KUALA LUMPUR -- Police arrested a former top port executive and two other suspects Thursday for alleged corruption involving one of Malaysia's biggest financial scandals.
The arrests were the first in connection with a government-backed port project that suffered debts of more than $1 billion from massive cost overruns and sparked public criticism of a lack of openness in state-linked initiatives.
Authorities detained O.C. Phang, the former general manager of Malaysia's main port authority, a senior official of the contracting company for the project, and an architect, said Abdul Majid Hamzah, a government prosecutor.
Mr. Phang was to be charged in court later Thursday with criminal breach of trust, an official in the Attorney General's Office said on condition of anonymity because he was not authorized to make public statements. The charge carries a maximum penalty of 20 years in prison. The two others will face unspecified charges, he said.
The scandal erupted when the government approved a loan in 2007 to rescue the Port Klang Authority, the main port authority, from debts exceeding $1 billion after it incurred cost overruns to develop the Port Klang Free Zone, a 1,000-acre industrial and trading hub that opened in 2006.
Parliament's Public Accounts Committee, which oversees government spending, recommended last month that authorities investigate Mr. Phang and ex-Transport Minister Chan Kong Choy for possible criminal breach of trust in the scandal.
The committee said Mr. Chan and Mr. Phang issued key letters to carry out the project without the Finance Ministry's approval. It also recommended investigations of other officials involved in the project for allegedly failing to perform their responsibilities diligently.
Mr. Phang stepped down last year in a revamp of the authority's board.
Opposition leaders have criticized the government over the past two years for not prosecuting anyone in the scandal, which further eroded public confidence in big state projects following bailouts of prominent companies in the 1980s and 1990s.
Complaints about corruption were among key public grievances that caused the National Front ruling coalition to suffer its worst results ever in general elections last year following five decades in power. Prime Minister Najib Razak has since pledged to take tougher steps to combat graft.
Private auditors warned earlier this year that the port project could sink into worse financial woes because it might face problems repaying the government loan, which would result in additional interest and send the project's bill soaring to 12.5 billion ringgit ($3.5 billion).
Copyright © 2009 Associated Press
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