought up the issue of banking mandate, saying that the normal practice was to have the controlling power (majority shareholder) in terms of the signatory of the bank.

“The letter, which was approved by the board of directors, in which the representatives of BHIC were also there, representatives of RAD were also there, they drafted in such a manner that CAD could have virtually issued cheques without having any control from the other joint venture partner.

“Even when you enter a 100-dollar business or a 1,000-dollar business, we would like to see the banking control is equally maintained so that the person may not misuse the funds,” he added.

The decisions at BNS/BHIC were made by BNS chairman and BHIC managing director Tan Sri Ahmad Ramli and its director Annuar Murad, a former navy captain.

Annuar was also the director of the LCS project.

He said CAD’s involvement with LCS resulted in a “much higher cost than expected and provided an umbrella to hide the actual cost”.

“I would like to tell you that based on my 20 years of investigative experience, whenever manipulation is required to be done in a given contract, variation order is the biggest culprit and that is what we have seen in this whole episode,” he said.