By RK Indumathinii
PETALING JAYA, Sept 21 – Why no investigations have been opened so far on several key figures including former chairman of the 1MDB board of directors, Lodin Wok Kamaruddin and former political analyst Razak Baginda when there is clear indication of their earlier involvement via ownership of shares or positions in companies related to the procurement of defence equipment?
This question was raised at a press conference entitled “The Littoral Combat Ship (LCS) scandal – the crooks and villains behind Malaysia’s defence procurement laid bare“, here today by the Center to Combat Corruption & Cronyism (C4 Center).
Saying there has been no real closure to the earlier Scorpene submarine scandal, which had tarnished the reputation of former Defence Minister and Prime Minister Datuk Seri Najib Tun Razak, Executive Director of C4 Center, Cynthia Gabriel said the recent LCS scandal was a repeat of a scandal with similar players and modus operandi.
In a statement issued at the event today, C4 Center, citing the declassified audit report by the Special Committee on Governance Investigation, Government Procurement and Finance’s (JKSTUPKK) and Boustead Holdings internal audit report, said it was shocked to learn of not just the degree of irregularities involved, but the shocking finds on key figures implicated in the Scorpene scandal also being linked to the LCS procurement and dealings.
It said investigations showed several high placed individuals were involved in decision-making across both of the deals, further underlining the corruption in the defence procurement and how large scale plundering have been enabled in the name of national security.
Najib Razak, who is currently serving a 12-year prison sentence for his corruption charges in the SRC International case as well as facing charges for his role in the 1MDB scandal, was the Defence Minister when the agreement to procure the Scorpene submarines was signed.
He also held the concurrent role of both Prime Minister and Finance Minister when it came to signing the agreement to procure the LCS.
“It has further been suggested that “hidden hands” were at play at the earlier stages of the procurement, where politics had further muzzled the process and compromised our national security for personal gain.”
Linking the two scandals together is the involvement of the Armed Forces Pension Fund (LTAT), a statutory body managed by the Ministry of Defence, C4 Center.
French court proceedings revealed that illegal commissions and kickbacks associated with the Scorpene scandal were channelled through LTAT. These funds were channelled to Perimekar, a shell company, or what the French described as a “taxi company” controlled by Najib Razak’s associate, Razak Baginda.
LTAT and Boustead Holdings Berhad (BHB) owned 40 percent of the shares in Perimekar (20 percen each).
In the LCS scandal, LTAT’s presence is less direct but nonetheless significant – LTAT is the majority shareholder of BHB and also has shares in its subsidiary, Boustead Heavy Industries Corporation Berhad (BHIC), and thus retained some control over these companies’ operations.
Both these companies are major shareholders in Boustead Naval Shipyard (BNS), the main contractor in the LCS project, C4 Center pointed.
“The above point leads us into a critical discussion regarding a key figure that has largely been absent from scrutiny: Lodin Wok Kamaruddin, a close personal friend of Najib Razak and former chairman of the 1MDB board of directors.
“His involvement in the Scorpene scandal has been well-documented:
“As the chief executive of LTAT as well as a director of Perimekar at the said time, he oversaw the transfer of illegal funds into Perimekar’s account. 20% of Perimekar’s shares at that time were owned by BHB, of which Lodin was Group Managing Director since 1991.
“Lodin Wok has now made a reappearance with strong links to the current LCS scandal,” C4 Center said.
He was also a former Deputy Chairman of BHB as well as Executive Chairman of BHIC until he relinquished all the stated positions in 2018 – his period of tenure would have likely seen him overseeing the initial contracting stages and a substantial portion of the project’s execution.
Besides his stint in the Boustead companies, Lodin also formerly occupied the board of directors and the Chairman role of Affin Bank – the same bank used by Perimekar. More importantly, BNS had promised all of its rights and future income to Affin Bank as collateral for obtaining a huge loan, with the properties affected valued at almost RM 6 billion. Affin Bank itself is part of the same group as many of the above mentioned companies; LTAT owns 33.08 percent of Affin’s shares, while Boustead Holdings owns 20.85 percent of them.
