MP Guaranteed Loan, Govt Agency Now Left with RM35M Bank Debt

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Board members of the federal agency never agreed to guarantee the loan for a Sabah-based private company involved in a project in Perak that has since failed.

A veteran Umno MP bypassed fellow board members of a federal agency meant to uplift the rural economy, in signing documents guaranteeing a bank loan of RM35 million for a private company which has since defaulted on the loan.

The politician from Sabah is said to have unilaterally signed an “irrevocable” letter of undertaking from the bank, leaving the agency to bear the burden of settling the huge debt.

A whistleblower who spoke to FMT under the condition of strict anonymity said the private company was involved in a joint venture to construct biogas plants at two palm oil mills in Perak. The project has since failed.

A biogas plant treats farm waste in air-tight tanks, converting it into energy.

“Under this project, the company would fund the plants while the agency provided the land in return for 15% of the company’s shares in a special purpose vehicle (SPV),” the source told FMT, adding that the Malaysian Anti-Corruption Commission should now investigate the failed project.

“This is taxpayers’ money which the government agency now has to pay. The government cannot cancel the loan agreement,” he added.

It is understood that the company, with a registered address in Sandakan, had proposed the project to the agency which then discussed it in 2014. A technical report on the feasibility of the project and background of the company was also prepared.

But a third board meeting that year could not decide on the status of the project “due to a lack of time”, according to minutes of the meeting.

Yet, on July 29, 2015, the Umno MP signed a letter of undertaking to a local bank in his capacity as a director, guaranteeing a loan of RM35 million for the private company.

“That means the agency irrevocably and unconditionally undertook to cover any cost overrun of the project and to provide additional funds or make any advances that may be required to complete the project,” said the source.

In other words, any outstanding or overdue amount or shortfall in repayment of the loan would be picked up by the government agency.

Less than a week after the May 9 polls which saw Barisan Nasional’s defeat, the bank sent a letter of demand to the government agency for loan arrears amounting to some RM1.7 million.

“The board never authorised the Umno MP to issue a letter of undertaking and represent the agency in the SPV, nor endorse the agency’s shareholdings in the SPV,” the source said.

The SPV could not honour its loan repayments due to the failure of the two plants, which could not generate electricity which was to be sold to Tenaga Nasional.

FMT is seeking a response from the agency as well as the MP. – FMT