Deals signed without board meetings

Stories by WONG CHUN WAI from the Public Accounts Committee report on the LCS project

PETALING JAYA: The managing director of the company undertaking the RM9bil littoral combat ships (LCS) project had so much power that he could sign all agreements, including letters of award (LOAs) to the main contractors involved in building the six ships.

In fact, 12 LOAs were given by former Boustead Heavy Industries Bhd (BHIB) managing director Tan Sri Ahmad Ramli Nor to two main contractors – Contraves Advanced Devices Sdn Bhd (CAD) and Contraves Electrodyamics Sdn Bhd (CED) totalling RM3.3bil – without the need to call for full board meetings.

The involvement of the two contractors inflated the cost to RM9bil.

“Tan Sri was given sweeping authority to execute and sign all agreements, LOAs with CAD. He was extremely confident that ‘whatever I’m going to do, it is ultimately going to be condoned by my boss’,” said forensic auditor Alliance IFA Sdn Bhd’s Prabhat Kumar.

He revealed that the appointment of CAD as lead contractor to procure components for the LCS was made through a directors’ circular resolution (DCR).

A DCR is normally issued as approval for routine matters and where the board feels that calling all the members is a waste of time. The directors merely need to sign the document.

Prabhat expressed his surprise at how such a major decision was made through a DCR as it was more appropriate to have a full board of directors meeting.

“The reason is that when the board meeting is being conducted, (at) that time every board member has the opportunity to raise a number of questions to clarify doubts and issues,” he added.

He told the Public Accounts Committee (PAC) that in his investigations of over 60 companies that “whenever DCRs, in a very critical situation, are used, it is always used to avoid discussions”.CAD and CED are two companies which are jointly owned by BHIB and German firm Rheinmetall Group.

Ahmad Ramli, an ex-navy chief, was managing director of BHIB and former chairman of Boustead Naval Shipyard Sdn Bhd (BNS), a unit of Boustead Heavy Industries Corporation (BHIC).

His name has been repeatedly mentioned in the 247-page PAC report on the RM9bil scandal.

The LCS was supposed to have been delivered in stages with the last one scheduled for 2023 but until today, not a single ship is ready although RM6bil has been paid to BNS.

“Primary evidence suggested that CAD was used as a vehicle – this is very important – to minimise transparency and to avoid the scrutiny and detection by the procurement team, the steering committee, and the internal audit of BHIC.

“The scrutiny by the three was avoided because BHIC is a public-listed company,” said Prabhat.

He said: “CAD will be the vehicle ... (that) by entering into such a contract, that does not allow them to enter and to look into the details and the nitty-gritty of the business, which has been taken by them.”

The involvement of CAD in the LCS project, said Prabhat, had “resulted in a much higher cost than expected and provided an umbrella to hide the actual cost, which was paid to secure various components for this programme”.