Chronicle of Lim Guan Eng’s Corruption
It can’t be a coincidence that the cost of the project announced by Lim Guan Eng is approximately equivalent to cost announced by China Railway Construction Corporation.
Ong Eu Soon
On 6 Oct 2013, I wrote a letter accusing Lim Guan Eng of corruption by proxy. The letter was published by The Malaysian Insider. In the letter, I openly questioned the technical ability of Astral Supreme Construction on tunnel related project. I asked why the feasibility study and detailed design was awarded to an unknown company as a middleman. Why there is a profit guarantee of RM15 million for ASC? This invited a response from Ahmad Mohd Zulkifi claimed that I have no privy to the full facts of the transaction.
On 24 Jan 2014, Ahmad Mohd Zulkifi made a press statement declared that the feasibility studies will be completed on APRIL 2014. In response I challenged Ahmad Mohd Zulkifi to furnish proof on the completion of the feasibility studies.
In February 2014, in a letter to Malaysiakini I questioned why there is no visible action on the feasibility studies and accused Consortium Zenith Bucg of faking the feasibility studies.
In reply to my letter, Consortium Zenith Bucg threatened to sue me for defamation but the timeline for the feasibility studies suddenly changed and no longer to be completed in April 2014.
Subsequently I threatened to lodge a report with Bursa Malaysia regarding the possibility of ASC faking the feasibility studies.
On 25 July 2014, in a filing with Bursa Malaysia, Astral Supreme announced that Zenith PMC Sdn Bhd has terminated its joint venture with Astral Supreme Construction Sdn Bhd (ASC), a wholly-owned subsidiary of Astral Supreme Bhd, to carry out a feasibility study and design of the ambitious Penang-Butterworth undersea tunnel, after it failed to secure consultants who could undertake the project within the budget and the funding requirements.
On 4 June 2014, blogger Anil Netto in an article claimed that the auditors of ASC “wish to highlight the unaudited unusual large payments amounting to RM12.84 million alleged to be made by the former Managing Director during the financial year”.
The MACC should investigate whether this unusual payment is related to the guaranteed profit which is supposed to be a kickback to a certain politician.
On 17 August 2014, I was attacked by a vigilante group in an attempted murder with the aim to shut me up after I questioned how the feasibility studies can be completed in April 2014 two months earlier than scheduled with the withdrawal of Astral Supreme Construction Sdn Bhd (ASC).
During the whole controversy Lim Guan Eng distanced himself by claiming that he only deals with Consortium Zenith Bucg, he had no idea about ASC.
On October 2015, I further pressured the state government over the status of the feasibility studies. Finally, Lim Guan Eng personally confirmed that the feasibility studies were not completed. Lim said there are two phases for the undersea tunnel project — 1A for the construction of major roads to ease connectivity to the tunnel and 1B for the tunnel itself.
“The feasibility study for 1A is now almost 85 per cent complete while it is about 25 per cent for 1B,” he said. The feasibility study for 1A is expected to be completed by the first quarter of next year while the study for 1B will still be ongoing, he added.
This is a clear sign the state government has conceded to the fact that the completion of feasibility studies is misleading.
On 14 January 2016, Consortium Zenith (through a memorandum of agreement) granted a 10-year exclusive rights to Ewein Zenith Sdn Bhd to purchase a portion of the Exchanged Lands (i.e. Plot 1 – 10 with an approximate net developed area of 50 acres) from Consortium Zenith for an aggregate consideration of RM2,831,400,000, which is based on a rate of RM1,300 per square foot.
On 5 May 2016, Barisan Nasional Strategic Communications director Datuk Abdul Rahman Dahlan asked the Penang government how the total cost of the feasibility studies, detailed design and Environmental Impact Assessment (EIA) report for the undersea project came to a staggering RM305mil. Abdul Rahman said if this was the case, he questioned why the initial feasibility study was awarded to a party who allegedly did not appoint consultants or experts and had to subsequently give up the job.
He also asked why this company was paid RM139mil in advance when studies were yet to be completed, and if it was penalised for failing to adhere to the project timeline. Abdul Rahman further questioned why the state government decided to give the company 30 years of toll concession for the tunnel, on top of a payment-in-kind of 110 acres of land.
