KUALA LUMPUR (Aug 22): Vendors of the the RM9 billion littoral combat ships (LCS) project were chosen even before the issuance of letter of awards (LOAs) by the government, according to the declassified forensic audit report released by the Public Accounts Committee (PAC).

“The evidence of irregularities and lack of proper governance related to the project were gathered as early as 2010,” the report read.

The 104-page forensic audit report was declassified on Monday (Aug 22) night by Boustead Heavy Industries Corp Bhd (BHIC). The audit covered 21 LOAs, including variation orders, with a combined value of RM4.97 billion.

According to the report, the terms of reference (TOR) of the LCS steering committee (LCSSC) appeared lopsided, as the members of the committee were selected by BHIC managing director Tan Sri Ahmad Ramli Mohd Nor without having to consult with the board of directors (BOD). Ramli was then chairman of LCSSC.

This provided Ahmad Ramli with absolute control and resulted in a lack of independence among other members of the committee. Ahmad Ramli was charged last Tuesday (Aug 16) with three counts of criminal breach of trust involving the project.

“As a result, the members became redundant and failed to discharge their function for which they were selected in the LCSSC,” said the forensic audit report on BHIC by Alliance IFA (M) Sdn Bhd in July 2020.

The report also highlighted that the then programme director Anuar Murad took advantage of the situation, and with the blessings of Ahmad Ramli, acted arbitrarily while making decisions pertaining to various LOAs and variation orders (VOs).

At the time of issuance of LOA, Anuar Murad signed as a witness on behalf of BNS, and signed on behalf of Contravenes Electrodynamics Sdn Bhd (CED) during the reassignment of the LOA by Contraves Advanced Devices Sdn Bhd (CAD) to CED.

Anuar Murad, the forensic audit report said, was the person who recommended all payments to CED for the approval by Ahmad Ramli, including milestones certificates which were acknowledged by Anuar Murad.

“This indicated that Anuar Murad was acting on behalf of BNS and CAD/CED both at the same time, which was in conflict and showed a serious lack of independence on the part of the decision maker,” the report read.

The existence of these two companies — namely CAD and CED — were first highlighted in the PAC report on Aug 4. Both are 51%-controlled by BHIC, with 49% held by German outfit Rheinmetall Air Defence AG.

BNS had appointed the two subsidiaries to buy equipment from the original equipment manufacturer (OEM), which caused acquisition costs to swell several times. As of 2018, BNS' debt to the OEM stood at RM801 million, while it owed RM956 million to financial institutions.

The committee members also failed to raise any objections with the way decisions were being made by the management about the selection of various vendors for the LCS programme.

“In most of the cases, LOAs were issued to CAD or CED without being first presented to the LCSSC for their approval.

“The BOD had also given sweeping authority to Ahmad Ramli to negotiate the terms and executive [of] various contracts with CAD, without seeking their approval,” it said.

The report further revealed that major decisions were made through directors’ circular resolutions (DCR) without convening a board meeting, which further reduced transparency and opportunities for discussion, as well as for vital documents to be studied, before the DCRs were approved.

The board also ignored the advice of the ex-chief of navy, who raised objections at the board meeting on the selection of DCNS SA/Naval Group (DCNS) for the LCS design and support contract.

“The organisation structure for the LCS programme was not approved by the appropriate authority (BOD) till 2015,” it added.

Read also:
LCS: Evidence of irregularities, lack of proper governance gathered as early as 2010, says Audit Report 

PAC calls for further forensic audit of LCS and declassification of NGPV probe report 

LCS project: BHIC faces RM890m loss from double claims, dummy payments and overlapping LOAs