Palm oil giant sues five execs over cost overruns

KUALA LUMPUR, December 24, 2010 – The world’s largest listed palm oil producer Sime Darby has sued five of its former senior executives for at least 139 million dollars over massive cost overruns at the Malaysian company.

Sime Darby is suing former group chief executive Ahmad Zubir Murshid and four senior officials from its energy and utilities division, which declared 2.09 billion ringgit (675 million dollars) in overruns and provisions in the group’s last annual results.

The overruns at loss-making projects, including the controversial Bakun hydroelectric dam on Borneo island in eastern Malaysia and two oil projects in Qatar, have prompted an investigation by Malaysian anti-graft busters.

Sime Darby on Thursday launched a legal challenge seeking at least 338 million ringgit (109 million dollars) in damages from the five for “breaches of duties”, it said in filing with the local bourse.

The state-controlled palm oil-to-property conglomerate said it was claiming from the defendants for “restitution for monies wrongfully paid out, damages for losses suffered, loss of profit, aggravated damages and costs”.

It filed a second suit Friday seeking 92.2 million ringgit (30 million dollars) from Ahmad Zubir and two others who were also named in the first suit for breach of trust and duty over the Bakun Dam project, state media reported.

The dam project, in which its subsidiary Sime Engineering holds a 35.7 percent interest, was scheduled for completion in September 2007 but it has been delayed and costs have escalated.

The dam, which involves flooding an area the size of Singapore, has attracted fierce criticism of its impact on the environment and the forced relocation of about 10,000 indigenous people.

After an anti-graft investigation uncovered the problem in the energy and utilities division, the firm in May asked Ahmad Zubir to go on leave until his contract expired and appointed his replacement a month later.

The group’s profits plummeted to 726.8 million ringgit in the 12 months to June 30, from 2.28 billion ringgit the previous year, because of the overruns, the company has said.

Sime Darby is Malaysia’s second-largest company by value, with a market capitalisation of 47 billion ringgit. It owns more than 5,000 square kilometres (1,930 square miles) of palm oil plantations in Malaysia and Indonesia.