Sime Darby Forensic Audit: Another BOD cover up?

Sime Darby Bhd. announced to Bursa Malaysia yesterday evening that they will not make the findings public of the recently concluded forensic audit that was carried out after the Board of Directors fully realised of the losses incurred in Bakun, Qatar Project, Maersk Oil Qatar and the “Marine Project” on 13 May 2010. In that extra long special BOD meeting, President and Group CEO Dato’ Seri Ahmad Zubir Mursyid was asked to leave.

BOD Chairman Tun Musa Hitam announced that a ‘forensic audit’ would be immediately carried out to determine the cause and those who are responsible of these “irregular practices which resulted to extra ordinary losses”. Accounting firms KPMG and Deloitte were appointed and Musa promised to fully conclude the findings, which was thenthe forensic audit  expected to be completed by August.

The forensic audit found that there were misconduct and breaches of duty in these projects, which included element of criminal intent by some of the senior management of the Sime Darby Energy and Utilities Division.

The Sime Darby BOD have now decided to not make public of the findings. It was said that making the forensic audit public would hamper the effort to bring all those involved and responsible for the ‘misconduct and criminal intent’ to face the music and  according to a Sime Darby insider “Probably would impair the initiatives to recover some of the losses and realise as much as possible”. It was believed that this decision to keep mum made by the BOD yesterday was under advice by their legal advisers. Legal issues to recover some of the monies from irregular deals within the three projects were some of the excuse given.

Tun Musa announced that Sime Darby would make public the findings. He even promised to resign if he is accountable for the losses.

Friday May 21, 2010

Tun Musa Hitam: I’ll step down if found accountable

KUALA LUMPUR: Tun Musa Hitam has no qualms stepping down as the chairman of Sime Darby Bhd if the board is proven to be accountable for the huge losses of RM964mil from delays and cost overruns in several projects involving the company’s utilities and energy division.

The RM964mil provisioning is made up of losses of RM200mil from the Qatar Petroleum project, RM159mil from the Maersk Oil Qatar project, RM155mil from a project to construct vessels for use in the Maersk project and RM450mil from cost overruns in the Bakun project.

“I do not mind stepping down but it must be based on facts. At this point it is not clear yet who should be held accountable.

“We have external people looking at the matter from the legal, financial and accounting aspects now.

File pic of Tun Musa Hitam: … We have external people looking at the matter from the legal, financial and accounting aspects now.

“I have told my board that if it comes to us being found guilty, we must be accountable but we must go through the process to be fair where every decision must be based on the principles of corporate governance,” he told reporters following the concluding session of the 6th World Islamic Economic Forum.

Musa added that the board consisted of credible people ranging from accountants, lawyers and auditors that after seven months of investigating this matter, had come up with short and long-term measures.

“The short-term outcome has been revealed at the previous Sime Darby press conference and in the long run we plan to do restructuring at all levels but it’s a little bit pre-mature to announce the details now.

“If we are in the wrong, we have the courage to admit where necessary and we will not let the water just pass under the bridge.

“At Sime Darby, work is still in progress because it is not a small matter but we will not rush in pointing fingers at anyone,” he said in response to the news report that urged that Sime Darby board should be held accountable for the losses.

On mitigation measures to reduce the losses, Musa said a loss was a loss but Sime Darby would have to be more prudent in the future undertakings.

On the allegation that the “actual” losses were more than RM964mil, Musa said this was a speculation while the facts were already stated in the earlier statement to Bursa Malaysia.

“And I will not reveal the time line for the investigation process,” he said.

The losses is to be realised in second half of financial year 2010 ending June 30.

The group announced a profit of RM1.1bil for the first half of FY2010. The third quarter results of the Group will be announced on May 27, 2010.

President and group chief executive Datuk Seri Ahmad Zubir Murshid, has been asked to take a leave of absence starting middle of this month prior to the expiry of his contract on Nov 26.

To recap, the above findings were the results of a board work group established in October 2009 to assess the operations of its energy and utilities division in terms of corporate governance and performance of the division, following its results in the previous financial year.

The work group consists of Datuk Seri Panglima Andrew Sheng Len Tao, Tan Sri Wan Mohd Zahid Mohd Noordin and Datin Paduka Zaitoon Othman and they were advised by independent lawyers and accountants.

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The first thing that struck our mind when we learnt of this non disclosure of the ‘forensic audit’ is: Is this another cover up? Who are the people the BOD “Trying to protect”? Are these members who are being ‘protected’ are some of the BOD themselves?

The forensic audit should able to gather enough evidence to get the perpetrators for what they did to Sime Darby. If making it public would allow these perpetrators to find ways to cover themselves, then the forensic audit isn’t comprehensive and water-tight enough. ‘White collar’ crimes leave behind trails, usually documents and information.

The Sime Darby BOD comprises of “2 Tuns, 5 Tan Sris and 4 Dato’s” already failed their fiduciary duty as stewards and custodian for the shareholders when they allowed the management (in this case, CEO Zubir) to “Mislead and give wrong information about the three ‘sick’ projects” all the while. But then again, isnt it the BOD’s responsibilities to ask the right questions and demand for answers for the progress and status of these projects as they went along, especially when people in the ‘market’ were openly mocking Sime Darby for these projects as something “Not to do”?

Sime Darby BOD now already faces perception issues of not able to carry out their duty properly. There are strong demands that they resign and allow other persons ‘untainted’ to complete what they had to do in the first place.  Keeping mum about this forensic report, especially after Musa promised to ‘reveal all’ isn’t their best option.

Probably safe guarding the integrity of the Sime Darby BOD and public faith on largest public listed company in the country and coming out with very bold steps of control and reporting system to prevent this from happening in the future,  is more important than recovering some of the RM 1.7 billion losses.

Sime Darby has enough reserves to underwrite these losses and still not impiar its obligations against the annual dividends that schemes such as ASB and ASN under PNB depend on and its ability to meet its commitments. Giving shareholders and stakeholders comfort is far more important than these ‘water under the bridge’ losses.

We hope the shareholders exercise their rights in this upcoming annual general meeting sometime in November. This include getting most of the ‘extraordinarily illustrious’ members of the Sime Darby to go and face the music for their failure to safeguard the interests of the company and shareholders.

Published in: on September 21, 2010 at 10:42  Comments (2)