This article first appeared in The Edge Malaysia Weekly on July 4, 2022 - July 10, 2022

ARIES Telecoms (M) Bhd, formerly known as V Telecoms Bhd, was once hailed as the first telecommunications company in Malaysia to have a regional presence in Southeast Asia with its planned US$5 billion Vasseti South Asia Network (VSAN) project.

However, the mammoth undertaking, which boasted that it would have more than 30,000km of terrestrial fibre-optic infrastructure across the region, did not pan out, as Bank Pembangunan Malaysia Bhd (BPMB) found out following the conclusion of its investigations in January this year.

BPMB alleged wrongdoings by several quarters and has initiated a RM564.99 million civil suit against 27 defendants, including Aries’ former president and group managing director Datuk Mohd Zafer Hashim, former directors, corporate shareholders and indirect shareholders (see chart).

It is understood that this will not be the only fraud-related legal action taken by BPMB. The development financial institution (DFI) is said to be initiating another suit, claiming around RM1 billion.

The Aries saga began in May 2012, when a RM400 million term loan was granted by BPMB to the company to finance the Malaysian portion of the VSAN project, with an estimated cost of RM1.3 billion.

The private project — mainly involving the laying of fibre-optic lines along the entire coast of Peninsular Malaysia — was made out to be an infrastructure undertaking that was in line with the then government’s aspirations to increase broadband penetration.

The loan was initially approved based on several factors: Aries’ purported paid-up capital of RM501 million; the appointment of Huawei Technologies Co Ltd China (Huawei China) as the turnkey contractor for the project; and an additional RM400 million financing to be secured from Malayan Banking Bhd (Maybank).

However, following investigations by its appointed receiver and manager, Lim Keng Peo of Deloitte Corporate Solutions Sdn Bhd, the DFI found that the defendants in their various capacities had conspired in redirecting the loan Aries obtained to other parties.

Fictitious capital injection into Aries

In June 2010, three offshore companies — Primawin Ltd, Arab Emirates Capital Ltd and China Finance Ltd (all of which are defendants) — purportedly injected RM396 million into Open Fibre Sdn Bhd for the latter to acquire a 91% stake in Aries.

However, BPMB alleged in its court filing that the purported cash injection was never recorded in Aries’ accounts for the financial year ended Dec 31, 2010. As such, it appeared that the sum of RM396 million was never injected into Aries.

“On Dec 13, 2010, Open Fibre entered into a sales and purchase agreement with Zavarco Bhd for RM396 million. However, this transaction is fictitious and a sham as the transfer of shares took place with no consideration,” the DFI stated in the filing.

Zafer, the then group managing director of BPMB who approved the RM400 million loan, had allegedly caused the DFI to waive the conditions precedent to the disbursement of the loan for an RM8 million bribe.

The court filing states that Aries’ former managing director Datuk Wira Ranjeet (the 13th defendant) paid Zafer an RM8 million bribe through Datuk Noorusa’adah Othman (the 14th defendant) — a former senior corporate finance officer to Tan Sri Syed Yusof Syed Nasir, who in turn is a former chairman and director of Aries. Syed Yusof is not among the defendants in the case.

For the disbursement of the first tranche of the loan, Aries was required to provide a joint completion guarantee by Huawei China and Zavarco. Subsequently, the condition of having a joint completion guarantee was temporarily waived by Zafer five days before the first RM200 million disbursement on July 2, 2012.

BPMB’s probe revealed that the joint completion guarantee was neither approved nor registered with China’s State Administration of Foreign Exchange. Paneagle Holdings Bhd (15th defendant) later replaced Huawei China to be the turnkey contractor. Aries was accused of appointing its 9% shareholder Paneagle Holdings without the knowledge and consent of BPMB’s board.

The condition for the joint guarantee was later amended by Zafer, and instead required a completion guarantee from Zavarco Plc (26th defendant) before the second RM200 million disbursement. The revised condition was not met either, but Zafer still cleared the way for the second tranche to be disbursed on Nov 15, 2013.

Two days before the second disbursement, Zafer also waived the need for Aries to provide its facility agreement with Maybank, which was represented to be the other RM400 million financier for the project.

Aries defaulted on the loan five years later. BPMB proceeded to issue the company a notice of default in July 2018, demanding full loan repayment plus interest.

The DFI then found that the fibre-optic infrastructure for the project was also never fully constructed, raising the question of the utilisation of the RM400 million cash Aries had borrowed.

Between July 2012 and 2016, Aries allegedly made RM499 million in payments to Paneagle Holdings — which exceeded the value of contracts for the fibre-optic project.

The invoices issued by Paneagle Holdings for the payments did not contain supporting documents to indicate proper verification of the work done.

“In essence, the invoices by Paneagle Holdings do not appear to have been for actual work done or equipment supplied for the project. The invoices also appear to be inflated,” states BPMB in its legal filing.