“This is a huge departure from a standard concession agreement practice where the concession company would fund the project and collect toll to recover their investment,” he said.
“And isn’t toll roads against Pakatan manifesto? he added.
He further questioned why the Penang state government agreed to pay with land valued at 2013 prices, when the project was estimated to be completed in 2025 as the prices could be substantially more.
Few days later he also asked Lim Guan Eng to give an explanation as to why feasibility studies for three related roads cost RM31 million, while the more complicated and riskier Undersea Tunnel Project is RM20 million.
On 10 May 2016, l had highlighted the issues of the exorbitant price for the feasibility studies and the undersea tunnel. I had highlighted that the feasibility study for Labrador tunnel cost only $750,00 while the feasibility study for Penang undersea tunnel cost about RM20 million. The proposed Labrador tunnel will have a minimum length of 17.4km and the total development cost is estimate to be $1.8 billion or RM5.76 billion at the exchange rate of 3.2 per Canada dollar. The cost is about RM320 million per km. Penang undersea tunnel with the length of 7.2km cost more than RM4 billion. The cost per km is RM555 million.
On 14 June 2016 Datuk Zarul Ahmad Mohd Zulkifli claimed that Consortium Zenith BUCG Sdn Bhd (CZBUCG) has yet to receive RM100 million for the feasibility studies and detailed design work completed thus far for the RM6.3 billion integrated infrastructure project in Penang. The amount due includes the 83% feasibility studies done on the 7.2km undersea tunnel connecting Butterworth on the mainland and Gurney Drive on the island.
On 2 December 2016, Mudajaya Group Bhd announced that it had received the letter of award for Package Two which involves building the Ayer Itam to Lebuhraya Tun Dr Lim Chong Eu by-pass of Penang major roads and Third Link project in the state. “The project is targeted to be completed in 36 months from the date of site possession, which is expected to be in the second half of 2017,” it said.
On December 2016, Bursa Malaysia Securities Bhd had publicly reprimanded construction and property development company Vizione Holdings Bhd (formerly Astral Supreme Bhd) and nine former directors for breaches of the Main Market Listing Requirements. The regulator said in a statement that eight out of the nine former directors were also fined a total of RM1.112mil.
The biggest fine — RM540,000 — was imposed on former managing director Ong Tai Chin @ Wong Tai Chin.
Among the breaches committed by Vizione was failure to establish an internal audit function during the financial years ended Dec 31, 2011 and 2012 — that is, until the appointment of a new internal auditor on March 15, 2013. The audit committee failed to review the adequacy of the internal audit function and internal audit plan and/or report during the two financial years.
The company was also reprimanded for submitting the annual audited financial statements for the financial year ended 31 Dec 2013, one month after the deadline and showing a 154% deviation between the audited and the reported unaudited loss after tax and minority interest for that financial year.
On 14 Jan 2017, the Penang government gave a breakdown of how much it had paid in kind for studies of the proposed Penang undersea tunnel and three major roads project to date.
On 12 April 2017, in an email to MACC I reported about possible scandal in Penang Roads and Tunnels project .
In the year 2014 it was reported that the feasibility studies of Penang Roads and Tunnels project will be completed in February 2014. After I openly questioned why there were no visible geotechnical engineering along the major alignments of the project, Zenith Bucg changed its stand about the completeness of the studies.
In 2016 Zenith Bucg once again claimed the studies will be completed in December 2016, once again I openly questioned why there is no visible physical geotechnical engineering activity along the proposed alignments of the project, the studies seem to be unable to complete. The original date of completion supposed to be in the second quarter of 2016, did the state government fine the consortium for the delay with monetary compensation?
Now I openly questioned whether there is irregularities and corrupted practices in the said project, Zenith Bucg announced that the studies will be completed in April 2017.
This is a major challenge that I have mounted to unearthed any irregularities or corrupted practices in the project.
In 2011 at Rasa Sayang Lim Guan Eng announced to a group of audiences about the state government’s efforts in upgrading the state infrastructures involving a RM4 billion Roads and Tunnels project.
The state government subsequently awarded the said project to Zenith Bucg at a cost of RM6.3 billion. The difference in cost of more than RM2 billion led to the criticism by the state’s opposition, Gerakan. Lim Guan Eng conveniently attributed it as typo error .
