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

BANK Pembangunan Malaysia Bhd (BPMB) was required to appoint an independent checking engineer (ICE) from its panel of consultants to verify the progress claims made by Aries (M) Bhd for the disbursement of the loan. KLIA Consultancy Services was appointed initially.

However, the company was subsequently replaced by Silver Ridge Sdn Bhd. Why?

In the lawsuit filed on June 22 against 27 defendants, including Silver Ridge Holdings Bhd, BPMB alleged that its former president Datuk Zafer Hashim, who was also the managing director, had conspired with Silver Ridge to ensure that the latter was appointed as the ICE for the RM1.3 billion fibre-optic network project.

The development financial institution (DFI) contends that manipulation was involved in the appointment of Silver Ridge, pointing out that the company was never registered as a panel consultant of BPMB.

The appointment of Silver Ridge as its sole ICE was against the DFI’s appointment guideline, which states that BPMB should select at least three consultants from its panel list, which are KLIA Consultancy, Minconsult Sdn Bhd (MSB), KTA Tenaga Sdn Bhd, and Engineering and Environmental Consultants Sdn Bhd (EEC), based on an internal memo addressed to Zafer.

According to the internal memo dated July 12, 2012, KLIA Consultancy had the highest evaluation score at 90, followed by EEC and MSB which scored 77 and 62 respectively. KTA Tenaga did not participate in the exercise.

There was no mention of Silver Ridge among the options listed.

A second memo dated Sept 18, 2012, however, showed a disparity in the evaluation score of KLIA Consultancy, which had been amended to 75. Meanwhile, Silver Ridge was added to the list, with the highest score of 85.

“The revision of KLIA Consultancy’s evaluation score and the addition of Silver Ridge Sdn Bhd (a wholly-owned unit of Silver Ridge) was unjustified and not backed with any documentation.

“Zafer was involved in reopening the bidding process and authorising and approving Silver Ridge Sdn Bhd’s appointment,” said BPMB in the court filing.

The court document added that Silver Ridge made a complaint to Zafer on Sept 25, 2012, stating that the appointment process by BPMB had a slow turnaround. The former managing director subsequently ensured that BPMB issued the letter of appointment to Silver Ridge on the very same day.

BPMB contends that the fees proposed by Silver Ridge were not commensurate with the scale of work to be done.

BPMB accused Silver Ridge of failing to declare the potential conflict of interest with Aries and other parties involved in the project, and had even signed a declaration indicating that it had no interest or relationship with the main parties involved in the project.

BPMB subsequently discovered through the investigation conducted by its receiver and manager (R&M) Deloitte Corporate Solutions Sdn Bhd that Aries issued a letter of intent for Silver Ridge’s services for a fee of RM18.36 million. The letter was signed by its director Wong Chee Keong on the same day.

Interestingly, Wong is the non-executive chairman of Aries Telecoms Plc, which was the holding company of Aries then. He is also the current chairman of Orient Telecoms — the company to which Aries’ assets and business were transferred when the DFI commenced the recovery process against Aries.

Silver Ridge had also been providing equipment and managed services to Aries via Konsep Gelombang Sdn Bhd and Inforzona Sdn Bhd since 2013, with payments made for these services amounting to approximately RM16 million.

Being the ICE, Silver Ridge was required to submit two sets of reports to BPMB, namely the technical and disbursement reports, with the latter containing supporting documents, such as purchase orders and invoices, to verify that the monies disbursed were in relation to the fibre-optic project.

However, only part of the first drawdown report could be found during the R&M’s investigation.

Silver Ridge had in total submitted two progress reports in May and September 2013 to update the bank that the entire fibre-optic infrastructure for the project has been built and completed.

However, this report lacked supporting documents to substantiate the work that was purportedly done, says BPMB.

The R&M’s investigation discovered that the infrastructure was never fully constructed, and that there were discrepancies in the September 2013 report.

While the fibre-optic lines that Silver Ridge had certified appeared to be a complete match of the purchase orders raised by Aries, physical inspection and photo confirmation were only done for the core node equipment and telco exchange portions.

There was no physical inspection or photo confirmation of other portions of the project, namely the preliminaries, core node infrastructure, coastal node equipment and coastal fibre infrastructure portions, which were certified via “documents submitted” without physical inspection.

Furthermore, Silver Ridge, according to BPMB, allegedly failed to report that the fibre-optic links were for short distances, hence the amounts invoiced by the turnkey contractor Paneagle Holdings Bhd are “overstated”.

Surprisingly, Deloitte’s investigation revealed that a majority of the local authorities who responded to the R&M’s queries informed that they had no records of Aries applying for permits to lay fibre-optic cables, therefore they did not have the necessary permits for the sites where they purportedly conducted digging works, said BPMB in the court filing.

BPMB accused Aries of inflating the amount of deposits paid to local authorities in order to use it as a basis for the crucial drawdown of the first RM200 million of the loan granted by the DFI.

Aries had previously stated it needed to place deposits of between RM100,000 and RM150,000 for every kilometre of fibre-optic line it installed. However, the probe by the R&M discovered that most of the deposits placed with the local councils amounted to less than RM100,000 per km.

“This indicates that the works done are for very short distances and/or the representation made by Aries to BPMB that the deposits amount to RM100,000 to RM150,000 per kilometre is inaccurate,” said BPMB, adding that the deposits paid by Aries to local authorities do not come up to RM140 million to RM200 million — the amount that was used as the basis for loan drawdown.

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