KUALA LUMPUR, Sept 20 — A forensic audit has revealed breaches of duties and misconduct in the beleaguered energy and utilities (E&U) division of government conglomerate Sime Darby group, which last month reported a RM77 million fourth-quarter loss and RM977 million in writedowns.

In an announcement made available on the Bursa Malaysia website today, the forensic and legal consultants engaged by the group’s board of directors in May had found irregularities in the division’s four key projects, namely the Bulhanine and Maydan Mahzam project with Qatar Petroleum, the Maersk Oil Qatar project, the Bakun hydroelectric dam project and the “Marine Project”.

“The investigations have found evidence to suggest, on a prima facie basis, that there may have been breaches of duties and obligations an inappropriate conduct,” the announcement read.

The announcement also said that the board had resolved to initiate legal proceedings “where appropriate” and would lodge reports with the relevant authorities.

The nature of the proceedings and further details from the forensic report, however, would not be revealed, it said.

“The board has been advised by legal counsel to keep confidential the details of the report and nature of such proceedings so as not to adversely affect the interests of the group,” the announcement said.

The plantations-to-property giant had engaged forensic consultants on May 27 to conduct audits into its energy division’s key projects and an independent legal consultant to conduct follow-through investigations to determine whether there was any evidence of culpability.

The controversial Sime Darby shake-up hit the headlines earlier this year following the announcement that its president and group chief Datuk Seri Ahmad Zubir Murshid was asked to take leave of absence following concerns over cost overruns amounting to RM964 million from the four troubled projects.

The cost overruns were discovered by a board work group formed in October 2009 to “assess the corporate governance and performance” of Sime Darby’s energy and utilities division.

On August 26, the group turned in a net profit of RM726 million for this year but booked foreseeable losses of RM2.1 billion for its E&U division, one of the highest ever for a local conglomerate.

It also reported a fourth-quarter net loss after tax and minority interest of RM77.4 million.

Sime Darby’s 2010 earnings fell short of analyst consensus forecast of a profit of between RM1.3 billion and RM1.5 billion excluding fourth-quarter provisions.

The last time the conglomerate spilled red ink on its balance sheets was just after the 1997 Asian Financial Crisis, when a plunge in the stock market and a sharp depreciation of the ringgit led its financial arm, Sime Bank, to post a RM1.6 billion loss — the largest in Malaysian banking history — for the six months to December 1997. The conglomerate also went on to post a six-month loss of RM676.2 million and closed the 1998 financial year with a net loss of RM540.9 million.

Its acting chief executive, Datuk Bakke Salleh, a close ally of Prime Minister Datuk Seri Najib Razak, said after the group’s second consecutive quarterly loss was revealed that Sime Darby was now in the process of reviewing its business activities — which began when Sime Darby first came to know about the massive costs overruns incurred by its energy and utilities division.

However, he said it was “still early days” and far too soon to decide if the group will divest some non-core operations.

“We reckon it will take us a few months before we can safely make the decision as to whether we want to divest some of the companies that are in our stable, or we want to call it a day in some of the business segments we’re in.

“Once we’re in a position to make a conclusion that we should not be hanging to some of these business activities, then the appropriate decision will be made,” he had reportedly said.

He noted that provisions of RM773 million at its stricken energy division pushed the firm to a fourth-quarter net loss of RM77.35 million and did not rule out further provisions.

Revamped in 2007 after a merger with two other state-owned plantation groups, Sime Darby earns more than half of its operating income from its plantation business. Its business model has come under question, with many analysts saying a break-up would create long-term value for the group.

“We are going to look at the implementation of a new business structure, which is similar to the old Sime Darby structure of having anchor subsidiaries in each business segment.

“The concept has been endorsed by the board this morning (August 26) and we are looking to implement it as early as January 1,” he had said.