What can you do with RM250 million? You could use that money to develop a farm and outfit it with the last technology. Maybe become an important export player in whatever livestock you choose to breed. Even help 130 farmers put food on the table. Or, you could siphon it off to purchase some luxury goods, such as a pair of condominiums. Allegedly, that is.
Sounds like the making of a scandal? That is the National Feedlot Corporation (NFCorp) in a nutshell: a saga of financial mismanagement ending in the sentencing of two whistleblowers.
As perplexing as that reads, it is just another blip in a long list of financial scandals. Here’s how the NFCorp scandal unfolded:
It all began with an ambition to build the National Feedlot Centre
When the Ninth Malaysian Plan (9MP) was mooted in 2006, livestock production recorded positive growth between the years 2001 and 2005. Mutton registered the highest growth, averaging 10.8% per year, followed by beef at 10.2% per year.
According to 9MP, this uptick was contributed largely by rearing cattle and goats in oil palm and rubber plantations as well as feedlot cattle rearing, which was done by the private sector.
Even the poultry and pork industry, both recovering from the avian bird flu and Nipah virus respectively, remained resilient.
While the country’s food self-sufficiency levels improved, with some commodities being close to fully sufficient, beef was highlighted as an item that needed further improvement, meaning a lesser reliance on imports.
So to meet its target, the government decided to set up its own feedlot centres in Jelai and Gemas, Negri Sembilan, with the aim of being the country’s “beef valley”. But it was Gemas where the pioneer project took off and it was called the National Feedlot Centre with RM74 million being invested into it.
The responsibility of ensuring the centre ran like clockwork was awarded to a company called the National Feedlot Corporation (NFCorp)
On October 2006, the Ministry of Agriculture and Agro-based Industry awarded a tender for the project to Agroscience Industries Sdn Bhd, which was led by Mohamad Salleh Ismail. He would then set up a subsidiary, NFCorp, to act as the “integrator” of the project.
Salleh would appoint his children Wan Shahinur Izmir, Wan Shahinur Izran, and Wan Izzana Fatimah as executive director, chief executive officer and director, respectively. The Ministry of Finance would also have a golden share in the company.
The role of the integrator, at least in this context, was to ensure the National Feedlot Centre met its targets. But more importantly, it was tasked with executing an Entrepreneurship Development Programme, which would see the creation of 130 “entrepreneurs” or stockmen.
NFCorp’s duties, among others, had to ensure that these farmers had sufficient cattle feed and feeder calves. To be able to achieve the above, on October 25, 2007, the finance ministry allocated a grant of RM13 million. The ministry also approved a soft loan amounting to RM250 million with a 2% interest rate to administer and operate the centre.
But three years on, the Auditor-General’s Report 2010 flagged the project’s poor performance
On October 24, 2011, upon the release of the report, the national auditor said the centre failed to achieve its target of 8,000 heads of cattle that year; it only achieved 3,289 heads of cattle, or 41% of the target.
The auditor, in its 12-page assessment, also raised other problems with the project. For example, after the 9MP was published, the Negri Sembilan state government expressed its willingness to realise the beef valley ambition and – through its investment vehicle Menteri Besar Negri Sembilan Inc – leased 5,000 acres of land to get the project started.
But in 2007, the state took back 3,000 acres, leaving some 2,000 acres to be divvied up between two companies, NFCorp and a certain Lamberts Agricultural Trade Sdn Bhd. While the auditor did not provide reasons for the retrieval of the land, NFCorp received the lion’s share with 1,500 acres while Lamberts being assigned to develop the remainder 500 acres.
Lamberts, however, withdrew from the project on November 13, 2008, due to a lack of confidence from its partners. But because the agriculture ministry failed to sign a contract with Lamberts, it could not penalise or claim compensation from the company for pulling out, after the infrastructure was set up. The auditor noted that the facilities prepared for Lamberts were unused and abandoned.
This after the federal government spent a total RM2.84 million to clear and clean up that 3,000 acres. The auditor was clear that the infrastructure around the feedlot centre were not used and the maintenance of such infrastructure was unsatisfying.
As for NFCorp, the auditor was clear that the integrator was off the mark: it did not execute the Entrepreneurship Development Programme; it did not draw up standard operating procedures; it left the entire feedlot premises, of which it was given guardianship, in a dilapidated condition.
The auditor also pointed out a discrepancy: NFCorp was awarded the tender on October 27, 2006, but the contract was only signed on March 8, 2010.
Ministry officials said the delay was due to both sides not coming to agreement on how to the entire project should be managed. Roughly 32 meetings were held before they could come to a consensus.
At the end of the entire assessment, it was observed that NFCorp’s handling and subsequent neglect of the project would jeopardise government interests and urged those abandoned areas to be quickly developed. This, the auditor, believed would avoid any form of wastage, or provide something “value for money”.
