1 August 2017. By Phoebe Seers and Toh Han Shih.
Over the past few days Malaysia's anti-corruption authorities have made unscheduled and coordinated visits on law firms, consultancies and accountants linked to Felda's wholly owned subsidiary Felda Investment Corporation, or FIC, in a rapidly expanding corruption investigation. Last night, MACC arrested FIC's former CEO and he has been remanded in custody for four days. Today, MACC detained an aide to Isa Samad, FIC's former chairman and a political heavyweight in the country.
As MACC's probe intensifies, a pattern has emerged in the mergers and acquisitions carried out by FIC and other Felda-related entities of massively overpaying for property, plantations and other businesses they acquired. What MACC will no doubt be trying to uncover is who benefitted from the overpayments and whether FIC's senior officers and advisors also profited from the deals. Felda, or the Federal Land Development Authority, is also a major political force in Malaysia, because the rural settlers it assists constitute a significant voting bloc. The country's next election must be held sometime between now and mid-next year.
MACC's probe into FIC stems from a boardroom tussle at listed Felda Global Ventures, or FGV, which led to its CEO Zakaria Arshad being put on indefinite leave on June 6. Shortly after, Zakaria gave an interview with a local newspaper in which he called on MACC to look into Felda's "ridiculous deals".
The recent arrests are part of MACC's investigations into the 2014 purchase of a hotel in the city of Kuching by FIC at a time when Zaid Adbul Jalil was CEO of FIC. It is believed that FIC paid between 40 million and 50 million ringgit ($9.3 million and $11.7 million) more than the market value of the hotel. Zaid was arrested last night and will be remanded in custody until Friday, MACC said today.
FIC was incorporated in July 2013. It is understood that Isa Samad held the position of chairman until January this year when the incoming Felda Director Shahrir Abdul Samad ordered the entire FIC board to resign. Isa had also been chairman of Felda from 2011 until Shahrir replaced him in January. Local reports from today quoted MACC commissioner Dzulkifli Ahmad confirming the arrest of an "aide" or a "special officer" to a "former chairman," presumably a figure close to Isa.
FIC is thought to manage around 12 hotels under its portfolio, which includes two London hotels, the Grand Borneo Hotel in Kota Kinabalu, Sabah, Grand Plaza Kuching in Kuching, Sarawak and Grand Beach Resort in Port Dickson, Negri Sembilan, as well as seven hotels owned by Felda itself.
The purchases of the London and Port Dickson hotels have also come under MACC's scrutiny, again for alleged over payments. One of the London hotels is said to have cost FIC 20 million pounds ($26.4 million) more than it was worth.
Malaysians often complain that MACC only targets small fry in its corruption probes, while the powerful go untouched. But the anti-graft authority is fighting for its reputation after Prime Minister Najib Razak managed to thwart its investigations into the scandal-plagued 1Malaysia Development Berhad, or 1MDB. Najib was chairman of 1MDB until May 2016, and there have been allegations that funds from 1MDB made their way into his personal bank account. The prime minister and 1MDB have denied any wrongdoing. Alleged money laundering linked to 1MDB is the subject of an ongoing investigation by the US Department of Justice.
However, in its probe of Felda, MACC has not spared any resources nor has it been afraid to target powerful figures. The detention of an aide to Isa, in particular, has raised eyebrows, because he is known to have the support of the prime minister, who recently promoted Isa to head the country's transport ministry, as the investigation of Felda picked up steam.
The reason MACC has been actively investigating FGV and FIC while hardly investigating 1MDB is because any probe of the latter would ultimately target Najib, while the investigations of FGV and FIC do not, MLex was told.
MACC is trying to regain public trust by investigating FGV and FIC, said a Malaysian opposition politician who declined to be named.
Among the "visits" MACC has made in recent days were simultaneous visits on Friday to auditors Deloitte Malaysia, estate agents Raine and Horne International, law firm Mohamad Ridza & Co. and property consultants Henry Butcher Malaysia. MACC reportedly tried to visit Gegasan Abadi Properties, but the office was closed.
In a statement, Deloitte Malaysia Country Managing Partner Tan Theng Hooi said the descriptions in most local media reports of the visit as a "raid" were incorrect. "The MACC officers requested our assistance in providing information relating to their investigation, and we are cooperating fully with them to provide all required information to assist their investigation."
Deloitte Malaysia appears to have had a close relationship with former FGV Chairman Emir Mavani Abdullah, who was one of only two non-Deloitte speakers at a conference the auditors organized in August 2015.
"He is a leading expert in economic and government administration reform in the Middle East and Asia for the past 20 years," the Deloitte program stated.
Emir was responsible for expediting M&A projects during his tenure at FGV, but was removed suddenly from his post following a botched attempt to buy into Indonesia's Rajawali Group through the acquisition of the Eagle High Plantation. When Emir took up the post of CEO in 2013, FGV was reporting annual profits of 982 million ringgit. When he left in 2016, profits had dropped to 31 million ringgit, a plunge of nearly 97 percent.
Ridza Abdullah at law firm Mohamad Ridza was quoted as saying that his firm was not under investigation, but confirmed that lawyers at the firm were the "lawyers for the [Kuching hotel] transaction," according to the New Straits Times.
According to the Legal 500, a directory of law firms, "highlights" for partner Mohamad Nazran Basirun include advising FGV on acquiring a 55 percent stake in edible oil producer Zhong Ling Nutril–Oil Holdings for 976 million ringgit. That deal, however, was nixed by now ousted CEO Zakaria Arshad only seven days into his job. Another legal directory lists both FGV and FIC as "significant clients."
Ironically, a member of the firm spoke at an event organized by FGV in April 2016 on the subject of "Mergers & Acquisitions — Managing Legal Risks," according to the law firm's website.
Concerns remain, however, that these advisors to Felda and its units could become scapegoats for more prominent figures. An Australian businessman who ended up in a legal battle with a Felda subsidiary told MLex that many Malaysian businesses he knew of that had been wronged by the Felda subsidiary would not retaliate because they feared retribution, given Felda's political connections with the government. "Felda is for all intents and purposes the de facto government," he said.
The crucial question is whether MACC will properly investigate Isa Samad, said the Malaysian opposition politician.
In June, Salahuddin Ayub, deputy president of a Malaysian opposition party, the National Trust Islamic Party, or Amanah in Malay, said, "my question to Najib is why is Isa Samid still untouchable?"
The bonds of loyalty between Isa and Najib go back a long way. Isa is said to have helped Najib out of a compromising situation that occurred in the 1980s in Port Dickson, a town in the Negeri Sembilan constituency, at a time when Isa was the chief minister there.