The trial of former Perwaja Steel Sdn Bhd managing director Eric Chia for criminal breach of trust began today in the Kuala Lumpur Sessions Court, which heard that he had authorised payment to a Japanese company through an allegedly non-existent company.

The prosecution's first witness, Perwaja corporate director Lawrence Lim, testified that payment amounting to RM76.4 million was to be made to Japan's NKK Corporation in 1994 through the accounts of Frilsham Enterprises Incorporated.

Chia, 71, had pleaded not guilty on Feb 10 when charged with criminal breach of trust under Section 409 of the Penal Code for 'fraudulently' ordering the payment, when no payment was due. He is alleged to have committed the offence in February 1994 in Hong Kong.

However, the prosecutors today read out an alternative charge that fixed the date of the alleged offence as having occurred between Nov 4, 1993 and Feb 22, 1994 at the office of Perwaja Rolling Mill Development Sdn Bhd in Kuala Lumpur.

Chia, who was also managing director of that company, is alleged to have dishonestly disposed of the money "without the approval of the board of directors or the tender committee of Perwaja Rolling Mill Development Sdn Bhd in violation of a legal contract".

He pleaded not guilty to the alternative charge before Judge Akhtar Tahir. The prosecution team comprises senior federal counsel Mohd Yusof Zainal Abiden, Tun Majid Tun Hamzah and Nordin Hassan.

About half of the courtroom was taken up by people linked to Chia. They were dressed in uniform blue blazers.

Prospective list

A total of 36 witnesses, including Japanese nationals, are expected to testify in what is seen as the most high profile corruption trials in recent years.

However, Chia's lead counsel Muhammad Shafee Abdullah ruled out the possibility that former Prime Minister Dr Mahathir Mohamad might be called to testify.

"We have a prospective list...(but) nothing involving prime ministers....nothing to do with that," he said outside the court.

He said the number of defence witnesses would depend on the list to be offered by the prosecution.

"We suspect that most of their witnesses will be in favour of us," he added.

AFP quoted Muhammad Shafee as saying he was not surprised by Lim's testimony.

"No one is denying payment has been made. It is a valid payment. Lim's evidence today has not changed anything," he said, adding that Chia was confident he would win the case.

He also said the defence did not feel it was under any pressure although the case forms part of the government's fight against corruption.

"This case is based on documents. We expect the court to be honest about the entire decision making process. If that happens, which we are confident will happen, he (Chia) will be acquitted," he said.

Chia, who appeared to be in good spirits throughout the day, was asked by reporters on how he felt about today's proceedings.

He said: "Excellent. I am happy."

Industrialisation policy

Perwaja, the government-owned steelmaker was the centrepiece of Mahathir industrialisation policy, which began in the early 1980s.

But the project soon faced serious problems, resulting in Japanese shareholder Nippon Steel abandoning it.

In 1988, Chia was tapped by Mahathir to save the company. He was initially given six months to find out what had gone wrong.

Chia stayed with the company for seven years. During his tenure, he put in place a 10-year plan which saw the setting up of a new company called Perwaja Steel.

However, the multi-billion ringgit losses continued. Chia resigned in 1995, a year before Anwar Ibrahim - then deputy prime minister - disclosed to Parliament that Perwaja's RM815 million interest payments on a yen loan were bleeding the company.

Chia's arrest came nine years after the Anti-Corruption Agency launched a probe in October 1996.

Investigations were initiated after it was revealed that Perwaja had suffered losses totaling RM2.98 billion as of Dec 31, 1995, including bank loans amounting to about RM7 billion.