On Dec 27 2013 China Reuters reported that China Railway Construction Corporation announced to the China stock exchange that it’s subsidiary in Malaysia has obtained a US$1.19 billion Roads and Tunnels project in Penang.
Earlier the company website reported the subsidiary also secured the $22 million details design job for Penang Roads and Tunnels project.
The exchange rate for ringgit per dollar between 2011 and 2013 was about 3.18. If using the exchange rate of 3.4 then the US$1.19 billion is approximately equivalent to RM4 billion.
It can’t be a coincidence that the cost of the project announced by Lim Guan Eng is approximately equivalent to cost announced by China Railway Construction Corporation.
It is clear that Lim Guan Eng adminstration had intentionally allowed Consortium Zenith Bucg (CZBUCG) to secure the project at RM6.3 billion and thus allowed CZBUCG to earn RM2 billion without much efforts.
In a letter of intent dated 6 Feb 2013 issued by the state government it was stated that Zenith Bucg was supposed to be a consortium consists of Zenith Construction Sdn Bhd in a joint venture with China Railway Construction Ltd (CRCL) 70% shares, Beijing Urban Construction Group (BUCG)10% shares, Sri Tinggi Sdn Bhd 10% shares and Juteras Sdn Bhd 10% shares.
This was the justification of the state government when questioned why the project was awarded to RM2 consortium.
A check with Suruhanjaya Syarikat Malaysia (SSM) later revealed that CRCL was not in any joint venture with Zenith Construction Sdn Bhd has zero share in CZBUCG while BUCG, only owns 0.0057% of CZBUCG. Back in 2013, BUCG was reportedly described by the Penang state secretary and the Penang state financial officer as “the main bidder which formed the SPV with Consortium Zenith”. While Malay Mail reported that despite the tie-up with Beijing Urban Construction Group (BUCG), the special purpose vehicle company led by Consortium Zenith is made up of RM4.5 billion paid up capital, largely contributed by China Railway Construction Ltd (CRCL). Now suddenly CRCL is reduced to be the main subcontractor of CZBUCG. A serious misrepresentation by the state government in awarding the project to Consortium Zenith BUCG.
The Malay Mail report cited documents saying that China Railway Construction Ltd had tied up with IJM during the initial RFP which closed in June 2012. They didn’t win the bid . CZBUCG was form in July 2012 for the second RFP which ignored all the terms and conditions defined in the initial RFP. CZBUCG was awarded the project with CRCL as the main subcontractor. The practice of a winning bidder selecting a losing bidder as its subcontractor is a corruption indicator according to World Bank.
If that corruption indicator is not enough, according to Lim Hock Seng, the cost of feasibility studies for the road projects was RM31.2 million and for the tunnel, RM20 million. The cost of environmental study is RM30 million. The cost of detailed design subcontracted to CRCL is RM90 million.Total cost of the feasibility studies for Penang Roads and Tunnels project is RM171.2 million. Which means that Consortium Zenith Bucg make an exorbitant profit of RM133.8 million out of this RM305 million feasibility studies project.
If that is not bad enough, there is no visible physical geotechnical hi activities took place along all the proposed alignments of the Roads and Tunnels project. How can CZBUCG claim that it has done the studies?
If it is not bad enough, the EIA study hasn’t been done yet, and only applies to the undersea tunnel. This is totally illogical for the state government to exclude the three road bypass from the EIA. Why can’t the EIA study be carried out in parallel with the feasibility studies? Why must it be carried out separately?
It is clear that there are a few serious corruption indicators existing in the Penang Roads and Tunnels project, and Lim Guan Eng must come out to give an explanation for all the irregularities.
On 22 June 2017, in an email to MACC, I reported that there was a manipulation of exorbitant cost of feasibility studies and detailed design.
It was reported in the past that the RM305mil will fund the feasibility study at RM180 million, detailed design for RM92 million, and environmental assessment for RM33 million.
After I highlighted that the cost of feasibility study for 17.4km Labrador tunnel is only C$750,000 , the cost of feasibility studies seem to have been shifted to the detailed design.
