Former Port Klang Authority (PKA) chairperson Lee Hwa Beng rebutted claims the port authority made former general manager OC Phang a scapegoat in the Port Klang Free Zone (PKFZ) scandal.

Lee argued that it was the Public Accounts Committee (PAC) and Attorney-General's Chambers that first recommended PKA take legal action against Phang for breaching her fiduciary duties, and that they did so before he assumed his position as chairperson on Apr 1, 2008.

"These two bodies made the recommendation before I took office," he testified before Shah Alam High Court judge M Gunalan.

Yesterday, Phang’s lawyer had suggested that PKA succumbed to political pressure and made his client a scapegoat.

Phang was sued by PKA in Dec 2016 when helming the PKFZ projects, for allegedly causing costs to balloon from nearly RM2 billion to RM4.63 billion in 2006.

Lee said he had been instructed by the then transport minister Ong Tee Keat to act on the PKFZ scandal.

Citing the Port Authority Act 1963, which defined the minister's role in PKA as advisory, Lee stated that even if the prime minister and transport minister made decisions against the best interests of PKA, Phang should have advised the board accordingly.

"It was her duty to advise PKA board, because at the end the port authority has to pay (for the additional costs incurred in the project)," he said when asked by lawyer Lim Chee Wee, representing PKA.

In a previous statement, Lee held Phang accountable for eight key agreements signed between PKA and PKFZ's turnkey contractor Kuala Dimensi Sdn Bhd (KDSB), without ensuring PKA would be in self-financing position.

Zooming into a cash flow statement prepared by Phang for a loan taken to fund additional works, he said the report was inadequate.

"The statement looked good, but it failed to take into the account loans taken for two other agreements. Nobody in their right mind would approve it if these two loans were taken into account," he said.

Lee also argued that KDSB had a lot to gain when additional interest rates on the loan increased from five to 7.5 percent per annum.

"I can't think of a good reason (for Phang to propose PKA accept the 7.5 percent rate on the land acquisition)," he said.

"If PKA had secured a government-guaranteed loan (for the land purchase), it would only need to pay 3.5 percent to four percent interest at that time.

“KDSB itself raised bonds in the market to finance this project. The interest rate incurred was between five and six percent.

"KDSB was the middleman in this project and gained an extra one to two percent interest out of the multi-billion ringgit project. That was a lot of money," he noted.

"Why should we go through a middleman when the government was prepared to finance the project through raising bonds?"

The trial continues tomorrow.