Wednesday, 12 September 2007

Timber kickbacks: The Shea connection

PLEASE NOTE. This article was originaly published with photos and charts.

Timber kickbacks: The Shea connection -
Erik Wang
Sep 11, 07 2:03pm

Exclusive He is a complete unknown. Perhaps his parents want him to be someone important - after all, his name ‘Kin Kwok’ means ‘nation-building’.

A search on the Internet does not reveal much of this shadowy man. He was a participant at a golf tournament for the elderly in Hong Kong, suggesting that Shea Kin Kwok is a senior citizen.

Golf aside, Shea is a businessman. He is a shareholder and director of two companies registered in Hong Kong - Regent Star Company Limited and Richfold Investment Limited.

Behind that veneer of anonymity, Shea has indeed much to do with Malaysia, specifically his ties to members of Sarawak Chief Minister Abdul Taib Mahmud’s (photo) family and their business empire.

Shea’s name first surfaced late March when Regent Star was implicated by the Japanese media in a multi-million ringgit timber-shipment kickbacks scandal.

It was reported that a Japanese shipping cartel of the country’s top shipping companies paid at least RM32 million to Regent Star to help “resolve” problems encountered in the exports of timber from Sarawak to Japan.

Japan’s tax authorities had considered these payments as ‘illegitimate expenses’ since Regent Star - believed to be a paper company - did little ‘substantive work’. As a result, the Japanese shipping companies were slapped with back taxes along with heavy fines for ‘hiding’ the funds from the tax authorities.

A week later, malaysiakini broke the news on the alleged kickbacks in Malaysia, quoting Japanese media sources.

Shea is one of two directors of Regent Star. The company was incorporated in Hong Kong 24 years ago. Corporate information obtained from the Hong Kong authorities indicated that Regent Star’s office is in Kowloon.

The company has a paid-up capital of HK$10,000 (RM4,500). Regent Star’s 1985 annual return said its two pioneers directors were Shea Kin Kwok and Kho Eng Beng. Both were appointed a week after the company was formed, and each director held 5,000 shares.

Kho was listed as a British national while Shea was a Hong Kong national. Kho resigned as director in 2001 and was replaced by Ng York Kee, a Philippine national.

In June - two months after the timber kickbacks scandal broke - Regent Star made a surprise move. Ng, on behalf of the company, applied to the Hong Kong Companies Registry for Regent Star to be deregistered.

This came in the wake of Taib’s lawsuits against malaysiakini and two opposition leaders for defamation over the alleged kickbacks scandal. The two PRK state leaders had reprinted press reports on the scandal from malaysiakini and Japanese media organisations for distribution to the Kuching public.

The PKR leaders have since, through their lawyer, written to the Hong Kong Companies Registry and Tax Office to query the deregistration of Regent Star.

Rise of Dewan Niaga Sarawak

The Sarawak government under Taib, who was also forestry minister, appointed Dewan Niaga (Sarawak) Sdn Bhd soon after he took power in 1981 as the local shipping agent for the exports of timber.

Dewan Niaga Sarawak, incorporated in 1981 as a wholly Sarawak-based entity, is the sole agent for timber shipments out of the state. Anyone who wants to export timber has to go through them.
The company has an authorised capital of RM1 million with an issued capital of RM200,000. Its directors are individuals closely linked to the state government as well as Sarawak’s Associated Chinese Chamber of Commerce and Industry.

Among them is ex-senator Wee Kok Tiong (photo), son of the late Sarawakian tycoon Wee Boon Ping.

Wee, who was Bandar Kuching parliamentary candidate in the 2004 general election, is from the predominately Chinese Sarawak United People’s Party (SUPP) - a key Barisan Nasional component party in the state. He lost to the DAP candidate in the contest.

Wee is also president of the Associated Chinese Chamber of Commerce and Industry and the vice-chairman of SUPP Kuching branch, as well as a member of the party’s powerful Central Working Committee. He also owns Sarawak-based Chinese-language daily, International Times.

Another prominent director of Dewan Niaga Sarawak is Abdul Aziz Husain. Abdul Aziz, one of the pioneer directors when the company was formed 26 years ago, was Sarawak’s state secretary until 2006. He is also Taib’s brother-in-law.

He has since been appointed group managing director of the public-listed Sarawak Energy Bhd, which is majority owned by the state government. Sarawak Energy is responsible for, among others, the generation, transmission and distribution of electricity in the state.

Two other family members of Taib are also directors of Dewan Niaga Sarawak - younger brothers, Onn Mahmud and Mohd Tufail Mahmud, were appointed in 1988 and 1991 respectively.

Sarawak’s first family

Dewan Niaga Sarawak’s shareholders are Achi Jaya Transportation Sdn Bhd, with 104,000 shares, the Associated Chinese Chamber of Commerce and Industry (80,000 shares) and Koperasi Koppes Bhd (16,000 shares).

The majority shareholder, Achi Jaya Transportation, is the new name for CMS Transportation Sdn Bhd. The company was established in 1983 and described its business as ‘transportation and trading of goods and services’. It has an authorised capital of RM3 million with an issued capital of RM500,000.

Three of the five directors of Achi Jaya Transportation are from the Mahmud family. They are brothers Onn, who is the company’s pioneer director, Mohammad Tufail, who became director two months after the registration of the company, and sister Fredahanam, wife of former state secretary Abdul Aziz.

