Fudge the accounts, strip the company of its assets, sell it to a RM2 company, change the name and then wind it up and presto! you are free from a debt of RM159.8 million.

These are the slick moves allegedly taken by the Selangor state government to 'cheat' the federal government of having to pay penalty and damages amounting to RM159.8 million as a result of the delay in the long-suffering Malaysian External Trade Development Corporation (Matrade) building project.

This startling claim was made by Selangor state assemblyperson Teng Chang Khim (DAP-Sungai Pinang) ( centre ) today after he presented two bundles of documents to the Securities Commission headquarters allegedly proving that Kumpulan Hartanah Selangor Bhd (KHSB) had cheated the federal government by avoiding paying the multi-million-ringgit compensation.

KHSB is a public-listed company owned by Selangor state government-linked company, Kumpulan Darul Ehsan Berhad, which is chaired by Selangor Menteri Besar Dr Mohd Khir Toyo

Teng's report was received by Jahawar Ali Ameer Ali, the head of the commission's Complaints Department.

Work on the Matrade building started in 1994 with completion scheduled for 1997. After several lengthy delays due to shoddy construction, a new contractor was appointed.

It was finally completed in April this year - a delay of nine years - with the project's original cost of RM167 million ballooning to RM287.5 million, an additional 70 percent.

The project's contract was first granted to property developer Perangsang International Sdn Bhd (PISB), a subsidiary company of KHSB.

Not one sen

PISB's contract was terminated last March and it was later ordered by the federal government to pay damages amounting to RM159.8 million for the delays and damages the project suffered.

According to Teng, KHSB had stripped PISB of all assets and sold it for RM2 in 2004 to another RM2 shell company, Tajuk Modal Sdn Bhd. PISB's name was then changed to Tajuk Construction Sdn Bhd. This company was wound up in January this year, one month before Works Minister S Samy Vellu publicly revealed how much the Matrade project delay had cost.

Teng claimed that the elaborate maneuvers involving the former PISB and its subsequent winding-up was premeditated by KHSB who knew early on that it would be asked to compensate the federal government over the delayed Matrade project.

The move, he added, seemed to have worked as not one sen of the RM159.8 million compensation has been paid to the federal government to date.

Teng also questioned if PISB, just before it was sold, had also taken on the liabilities of several other Selangor state government-linked companies (GLCs) amounting to millions in order for the latter to have a 'clean bills of health'.

"Who has been fooled? The federal government? Samy Vellu? Or the taxpayers? How can the state government cheat the federal government?" he asked.

Teng urged Khir to provide an explanation. Khir has to date remained tight-lipped over this issue of a Selangor GLC having to pay the federal government millions in compensation for a delayed project.

Revenue diverted

Commenting on Samy's statement early this year that the federal government will take PISB's directors to court , Teng, a practicing lawyer, said the federal government cannot recover the RM159.8 million from the directors as they had not signed a personal guarantee with PISB.

Teng said he believes that KHSB had known much earlier that PISB would suffer major losses from the Matrade project and hence had channeled revenue from PISB to other entities since 2003.

He pointed out that PISB's revenue of RM4.13 million in 2003 was not recorded in KHSB's financial report for 2004.

He said the same report lists PISB as 'an inactive company' and the acquisition agreement between KHSB and Tajuk Modal states that all projects handled by PISB were completed, and there would be 'no further revenue' to be claimed by PISB.

Teng, however, said he has evidence to show that until March this year, PISB could still claim payments amounting to RM12.71 million from projects it had undertaken before it was stripped and sold.

"This shows they have diverted the revenue, but I don't know where the revenue was channeled to," said the assemblyperson, adding Tajuk Modal was a RM2 company owned by two persons whom he alleged had no track record in the corporate world.

Teng revealed that in a written reply to him when he brought up the matter at a state assembly sitting in November 2004, Mohd Khir had stated that PISB was sold to Tajuk Modal for RM2 on July 19, 2004.

Winding-up petition

Mohd Khir told the house that by acquiring PISB, Tajuk Modal would absorb PISB's net losses of RM283,977 and a liability of RM7.65 million in exchange for the Class A contractor license held by PISB which was sought by Tajuk Modal in order to get major government projects.

Four months after the acquisition, PISB was renamed as Tajuk Construction Sdn Bhd, and eventually on Oct 25, 2005 made a statutory declaration of its inability to continue doing business by reason of liabilities.

According to Teng, a creditor was then reported to have filed a petition for the winding-up petition of PISB/Tajuk Construction for failing to pay RM239,468 within three weeks.

Instead of settling the debt, PISB/Tajuk Construction commenced a voluntary winding-up by calling for a creditors' meeting on Nov 22 last year and finally wound up it operations on Jan 19 this year.