Sime Darby Bhd. which has been in bad light since the mega accumulated loss of RM 1.7 billion from the scandals of projects, particularly in the Gulf States, decided to go one step ahead. Not only they sacked the executives who are responsible to manage these miserably failed projects and some were even handed to authorities for a more detail investigation and eventually prosecution, Sime Darby is now making them pay for their sins.
This morning’s Business Times:
Sime sues ex-CEO, 4 others
Sime Darby is claiming at least RM338 million from the five over their alleged roles in the RM1.7 billion losses suffered by its energy and utilities division this year.
Conglomerate Sime Darby Bhd has sued its former group chief executive officer Datuk Seri Ahmad Zubir Murshid and four senior executives over their alleged roles in the massive RM1.7 billion losses suffered by its energy and utilities (E&U) division this year.
The executives, all under the E&U division, are former Sime Darby Energy Sdn Bhd vice president Datuk Mohd Shukri Baharom, chief financial officer Abdul Rahim Ismail, head of oil and gas Abdul Kadir Alias and senior general manager of Sime Darby Engineering, Mohd Zaki Othman.
“They are being sued for breaches of duties owed to the Sime Darby Group.
“The Sime Darby Group is claiming from the defendants, inter alia, restitution for monies wrongfully paid out, damages for losses suffered, loss of profit, aggravated damages and costs,” it said in a statement yesterday.
Zubir and the other executives could not be reached for comment.
Sime is claiming at least RM338 million from the five, with almost half of that from Zubir and Shukri. It is also seeking damages for losses caused by them in three projects and any aggravated or exemplary damages.
Specifically, the suit deals with three projects, namely the Bulhanine and Maydan Mahzam project with Qatar Petroleum, the Maersk Oil Qatar project and building of marine vessels for the Maersk Oil Qatar project.
The suit was filed at the Kuala Lumpur High Court yesterday.
Sime recorded RM1.7 billion in cost overruns for the three projects and the Bakun hydroelectric dam project earlier this year, causing it to allocate a RM2.1 billion provision.
As a result, the government-linked company in July established an investigative reports review committee, carried out a forensic audit and appointed legal advisers.
Zubir was asked to take a leave of absence in May and the following month, Datuk Mohd Bakke Mohd Salleh was named acting president and group CEO.
The extra costs led Sime to post losses in the third quarter to March 2010, its first quarterly loss since its mega merger with state-owned Golden Hope Plantations Bhd and Kumpulan Guthrie Bhd in December 2007.
Losses dragged on to the fourth quarter ending in June 2010 but Sime continued to be profitable for the full year and has bounced back with a first-quarter profit for fiscal 2011.
This is an unprecedented move by a plc to ensure that not only their executives are made accountable and responsible to manage the resources that were entrusted upon them by the investors, they are now liable for their mismanagement. Especially if their mismanagement has a tinge of criminal intent, of which should be a good deterrent for the temptations of corrupt practices amongst corporate leaders.
Sime Darby already got three of the Board of Directors who are supposed to be responsible and held fiduciary duties for these losses to go at last month’s AGM. Deputy Chairman Tun Ahmad Sarji Abdul Hamid, Director-in-charge-of-SDE Tan Sri Dr. Tajudin Ali and former Sime UEP MD who has been appointed to the BOD Dato’ Mohamed Sulaiman were ‘retired’.
Other BOD members who volunteered to leave were Former PWC Executive Chairman Raja Tan Sri Arshad Raja Tun Uda, Dato’ Dr Abdul Halim Ismail, Dato’ Paduka Zaitoon Osman and Ariffin Siregar.
We reckoned that the retirement of these three plus four others were not enough. Sime Darby owe it to the public, especially Malaysians. Their highly illustrious BOD should have been more vigilant and ‘getting wiser after the event’ is not acceptable, considering the experience, systems and controls and tradition of a conglomerate of several plcs wich serve as pillars of Kuala Lumpur Composite Index (many regard this as the simplistic ‘barometer’ for the economic health of the nation).
One personality was spared: Chairman of the Group Tun Musa Hitam. He should also leave. It is a matter of principle. Of course one should also take into account that he explicitly did not consider to promote sacked-with-shame Former President and Group CEO Dato’ Seri Ahmad Zubir Murshid’s successor from someone within, probably because of ‘ego and personality clashes’. If so, it is ashame because there are streams of very experienced and proven talents within was denied when the CEO was brought in from outside the conglomerate of 100,000 employees.
Until today, Sime Darby has not made public of its ‘Forensic Audit’. Earlier Sime Darby announced that the excuse was they wanted “To recover these or part of these losses” as a move to give comfort to the stakeholders, especially the investors where more than 7 million Malays and Bumiputras have their life savings locked under PNB’s ASB and ASN schemes. For the rest of Malaysians, they have part of the EPF locked in the form investment as well.
Officially, Sime Darby kept mum about the ‘Forensic Audit’. It was thought that they were going after the JV partners, consultants, contractors and suppliers to ‘recover’ these losses. It is believed also that all the material evidence would be mitigated when they go after the said parties. If eventually they do, it should be a lengthy legal process and circus stunts expected.
It is practically doubtful that Sime Darby is able to recover all or most of the RM 338 million claim from these five former executives. The ‘Statement of Claims’ is a ravishing read; Part 1 and Part 2. However, the positive and favourable outcome of this case would serve a stern warning for errant executives or those entrusted as stewards but instead having personal agenda to be realised by ill-intent. In the words of Sime Darby’s own, “It is a matter of principle”.
A few things learnt from this episode. Make the executives pay for their sins, look for talents from outside because of an ego and allow the ‘Statesman’ to remain, especially after he was said to have “Mellowed down and learnt a valuable lesson”. That is from now on should be known as ‘Sime Management 101’ and should be a compulsory subject to all second year business courses.