A prosecution witness in ex-Perwaja Steel managing director Eric Chia's criminal breach of trust trial testified today that a detailed report on a fraudulent payment for technical assistance amounting to RM76.4 million was prepared as early as December 1995.

Perwaja Steel's former corporate banking general manager Ahmad Zaini Othman said he prepared the report revealing the misappropriation following a paper trail and a personal meeting with NKK Enterprise director N Otani, who has denied his company had asked for any payment for the technical assistance.

Ahmad Zaini said he tabled the 31-page report entitled 'Perwaja Steel's Group Financial Issues' at a board directors' meeting in December 1995 and sent copies to the Finance Ministry and its officers.

"I prepared the report because Perwaja was facing financial difficulties then. So this report was to get the support of the government who was one of the company's shareholder as well as to inform the board members of the financial position of the Perwaja Group," he said.

In his report, he said he informed the board that Frilsham Inc- the company to which the payment was made - was not associated with NKK Corp who had already confirmed in writing that it did not request for such payment and that the letter demanding for payment was forged.

"The management takes very serious view of this large misappropriation of funds and deems it a breach of trust," said Ahmad Zaini quoting from his report.

Chia is charged with making an unauthorised payment of RM76.4 million to NKK on Feb 22, 1994 via the account of Frilsham Enterprises Incorporated..

He also faces an alternative charge of illegally entering into an agreement with NKK to dispose the RM76.4 million without the approval of Perwaja's board of directors.

He is charged under section 409 of the Penal Code which carries the maximum penalty of 20 years jail.

'Not happy'

Ahmad Zaini also said he believed Otani's explanation that NKK never asked for a payment although he (Otani) had signed additional agreements (addendums) detailing the payment.

"Otani told me that he had signed the addendums at the request of (Perwaja's Japanese consultant) sometime in 1995 for the purposes of internal documentation for Perwaja Steel," he said.

Cross-examined by Chia's lead counsel Muhammad Shafee Abdullah, Ahmad Zaini admitted that he was 'not happy' with Otani.

"Although I was satisfied with his statement, I was unhappy with him because he had allowed himself to be manipulated," he said.

Asked if he 'had taken Otani as a fool', Ahmad Zaini said: "Well, his English was not very good, but I guess he must be a smart man to be in that position at NKK."

He added he had no reason to be suspicious of Otani who informed him that the technical assistance agreement between NKK and Perwaja did not involve money.

"So he told you the technical assistance to Perwaja was free of charge and you believed him?" asked Shafee ( photo ) to which the witness said yes.

He then agreed with Shafee's suggestion that such agreement which did involve not money were rare.

The hearing before Sessions Court judge Akhtar Tahir continues tomorrow.