This led to Rafizi Ramli and his party PKR to demand answers from the government over unfettered spending on the part of NFCorp
In November, 2011, which was just about a month after the auditor-general’s report was published, the Pandan MP claimed he had evidence of financial mismanagement. His first expose on the matter led to detailed blogpost on the abuse of funds.
This covered big-ticket purchases of luxury condominium units, luxury cars, two plots of land In Putrajaya, overseas trips and credit card expenses close to RM600,000 in 2009 for business development purposes.
Through investigations done by his party, PKR, he itemised the spending: Salleh spent RM182,525 throughout the year; Shahinur Izran, RM160, 673; Izzana, RM127,900; and Shahinur Izmir, RM122,402.
He also questioned conflicts of interest on the part of Salleh and his family. National Meat & Livestock Corporation Sdn Bhd and Real Food Company Sdn Bhd.
The opposition also questioned the transparency of dealing, highlighting possible conflicts of interest as Mohamad Salleh is the husband of Shahrizat Jalil, Umno Wanita chief and then senator.
One of Salleh’s children, Izmir, who is also NFCorp’s chief executive, said the company had the right to use its RM250 million soft loan from the government as it saw fit, even to invest in property, as long as it repaid the interest.
When the scandal started to gain momentum, Barisan Nasional politicians were split. Umno youth chief Khairy Jamaluddin questioned the veracity of Rafizi’s findings and motives. He broke down some of the arguments, pointing out that this is about PKR’s politicising of the problem.
Noh Omar, when he was agriculture and agro-based industry minister, said the National Feedlot Centre project was not a failure, after the then auditor-general Ambrin Buang clarified the contents of the report.
Noh said this was due to the NFCorp achieving its key performance indicator (KPI) of producing more than 8,000 heads of cattle over the three year period since 2008. But the problem here is that the auditor-general was very clear that NFCorp did not meet its KPI. In a detailed version, the report maintained its observation despite the response from Noh.
Also, in the auditor’s clarification, it still stood by the fact that there were weakness in the execution of the project. For example, it questioned the government’s move in May 2009 for the suspension of the feedlot centre until a viability and business model study was done on the project.
It added that this gave the impression that the Malaysian government was aware of the project’s weaknesses but has taken necessary steps to correct the problem.
DAP parliamentary leader Lim Kit Siang blogged about the scandal demanding the government to answer for the exorbitant salaries paid to Salleh and his children. In an entry, he listed the monthly remuneration as follows: RM100,000 for Salleh; RM45,000 for Izmir; and RM35,000 each for Shahinur and Izzanah.
Salleh and his children spent almost RM600,000 of taxpayer’s money through NFCorp. He said investigations by the party found that in 2009, the credit card spending by the four reached RM593,500.
Lim also questioned Muyhiddin Yassin’s involvement. Muhyiddin was the agriculture minister who awarded the tender to NFCorp. When the scandal imploded, he was already deputy prime minister.
Muhyiddin, who is now with Parti Pribumi Bersatu Malaysia, a splinter group of Umno and part of the opposition coalition, Pakatan Harapan, admitted that he was the one to sign off on the project but could not remember whether he received updates on the project or not. His party has said he does not need to provide an explanation regarding his involvement with the scandal.
The authorities acted, the office was raided and assets frozen
Shortly after Rafizi’s allegations hit the headlines, enforcement agencies – especially the police and the Malaysian Anti-Corruption Commission – investigated NFCorp and its dealings. The company’s office in Mont Kiara was raided by the MACC, and police investigated its purchases and transactions.
Shahrizat also took leave from her official duties to make way for MACC’s investigations into whether she had any involvement in the scandal. But all of these came up short: the MACC acquitted her, while the police’s investigations revealed that all business transactions were not done illegally.
The public accounts committee also waded into the scandal and questioned the credentials of the government representatives who dealt with NFCorp. The then chairman Azmi Khalid said the committee found weaknesses in the standard operating procedures (SOP) practiced by the finance and agriculture ministries.
The committee observed that the weakness in the system occurred because orders from the top were inadequate: specific rules in the Companies Act 1965 which the directors should have understood and known.
He said the ministries appointed their officers to sit on the board of NFCorp but he wasn’t sure if they were given proper instructions. The implementation of the tender was on top of the list.
According to Tony Pua, who also sat on the PAC, the finance ministry said there was no provision that permitted the NFCorp to use its federal loan to purchase property.
A ministry official disclosed to the PAC during a meeting convened to discuss the NFCorp problem and was “very specific” that such loans could not be used for purposes other than what had been specified.
Pua said this meeting was held on November 23, 2011, and the officer said the purpose of each drawdown must be clearly stated and the ministry had never received an application from NFCorp to purchase property.