Another director, Noor Zakri Abdul Ghani, shares the same registered residential address as that of Onn. Noor Zakri is believed to be Onn’s brother-in-law. The final director is one Chiew Chee Hung @ Chiew Chee Ung.

In turn, Achi Jaya Transportation’s sole shareholder is Achi Jaya Holdings Sdn Bhd, with 500,000 shares. Achi Jaya Holdings was set up as Achi Corporation Sdn Bhd in 1983 to provide ‘management services, property and investment holding and property letting’. It has an authorised capital of RM2 million with an issued capital of RM1 million.

All five Achi Jaya Holdings directors are linked to Sarawak’s first family. They comprise Onn, his wife Halimatun Abdul Ghani, 23-year-old son Omar Yakub and 28-year-old daughter Siti Hajah Hamidah, and Noor Zakri.

Onn and Halimatun were the pioneer directors while their son became a director in January 2007. Onn and his wife together own all the shares of Achi Jaya Holdings. Onn holds 499,999 shares while the wife has one share in the company.

This story would not be complete without mentioning CMSB, or Cahya Mata Sarawak Bhd.

Most Sarawakians know CMSB, which is majority owned by Sarawak’s first family. It is a public-listed company and its 2006 annual report put its revenue at RM6.4 billion.

CMSB is a conglomerate involved in manufacturing, construction, construction materials, stockbroking and other financial services, property development, insurance, and until recently, banking. However, its banking business - the RHB Bank - was recently sold to the Employees Provident Fund for RM2.25 billion.

Prominent among the board of directors are two of Taib’s sons - Abu Bakir, 43, and younger brother Sulaiman Abdul Rahman, 38. The elder son is CMSB deputy group chairman and a non-executive director while the younger son is a non-executive director.

Some of the key owners of CMSB are Taib’s immediate family members - wife Laila (11.23%), daughters Hanifah Hajar (13.85%) and Jamilah Hamidah (13.64%), and sons Sulaiman (8.94%) and Abu Bakir (8.92%).

Altogether Taib’s family owns at least 56.58% of the company. His brother, Onn, also owns 0.76% in CMSB.

Given its pedigree, CMSB secures some of plumpest contracts from the Sarawak government. Moreover, it owns more than 2,234 ha of vacant land in various locations in the state as well as offices, factories, quarries, premix operations, shophouses and even a jetty.

Shea’s investments

Shea’s business relationship with Onn dates back more than two decades. Shea’s Regent Star is linked to another Hong Kong-registered company, Richfold Investments, in which one of two directors is Onn.

A check by malaysiakini with the Hong Kong Companies Registry revealed that Richfold Investments was established on the same day as Regent Star - Nov 22, 1983. In addition, the two companies shared the same office in Hong Kong.

Onn owns 49,999 shares of Richfold Investments while Shea holds just one. Onn was appointed director of Richfold Investments together with Shea just a day after Shea was appointed director of Regent Star. (see Chart below)

Ng York Kee, another director of Regent Star, is also listed as Richfold Investments’s company secretary.

However, Shea’s links to Taib’s family is not restricted to Hong Kong. According to Bursa Malaysia, Shea was also a substantial shareholder of two Sarawak-based companies.

From the public-listed Sarawak Oil Palm Bhd (SOPB) annual reports of 2002 to 2005, Shea held shares in this well-connected company and was listed under the ‘30 largest shareholders’ category.
His shares were 1,309,400 or 1.38% in 2002, 1,239,400 or 0.97% in 2003-2005. However, it the 2006 annual return, Shea disappeared as a direct shareholder. It is not known if he had cashed out or moved his share ownership to other companies.

Another of Shea’s investments in Sarawak was CMSB, but this appeared shortlived. The CMSB 2001 annual report listed Shea as having 663,000 shares in the company. Subsequent annual reports do not list Shea as a direct shareholder.

For a person who is a complete unknown in Sarawak, Shea certainly has a strong connection to the state.

Is he a proxy?

It is also not clear how much the Japan’s shipping cartel had paid Regent Star over the more than two decades of its existence. The Japanese Taxation Bureau, whose probe is limited to seven years, estimated RM32 million was paid over that period.

This will translate into Japanese consumers having paid millions of ringgit extra for furniture and other timber products. And this could also translate into large tracts of forests saved or much improved livelihood for the native communities in Sarawak and Sabah who regarded land and forests as their life and blood.

But was this money paid to a Hong Kong national called Shea or was he merely a proxy? If so, a proxy to whom?

And just who is Shea? He doesn’t seem to play a significant role in Hong Kong corporate world because a search with Hong Kong Companies Registry does not show he has other business interests save for Regent Star and Richfold Investments.

What can be established however is that Shea is a business associate of Onn and that their association goes back to 1983 - the same year Onn incorporated Archipelago Shipping to be a shipping agent, the same year Dewan Niaga Sarawak executed the shipping agreement with the Japanese shipping cartel for the shipment of logs from Sarawak.

And 1983 is also the same year Dewan Niaga Sarawak appointed Archipelago Shipping to be the sole handler of shipments of all logs exported from Sarawak. What’s more, both Regent Star and Richfold Investments were incorporated at the same time in that year.

Clearly Shea is a person intrinsically linked to the alleged timber kickbacks involving the Japanese shipping cartels and Sarawak’s political elite. But this trail is about to turn cold as Regent Star could soon disappear should its application to close shop is approved by the Hong Kong Companies Registry.