This shift made the cost of the feasibility studies RM31million for the three paired roads and RM20 million for the tunnel, but the cost of detailed design for the three paired roads ballooned to RM177.5 million. The detailed design for the undersea tunnel should be RM46.5 million. The cost of Environmental Impacts Study should remain at RM30 million but I suspect that this study is no more and the cost is shift to the detailed design for the undersea tunnel. Therefore the total consultancy fees for the undersea tunnel is RM96 million.
This unscrupulous manipulation of cost according to Datuk Seri Abdul Rahman Dahlan has made the cost of detailed design for the three paired roads to be four times higher than the maximum allowed under the gazetted scale of fees.
The best part of the manipulation is the total consultancy fees for one of the roads – from Tanjong Bungah to Teluk Bahang – cost RM120.4 million for a mere 10.53km when the limit for the fee is only RM11.7 million. This fee is TEN TIMES more than the gazetted scale of fees allowed by the Board of Engineers Malaysia (BEM). Lim Guan Eng paid more than RM10 million per km for a paper work.
From the website of the main subcontractor, the total cost of the detailed design is RM90 million, but the state government seem to be awarded the detailed design at the total cost of RM224 million to Zenith Bucg Sdn Bhd. This overpaid has allowed Zenith Bucg Sdn Bhd to earn an exorbitant profit of RM134 million from the detailed design alone.
On 12 April 2017, in another email to MACC, I listed out all the irregularities in the Penang Roads and Tunnels project.
On 19 June 2017, Consortium Zenith entered into a joint venture agreement with Wira Syukur (M) Sdn Bhd to undertake a residential development comprising, amongst others, two blocks of luxury service apartments with carparks, subject to finalisation of the development plan at a later stage (“Zenith Urban Project”). For the purpose of this joint venture, Zenith Urban (their joint venture vehicle) acquired a portion of Parcel B with gross developed area of approximately 2.00 acres from Consortium Zenith for a consideration of RM73,616,400. The said land was transferred to and registered in the name of Zenith Urban on 22 March 2017.
On 29 June 2017, Barisan strategic communications director Datuk Seri Abdul Rahman Dahlan announced that he was giving the Penang Government a week to explain BEM’s findings, failing which the matter would be referred to the Malaysian Anti-Corruption Commission. This followed after Barisan’s strategic communication team sought the professional opinion of BEM on the costing of the three paired roads.
The board was said to have replied that the RM177 million in detailed design costs was four times higher than the maximum allowed under the gazetted scale of fees, which the board calculated to be RM41 million.
On 18 July 2017, Datuk Huan Cheng Guan lodged a police report in Penang over the tunnel project.
On 22 July 2017, Datuk Huan Cheng Guan, together with several party members, arrived at the Malaysian Anti-Corruption Commission (MACC) headquarters with “evidence” of misuse of power related to the project.
On 30 August 2017, VIOR Holdings Berhad entered into a share subscription agreement (“SSA”) with Consortium Zenith pursuant to which the Company will subscribe for 3,500,000 new ordinary shares representing 13.21% in Consortium Zenith (“Subscription Shares”) for a cash consideration of RM9.86 million (“Subscription Price”). Upon completion of the Proposed Share Subscription, Consortium Zenith intends to utilise the cash proceeds arising thereof for general corporate and working capital purposes. VIOR Holdings Berhad later changed its name to Vertice Bhd.
On 30 August 2017, Vertice Holding Bhd (formerly VIOR Holding Bhd) entered into a share subscription agreement (“SSA”) with Consortium Zenith pursuant to which the Company will subscribe for 3,500,000 new ordinary shares representing 13.21% in Consortium Zenith (“Subscription Shares”) for a cash consideration of RM9.86 million (“Subscription Price”). Upon completion of the Proposed Share Subscription, Consortium Zenith intends to utilise the cash proceeds arising thereof for general corporate and working capital purposes.
In Sept 2017 Vizione Holdings Bhd acquired an entire equity stake in Wira Syukur (M) Sdn Bhd (WSSB) for RM280 million.
Vizione Holdings Bhd was previously known as Astral Supreme Sdn Bhd which entered into a joint venture with Zenith PMC to undertake the Feasibility studies and detailed design for Penang Mega Infrastructure project (Penang roads and tunnels project) in 2013.