Pua added that the PAC weren’t presented with documents relating to NFCorp – including the loan agreement, schedule, terms and conditions of the loan drawdown and financial reports – despite specifically requesting them at the November meeting.
When asked if those SOP weaknesses highlighted by the PAC were minor or major, Azmi said if they were minor, the controversy would not have “exploded”.
And it was during this period of investigations that two major lawsuits happened
First, Salleh was charged with two counts of criminal breach of trust for misappropriating RM9.76 million in 2014 by way four cheques from NFCorp funds to finance the purchase of two condominium units at the One Menerung complex in Kuala Lumpur.
Then, he was charged with committing a similar offence by transferring RM40 million by way of a cheque, between May 6 and November 16, 2009, to the account of the National Meat & Livestock Corporation Sdn Bhd, which he and one of his children own.
To facilitate investigations, the government temporarily froze four of NFCorp’s assets. These were: two units at One Menerung Condominium, Bangsar (Unit B1-2 and B1-1) and two land parcels at Lot 4 and Lot 5, Precint 10, Putrajaya.
Salleh also had two additional alternative charges of using NFCorp funds prior to getting approval at the company’s annual general meeting. He was acquitted of all charges in 2015. Representing him was Muhammad Shafee Abdullah.
Attorney-General Mohamed Apandi Ali said he had to withdraw the charges citing a lack of strong evidence and after considering Shafee’s plea to drop the charges against Mohamad Salleh.
Apandi said the prosecution had used 90% evidence as a benchmark before an accused person is charged in court, adding that he followed the rule as practised by his predecessor, Abu Talib Othman.
Second, Rafizi was charged in 2012 under Sections 97(1) and 112(1)(c) of the Banking and Financial Institutions Act 1989. Former Public Bank clerk Johari Mohamad was also given the same charges for conspiring with Rafizi.
An after a seven-year trial, in early February, both were found guilty and sentenced to 30 months in prison. In mitigation, Rafizi’s lawyer, Ahmad Nizam Hamid, said the act was committed out of a sense of public responsibility as Rafizi was an MP.
Latheefa Koya, who represented Johari, in pleading for leniency said there was no evidence by the prosecution that her client had benefitted from the offence. Johari had no prior criminal record. Rafizi and Johari have been granted with one surety pending an appeal.
If Rafizi loses the appeal, he will cease to be the Pandan MP. Under Article 48(1)(e) of the Federal Constitution, an elected representative loses his seat if he is jailed for at least a year or fined a minimum of RM2,000.
Notes on the limits of the whistleblower act
Immediately after Rafizi and Johari were sentenced, activists and politicians took to social media and the press to say that the sentence would deter potential whistleblowers from coming forward.
According to Section 6 of the Whistleblowers Protection Act 2010, an informant can only make a disclosure of improper conduct to a government enforcement agency.
Section 7 stipulates that an informant who makes a disclosure in accordance with the act’s provisions shall have his or her identity protected and shall also be granted immunity from civil and criminal action.
Because Rafizi took to the press first, he was ineligible for protection under the act. That applies for bank clerk Johari, too.
But the act is not without its critics. It is one of the acts that was rushed thorough at 4am, after a marathon parliament sitting, without any debate. Individuals reporting information that fall under the Official Secrets Act can be charged with a RM1 million fine or imprisonment of up to one year or both.
Also as observed earlier, whistleblowers are not allowed to speak to third parties such as lawyers, employers or activists. They are required to only report directly to enforcement agencies such as the MACC or police.
But a major flaw to the act is that it gives executive control over whistleblower protection. The minister – and the act does not specific which minister – complete control and power to direct the enforcement agency’s actions in carrying out the act.
This has led for calls to set up an independent body like an ombudsman to manage the whistleblowing process. The body could also act as a point of contact for whistleblowers instead of specific enforcement agencies.
In the end, NFCorp defaulted on its loan and the feedlot project is in limbo
In 2014, the finance ministry said NFCorp failed to the repay the soft loan it received for the feedlot project and would initiate legal action.
NFCorp was given a timeline to repay the RM250 million loan between 2012 and 2018. Until September 30, 2014, a sum of RM34.98 million, which is the principal, had been recovered in 2012 and 2013.
But, according to Prime Minister and Finance Minister Najib Razak, even after the firm was granted a 90-day period to comply with a notice of non-payment, it did not settle the outstanding amount. This came on the back of a failed attempt to get Malaysia-Japan joint venture Kirimitonas Agro Sdn Bhd to buy NFCorp and its liabilities, including the RM250 million loan.
Previous media reports also said the Negri Sembilan government might turn the land it took back to start its own cattle-rearing project. But no evidence of such activity was found as well.