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FILE PHOTO: A man walks past a welcome signboard outside the Federal Land Development Authority (FELDA) Sungai Tengi Selatan palm oil plantation in Hulu Selangor, north of Kuala Lumpur February 22, 2012. REUTERS/Samsul Said/File Photo(reuters_tickers)
By Rozanna Latiff and Emily Chow
KUALA LUMPUR (Reuters) - A management crisis at Malaysia's Felda Global Ventures Holdings (FGV) deepened on Wednesday with the national anti-graft agency saying it will soon investigate several company officials for alleged corruption and abuse of power.
The board of FGV, the world's third-largest palm oil plantation operator, suspended its chief executive and chief financial officer on Tuesday as it investigates transactions at a subsidiary.
CEO Zakaria Arshad has denied wrongdoing and refused to step down as instructed by chairman Mohd Isa Abdul Samad, according to a letter seen by Reuters. Zakaria had called on the Malaysian Anti-Corruption Commission (MACC) to conduct its own investigation.
The anti-corruption agency is looking into FGV following Tuesday's developments and an investigation will be opened as soon as possible, MACC Deputy Chief Commissioner Azam Baki told Reuters on Wednesday.
"We are looking into claims of graft and possible abuse of power involving several officials," he said, declining to name the officials or give specifics on the claims.
Azam said he will be meeting Zakaria on Wednesday to seek his assistance in the probe. Media reports said he will also be meeting Mohd Isa on Wednesday.
KEY VOTE BANK
Turmoil at FGV - whose biggest shareholder is state-owned Felda - could hurt Prime Minister Najib Razak, who government sources say is expected to call elections later this year. Its shareholders, many of them small landowners, form a key vote bank for Najib's ruling alliance in battleground states.
Solving the public spat would be critical for Najib and FGV's parent company Felda.
Felda "settlers," or land owners, are the majority voters in at least 54 of the 222 seats in the parliament. They own shares in FGV, which raised over $3 billion in one of the world's biggest listings of 2012.
The shares have dropped 70 percent since that stock market launch, hurting settlers who have also complained about delayed payments from Felda, which buys the palm fruit the settlers produce in their land.
Shares of FGV fell about 1 percent initially on Wednesday before rebounding to trade up 3 percent. They had declined 6 percent on Tuesday, falling at one point to their lowest in five months.
Earlier this year, settlers had also expressed doubts about Felda's $505 million purchase of a non-controlling stake in PT Eagle High Plantations Tbh, owned by one of Indonesia's biggest conglomerates, the Rajawali Group. Plantation analysts said the purchase price was steep by some valuation measures.
FOCUSED ON RESTRUCTURING
Zakaria was perceived by FGV shareholders as someone who was focussed on restructuring efforts and improving the share value, according to industry analysts.
He took over in April last year from Mohd Emir Mavani Abdullah, who was replaced after a failed initial attempt in 2015 to buy the Eagle High stake.
Since then, Zakaria has said FGV will rationalise its operations to address its "structural and financial issues".
The FGV board said a deal with Dubai-based palm oil buyer Safitex was at the heart of the company's internal investigation.
In a statement on Wednesday, the FGV board said a PricewaterhouseCoopers' audit showed that Safitex's debt to an FGV subsidiary, Delima Oil Products, had grown from $8.3 million at the end of 2015 to $11.7 million to 2016.
"Management had continuously represented that the balance would be fully recoverable," FGV said. Instead, it grew to exceed the allocated credit limit for the financial year ended Dec. 31 2016, it said.
After receiving the PwC report, the board then instructed internal auditors to probe the matter and they "detected potential contraventions of group policies," FGV said.
CIMB on Wednesday downgraded FGV to a "reduce" rating from "hold," saying the suspension of the CEO and CFO for an indefinite period of time will lead to uncertainties about its direction.
"FGV under its current CEO has been successful in cutting costs and improving its plantation performance," analyst Ivy Ng said in her report.
"We cut our rating... to account for our concern that this could negatively impact FGV's future earnings."
(Writing by A. Ananthalakshmi; Editing by Bill Tarrant)