On 10 November 2017, in a filing with Bursa Malaysia, Mudajaya said its unit Mudajaya Corp Bhd and Consortium Zenith Construction Sdn Bhd (formerly known as Consortium Zenith BUCG Sdn Bhd) had mutually decided that it would be difficult to proceed with the obligations under the letter of award and further proceed with the project due to some uncertainties.
Uncertainties that are making it difficult to carry on the project include the uncertainty in being able to secure the exact date for the site possession, the uncertainty in signing the construction contract, and insufficient information provided for the project causing a lapse of time to the timelines in the letter of award.
This is a clear sign proving that the feasibility studies have been faked.
On 5 Jan 2018, Datuk Huan Cheng Guan lodged a report and gave new evidence on the Penang undersea tunnel project to the Malaysian Anti-Corruption Commission (MACC). He urged the MACC to investigate whether there were elements of misconduct or corruption in the bidding for the controversial project costing RM15 billion.
On 24 January 2018, the MACC has arrested a fourth individual – a “datuk seri” – in connection with the undersea tunnel project in Penang.
It is learned that the 62-year-old chairperson of an engineering consultancy firm was nabbed at the MACC headquarters in Putrajaya
On 2 February 2018, in an email to MACC, I highlighted that Vertice Holding Bhd reported to Bursa Malaysia with figures that is completely different from what is provided by PAC in state assembly.
Cost of Tanjung Bungah to Teluk Bahang paired road skyrocketed from RM772,395,000 to RM 1.1billion.
Cost of Ayer Itam to Lebuhraya Tun Dr Lim Chong Eu paired road changed from RM991,571,000 to RM974.8 million.
Cost of Persiaran Gurney to Lebuhraya Tun Dr Lim Chong Eu paired road skyrocketed from RM767,492,000 to RM1.1 billion.
Cost of Penang Undersea Tunnel changed from RM3,504,922,000 to only RM2.845 billion
The shift of cost is believe to allow Consortium Zenith Construction Sdn Bhd to claim major portion of the total cost as the Undersea Tunnel is uncertain whether it can be built or not.
This is a clear case of cheating by Penang state government and Consortium Zenith Construction Sdn Bhd.
On 12 February 2018, I wrote in my FB page the following story regarding land acquisition of the project.
North coastal paired road from Tanjung Bungah to Teluk Bahang
Land acquisition=600555 sq meter
66 pieces of land to be acquired from Daerah Timur Laut
58 pieces of land to be acquired from Daerah Barat Daya
When the feasibility studies were conducted, one of the crucial task was to determine the feasibility of land acquisition for the proposed development.
The North coastal paired road from Tanjung Bungah to Teluk Bahang needs to acquire total 124 pieces of land.
Ayer Itam – Lebuhraya Tun Dr Lim Chong Eu Bypass
Land acquisition=216606 sq meter
The Ayer Itam – Lebuhraya Tun Dr Lim Chong Eu Bypass needs to acquire total 58 pieces of land.
Persiaran Gurney – Lebuhraya Tun Dr Lim Chong Eu Bypass
Land acquisition=9792 sq meter
The Persiaran Gurney – Lebuhraya Tun Dr Lim Chong Eu Bypass needs to acquire total 56 pieces of land.
Total Land Acquisition=826953 sq meter
Total pieces of land need to be acquired= 248
What are the timeframe set for the acquisition?
What are the cost set for the acquisition?
One cannot assume that the state government will not have difficulty in land acquisition.
The following information is required for feasibility study and evaluation:
1) Land titles
2) Layout plans
3) Detailed map location
4) Approval if any
Undertaking a feasibility study the right way can be the difference between making a profit or making a loss on an infrastructure development.
I just wonder how Consortium Zenith Construction Sdn Bhd conducted the feasibility study when it has no ideas about the timeframe required to negotiate for land acquisition.
Ever wonder why Mudajaya withdrew from the project complaining about uncertainty and lack of information in land acquisition.
A simple scrutiny on the feasibility studies already revealed the major fault in the studies. Why we paid so much for such a lousy feasibility studies which clearly shown the projects are not feasible due to land acquisition issues. Until the land acquisition issues were solved there is no way to start any construction works. I have warned Lim Guan Eng not to fake the studies, it seems like he never learn to listen. How can Lim Guan Eng expect the public not to view the project with sceptical? How can Lim Guan Eng convince the public there is no misfeasance or malpractices in the project?