“There is demonstrably a circular flow of funds as the companies involved in these projects simply transfer money back and forth from each other, with the facts indicating that Lodin Wok and his associated cronies may likely be the beneficiaries of these operations no matter which way the money goes.”
C4 Center also questioned DCNS re-entry into the defence procurement scene right after its role in the Scorpene scandal.
The Malaysian government had directly dealt with DCNS to deliver two Scorpene submarines in 2002, and were later also sub-contracted by Boustead Naval Shipyard (BNS), the main contractor of the LCS project.
French investigations and judicial documents revealed that while acting as Defence Minister, Najib himself had requested US$1 billion from DCNS to be paid to Perimekar, the company controlled by Razak Baginda, who was handpicked by Najib himself to negotiate the procurement agreement.
The former CEO, Chairman, and President of DCNS were subsequently indicted by the French court for offences related to foreign bribery, corruption, and misappropriation of assets. Thales Group, one of the main shareholders of DCNS, was also charged by the French courts with complicity in bribery over this same scandal earlier this year on April 26.
The roles of the Defence Minister must be highlighted with regards to the opaque processes in defence procurement.
Zahid Hamidi, who himself was the Defence Minister during the initial stages of the LCS project, was revealed to have signed-off on a letter by BNS asking him for a letter of intent for the project, despite his previous denial of involvement.
Zahid had also gone against the Royal Malaysian Navy’s wishes regarding the design of the LCS, changing it from the Dutch’s Sigma to the French’s Gowind as per recommendations by BNS. BNS had adamantly decided on the Gowind design after their own discussions with DCNS.
All these are yet to be investigated by the MACC, said C4 Center.
A recent audit into the LCS had dropped a bombshell that there may have been a deal between the BNS, the main contractor of the project, and DCNS before the government even issued the initial contract.
The subcontractors for the implementation of the LCS’ Combat Management System, Contraves Advanced Devices Sdn Bhd (CAD) – a former subsidiary of the German company Rheinmetall AG – and Contraves Electrodynamics Sdn Bhd (CED) were revealed to have been issued letters of award based on a quotation that was issued by DCNS before the letter of authorisation (LOA) had even been signed with the government.
Further parallels can be found between the formation of the companies Perimekar, Terasasi, and CED in the context of their respective scandals.
Perimekar was established merely months before the agreement to procure the Scorpene submarines was signed, and therefore had no history nor demonstrable expertise in submarine maintenance, or even the financial means to perform the agreement.
Perimekar was a shell company under the ownership and control of KS Ombak Laut, a company owned by Razak’s wife, Mazlinda Makhzan who used her position as primary shareholder in Perimekar to receive 114 million euros in bribes. Another company under the control of Razak Baginda, Hong Kong-based Terasasi Ltd, had also allegedly received 36 million euros in kickbacks.
In the LCS procurement, CED was established to act as a “middleman” to purchase equipment from DCNS – auditors pointed out that this was a completely unnecessary practice and had caused purchasing prices to bloat substantially. Perimekar was proven to be a shell company formed simply for the purposes for channelling funds and facilitating corruption; it is highly likely that CED served the same purpose.
Prior to CED’s establishment, CAD had emerged as a joint venture between BHIC and the German Rheinmetall – even though BHIC owned 51 percent of CAD’s shares, they had ceded operational control of the company to Rheinmetall, a decision agreed upon by Lodin Wok and the rest of the BHIC board members. As a result, BHIC management and auditor had no access to documents of CAD and CED, and the banking mandate approved by CAD’s board was drafted in a way that signatories representing Rheinmetall would have had full authority to transact any business without involvement of BIHC’s representatives on the CAD board.
Forensic auditor Prabhat Kumar had told the Public Accounts Committee that CAD was possibly used as a vehicle to minimise transparency and to avoid the scrutiny and detection by the procurement team, the steering committee, and the internal audit of BHIC.
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