For instance, Aries had also engaged several other contractor s, including Scot Technology (M) Sdn Bhd and Excel Concept and Services, for the construction of air-conditioned cabins for the project at RM87,000 per cabin, which was significantly lower than the RM782,000 per cabin rate it agreed to in its contract with Paneagle Holdings.

In January 2016, Aries allegedly issued fictitious payment vouchers amounting to RM9 million to Paneagle Holdings, which were also not backed by any supporting documents.

In another twist, the probe by Deloitte revealed that although the payment vouchers were issued in favour of Paneagle Holdings, the RM9 million cash was actually diverted to another investment holding company, BVS Trinity Sdn Bhd (24th defendant), in which Aries’ former director Roslina Ibrahim  (fourth defendant) holds a 60% stake.

BPMB accused Roslina of being a mastermind in the “Aries fraud scheme”.

“The fictitious payment vouchers in favour of Paneagle were issued to conceal the siphoning of funds from Aries to BVS Trinity,” alleges BPMB.

BPMB also discovered discrepancies in the sites certified by its independent checking engineer (ICE) Silver Ridge Sdn Bhd (27th defendant) — tasked with verifying the progress of the project — alleging that manipulation was involved in the latter’s appointment during an open tender process (see accompanying story on next page).

While Paneagle Holdings had certified 28 network routes, Silver Ridge Sdn Bhd’s progress report, on the other hand, contained a total of 39 network routes. Surprisingly, BPMB only identified three common network routes between the list of certified and completed routes.

“This raises questions on the accuracy and validity of Paneagle Holdings’ certificate of acceptance and Silver Ridge Sdn Bhd’s and/or Silver Ridge Holdings’ progress report,” says BPMB.

In short, hundreds of million had been paid for little work done.

As BPMB commenced the recovery process against Aries as it failed to repay its loan, the assets and business of the latter were allegedly transferred to Orient Telecoms Sdn Bhd (22nd defendant), in which BVS Trinity holds a stake.

Interestingly, one of the defendants, Wong Chee Keong — a director of Silver Ridge Sdn Bhd and its parent Silver Ridge Holdings — is the current chairman of Orient Telecoms.

BPMB points out that Orient Telecoms was incorporated on Jan 4, 2018, less than a month after a notice of demand was issued to Aries on Dec 15, 2017.

From June 4, 2018 onwards, Aries began novating its licence, tenancy and customer agreements to Orient Telecoms.

Aries also allegedly funnelled money, disguised as directors’ fees, shortly after the notice of demand was issued to others.

For instance, between March and June 2018, Aries transferred approximately RM1.6 million to related entities, falsely recorded as payments to Aries’ creditors. These included a RM13,800 payment voucher to its director Zulizman Zainal Abidin and a RM180,000 payment voucher to Yanti Mushira Mustafa, who was not the company’s director then.

BPMB alleges that the RM180,000 sum was for the benefit of Zulizman, Shailen Popatlal and/or Roslina.

Besides that, fictitious payment vouchers were raised, which included a RM500,000 purported payment for Zeta Resources Sdn Bhd, although it was later discovered that the funds were actually transferred to BVS Trinity.

Another RM400,000 payment, purportedly for Aries’ creditors, was instead made to VCB Malaysia Bhd, a wholly-owned subsidiary of BVS Trinity.

There was also a RM700,300 payment received by BVI-incorporated Primawin under the guise of payment to Aries’ creditors.

More skeletons in the closet?

The RM400 million loan to Aries is regarded as one of the many credit facilities that raised many eyebrows.

Sources familiar with the DFI had previously highlighted to The Edge the loan and investment in Syarikat Borcos Shipping Sdn Bhd and the credit line to Asian Broadcasting Network Sdn Bhd (ABN), plus Integrated Nautical Resort Sdn Bhd and Garuda Suci Sdn Bhd — two companies linked to Indonesian businessman Tan Sri Peter Sondakh.

Global Maritime Ventures Bhd (GMV), a 90% unit of BPMB, bought 35% of Borcos for RM146.55 million in 2011 and the remaining 65% for RM190.45 million from AWH Equity Holdings Sdn Bhd in January 2013.

As at end-March 2014, Borcos had a RM62.7 million unsatisfied credit facility with BPMB.

Many were puzzled as to why GMV bought out Borcos. After the takeover by BPMB, Borcos posted an after-tax loss of RM238.39 million for its financial year ended December 2014 on revenue of RM123.28 million. At end-December 2014, Borcos’ total liabilities exceeded RM510 million while its total assets came to RM574.34 million.

KPMG was appointed as liquidator at Borcos at end-December 2016.

Pay-TV operator ABN was another company that was granted a loan by BPMB. ABN, which was linked to previously well-connected businessman Tan Sri KK Eswaran, had a RM450 million facility with BPMB that is unsatisfied, according to searches on the company.

However, the assets of ABN were auctioned off to help pay off its debts in late 2018 and early 2019.

Back to the lawsuit filed recently, this is not the first legal action taken against Aries (see sidebar on the right). The court case will be closely watched to see whether justice will be served eventually.

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