Other than land acquisition feasibility, the following feasibility should be studied too:
1) Physical Feasibility.
This requires that the evaluation of several physical characteristics and issues, including wetlands or flood plains, vegatation, soil conditions, topography, utilities, water, wastewater disposal, surrounding uses, environmental issues, easements and right of way and recapture obligations.
2) Political Feasibility.
This requires consideration of the governmental process for obtaining approval and assessing community support for the proposed project.
3) Financial Feasibility.
This requires an analysis of development costs for the planned development against the land value.
On 13 February 2018, I followed up with another article on land acquisition issue.
The expected commencement for the construction of Air Itam – Lebuhraya Tun Dr Lim Chong Eu Bypass is June 2018.
The Ayer Itam – Lebuhraya Tun Dr Lim Chong Eu Bypass needs to acquire total 58 pieces of land totalling 216606 sq meter, but the allocation is only RM140,531,000 or RM60 per sq ft.
Land acquisition is a complex , complicated and time consuming process which may take several years to complete and involves many stakeholders.
The first issue that Consortium Zenith Construction Sdn Bhd will face is the funding for land acquisition. With a paid up capital of RM26.5 million, and 4 months left, how is Consortium Zenith Construction Sdn Bhd going to secure the required funding to compensate land owners for the acquired lands?
Setting the land acquisition cost at RM60 per sq ft is an unrealistic figure when land owners expect Consortium Zenith Construction Sdn Bhd to compensate them according to market rate.
I really love to see how Lim Guan Eng administration and Consortium Zenith Construction Sdn Bhd solve the land acquisition problems within the 4 months timeframe with the financial strength of Consortium Zenith Construction Sdn Bhd.
If this Penang roads and tunnels project not a scam, what is it?
Do you need a RM305 million feasibility studies and detailed design to tell you that the project is not feasible?
On 28 February 2018, the controversial RM6.34 billion (S$2.14 billion) Penang undersea tunnel project has taken a new twist – a high-profile “Datuk Seri” is alleged to have received RM19 million to close the corruption probe.
The 37-year-old, believed to be also an actor in an upcoming local action movie, is said to have received the money in three portions between July and August 2017.
On 1 March 2018, an anonymous tip-off led graft-busters to track down a prominent businessman who is alleged to have received RM19mil to help “settle” the probe into the controversial RM6.34 billion Penang undersea tunnel project.
Officers from the anti-graft agency are said to have received the complaint quite recently while pursuing the case.
On 4 March 2018, the Malaysian Anti-Corruption Commission launched separate investigations on the Penang undersea tunnel project, and the two individuals who allegedly received bribes in order to help cover up the commission’s probe into the RM6.3 billion mega project.
On 12 March 2018, the Malaysian Anti-Corruption Commission (MACC) was reported to be working with several independent consultants in evaluating the cost of the feasibility study on the undersea tunnel project in Penang.
MACC deputy chief commissioner (operation) Datuk Seri Azam Baki said the commission also sought the views of the Public Works Department on the technical aspect of the investigation.
On March 2018, a selfie of Lim Guan Eng with a businessman who is being investigated by graft busters over the Penang undersea tunnel project started making its rounds on social media
On 2 July 2018, the Edge reported that Zenith claimed that it was conned in RM22 million Penang Undersea Tunnel graft case.
On 9 May 2019, Pakatan Harapan won the 14th General Election. The MACC has since remain silent on the development of the scandal.
On 18 September 2018, Vizione Holdings Bhd reported to Bursa that it has bagged a RM89.9 million contract from PBA Holdings Bhd to build submarine pipelines from Butterworth to the Macallum area on Penang Island.
Lim Guan Eng was the non executive chairman of PBA. Previously he claimed that he has no association with Vizione Holdings Bhd in the award of feasibility studies and detailed design. For unknown reason Vizione which previously known as Astral Supreme Construction with no experience in submarine pipelines can secured the project without open tender.
MACC should investigate the relationship between Lim Guan Eng and Vizione.
MACC should investigate Chow Kon Yeow’s role in awarding the contract to Vizione.
