Press Release: STATE SHOULD PLACE MORATORIUM ON CONSORTIUM ZENITH PROJECTS AND MACC MUST SPEED UP INVESTIGATION PROCESS

PRESS RELEASE 16 April 2019

STATE SHOULD PLACE MORATORIUM ON CONSORTIUM ZENITH PROJECTS AND
MACC MUST SPEED UP INVESTIGATION PROCESS

The Center to Combat Corruption and Cronyism [C4 Center] is concerned with the controversies and
mysteries surrounding the undersea tunnel project and the construction of the three paired highways.
On the 3rd of March 2019, former Dato Seri, Ganaphathy was charged in court for allegedly cheating by
receiving up to RM 19 million in bribes to lobby the MACC to close its investigation into the main
contractor that is building the undersea tunnel and three paired roads. On the 8 of April 2019, the same
accused was again prosecuted for 68 money laundering charges.

Background

In January 2018, it was reported that the MACC is probing if money was misappropriated from the
feasibility study awarded for the Penang undersea tunnel project. It was also investigating payments of
RM305 million to the companies that conducted the feasibility study of the mega project. In that
process, many individuals were arrested, offices raided and close to 100 witness interviewed.
BN leaders at that time had also raised many concerns and irregularities of statements by Penang
Government leaders and the Penang Public Account Committee report in regards to payments and
project cost.

In January 2018, the New Straits Times (NST) had reported that it had sources alleging kickbacks had
been given to “key politicians” in the Penang tunnel project. Without naming the sources, NST claimed
the information was based on “preliminary findings of the MACC investigation. While this may amount
to hearsay, Zenith’s action to indulge in bribes to settle an alleged fraud case currently under
investigation by the MACC raises eyebrows.

They should have made a complaint with the Police, MACC and go public if they were being victimized
or targeted for exhortation. However they failed to do this in the first instance and instead paid what
was termed as “consultation fee.”

Consortium Zenith Sdn. Bhd and Datuk Zarul Ahmad has lost every credibility to carry out the tunnel
and three paired roads highway project as they have been involved in such unethical way of conducting
business. The company has failed to live up to principles of good practices in doing business. It raises
more questions that the Penang State Government that boasts of its CAT principles, engages with a
company with suspicious credentials to conduct such a massive project.

The project was also awarded through a request for proposal [RFP]. A RFP is not transparent as in an
open tender system. The public have no means to scrutinize or compare and to play the role of check
and balance in an RFP concept. There is also no standard yardstick to evaluate the different proposals
submitted under an RFP model as opposed to an open tender system. This kind of procurement could

give rise to rigging or abuse as stated by Dr Lim Mah Hui and Ahmad Hilmy in an article in July last year,
titled “Request for Proposal is not Open Tender”.

C4 notes that the preliminary agreement on the tunnel and three paired roads between Zenith and the
state government contains a “Termination on Corruption” clause. Article 14.5 states that if the
company, its personal, consultant or agents is or are convicted by a court of law for corruption in
relation to the procurement, negotiations and conclusion of the agreement, the state government shall
be entitled to terminate the said agreement, claim losses, cost and damages. The state is also entitled to
take back any land alienated to Zenith under the agreement.

On the facts of the case, although no one has been convicted yet, Zenith has admitted to having paid the
“consultation fee”. The demand letter send to Ganapathy by Zenith requesting the return of the
“consultation fee” is also proof that Zenith has been involved in unethical and corrupted business
conduct.

At such,
1. C4 calls upon the Chief Minister of Penang, Chow Kon Yeow and his government to place a
moratorium on its agreement with Zenith until the MACC completes its investigation into the
project and clears Zenith of any corrupt practices.

2. C4 also calls upon the State Government to conduct an independent audit on Zenith’s entire
consortium of companies, eliminate conflict of interest and potential corruption. The Penang
state government needs to send out a strong message that it would not compromise with
unethical and corrupted practices and would live up to high standards of integrity and good
governance

3. If in the event, Zenith is found to have been involved in corrupted practices by the MACC or the
independent audit, the state should enforce clause 14.5 “Termination on Corruption” as per in
the preliminary agreement. At that stage, it may be recommended that the State government
may need to restart the tender process, engage more experts and conduct the entire process in
an open tender system, allowing the public to play the role of check and balance. This would
encourage greater transparency and accountability. The need of the project and the genuineness
of the feasibility study is cast under dark clouds of doubt, in light of the company’s unethical way
of conducting business.

4. C4 Center calls upon the Penang State government to ensure that it conducts business only with
companies which has strong anti-corruption compliance mechanisms. This is more needed
when projects worth millions of Ringgit are awarded. Recent amendments to the MACC Act
2009, which has included provisions on cooperate liability through Section 17A ‘Offence by
Commercial Organization’ has also made it possible for company directors and owners to be
held responsible for the corrupt practices of their staff, if they have not put in place adequate
procedures to prevent corruption in the company. Before engaging in business, the state should
check the relevant company’s anti-corruption compliance structure and if they are ISO 37001
certified, which sets the requirements, guidance and standard in an anti-bribery management
system for the organization. The standards should be high. This is the message that we need to
send out to the private sector.

5. C4 center also calls upon the MACC to speed up its investigation and shed light on the many
controversies surrounding the project. It now becomes imperative that MACC takes quick action
against the bribe giver, that the receiver has been charged.

The scandals of FELDA, Tabung Haji and 1MDB are great lessons in regards to poor accountability and
oversight. Billions of Ringgit in public funds have been swindled through these structures and projects.
Such incidents should not be allowed to be repeated under the PH government. The Penang government
need to put in place practices to the highest standard when conducting business.

C4 understands that the reclamation of land in Gurney Drive is nearing completion. Lots from the said
land would be transferred to Consortium Zenith once the reclamation is completed sometime in June
this year to enable the Air Itam to Jelutong Expressway link construction to begin. Once the transfer is
done and when construction begins, it would involve a more convoluted task of removing Zenith from
the picture. This is also why MACC must also speed up its investigation to shed light on all possible
malfeasance.

We need urgent answers now!

Released by Cynthia Gabriel Executive Director and Sudhagaran Stanley Northern Region
Coordinator of C4 Center