Was The Scam In The Cancellation Clause Of Sabah’s Secret Give-away Carbon Contract?

Deputy Sabah Chief Minister ‘Kanga’ Jeffrey Kitingan has been raging and threatening to sue in various directions over the gradual exposure and growing criticism over the past few weeks of a so-called ‘Nature Conservation Agreement’, more specifically a carbon credit contract calculated to be worth up to $24 BILLION in potential profits to a   Singapore based shell company with which he holds apparent connections.

The contract was clearly overseen by Kitingan in his number two position in the state (gained thanks to his umpteenth party-hop that helped destabilise the elected state government in 2020). After all, his signature is at the bottom of it, as is that of the chief minister himself.

Leaked contract was signed by Kitingan as Deputy Minister of Sabah
Leaked contract was signed by Kitingan as Deputy Minister of Sabah

Likewise, Kitingan’s long-standing associate, Stan Lassa Golokin, who according to insiders was involved in all the negotiations for this contract, has now come out of the shadows to front a press conference on Sunday, together with Kitingan, defending the deal against the growing outcry.

Stan & Jeff field questions at the weekend
Stan & Jeff field questions at the weekend

Stan and Jeff go back a long way and are known associates. Stan was working for Jeff at Innoprise in the 1990s, the state-owned subsidiary of Yayasan Sabah.

This was the foundation supposed to take care of Sabah’s forests but which under Kitingan’s management and that of his successors has seen most of the timber cut down and flogged off with massive kickbacks to politicians and their mates.

More to the point, back last year an Australian connected to the project (one Peter Burgis)  blurted out to a journalist that Stan Golokin was his ‘business partner’ on the deal. The actual contract, signed by Kitingan along with the chief minister and conservator of forests, is with a two bit company called Hoch Standard Pty Limited (HSPL) based in Singapore and incorporated in 2019.

However, this thousand dollar shell vehicle, which Kitingan now admits was set up to manage the ‘conservation’ of two million hectares of Sabah’s forest despite having zero experience or capacity, is itself owned by a mysterious off-shore concern called Lionsgate Ltd in the BVI.

The beneficial ownership of Lionsgate is undeclared. So, one is forced to ask whether it is appropriate for a state government to be doing such massive deals with a secretly owned company and to conclude, unless otherwise enlightened, that Mr Golokin has an interest.

What is entirely clear is that the most basic fundamentals of due diligence, transparency and good governance have not been adhered to in this deal, in which the treacherous deputy chief minister has clearly made all the political running and is plainly fronting for the state government.

Yet, Kitingan is evidently of the view that the entire matter ought to have been kept a state secret and is threatening those who have leaked it and those who have sought to criticise it with dire consequences for countering his actions.

Sabah’s Nature Resource Worth $80 BILLION In Secret Deal

Let us be clear, this ‘conservation’ opportunity to monetise what Stan & Jeff have chosen to describe as ‘lazy assets’ concerns one of the most valuable remaining natural resources to the people of Sabah.

What has been handed to the management of the mysterious Lionsgate/HSPL is the potential, over the next hundred years no less, to handle the sale of the carbon off-set rights from two million hectares of the state’s remaining jungle, which they are also laughably being entrusted to conserve without the slightest experience or capacity in that field.

Under terms classified as strictly confidential, this outfit has been awarded a stunning 30% of the profits gained. If the latest calculation of a potential $80 billion to be earned over that period is correct, that amounts to over $24 billion in store for HSPL for a middle-man role that a properly managed state government ought to be controlling directly for the benefit of the people.

For doing what it is most unclear, because with such margins Hoch Standard could easily hire any company with genuine expertise in conservation and carbon credits for a fraction of the amount to take on the job. Indeed, Stan & Jeff have now made clear that this is exactly what they have been up to by admitting they have been contacting the various players in the field who could do the work.

Secret Raid

The entire arrangement, remember, had been set up secretly without consultation, explanation, debate or discourse – let alone tendering – until the sheer enormity of the deal began to leak.

And it comes as sadly no surprise that the two-bit company secretly chosen without competition to become the beneficiary of this latest scheme to monetise Sabah’s natural resources happens to be controlled by this associate of Kitingan. No point ditching your allies to grab control of a wealthy state government for nothing?

The contract doesn’t stop there of course. Kitingan has also put his friendly company in charge of just about every possible form of management of Sabah’s eco-capital in this designated two million hectares belonging to the state as part of the ‘conservation’ role outlined:

 SG [Sabah State Government] wishes to engage the services of HSPL to:
(a)  develop nature conservation management plans to conserve forest and Natural Capital in the Designated Area;
(b)  develop nature conservation management plans to slow, halt or reverse forest loss and degradation, as the case may be;
(c) develop, support, consult and assist SG and the Government in implementing such nature conservation management plan so that it adheres to the REDD+ framework, supports the SDGs, the Ecosystem Services and adheres to best practice standards so far as it relates to Nature Capital;
(d)  provide ongoing assistance in maintaining the nature conservation management plan.
(e)  monetise the Natural Capital Benefit, including CCUs generated from and contained within the Designated Area; and
(f)  consult and provide feedback to SG in relation to its implementation and management of the nature conservation management plan in accordance with the REDD+ framework and the SDGs.

Native Rights Ignored

As has been pointed out, this covert deal has entirely ignored the legal rights of the actual owners of the land, namely the people of  Sabah, and also the customary rights of its native inhabitants. In fact, this secret deal not only failed to inform or consult any of them in the signing away of this extraordinary control of Sabah’s forest landmass to a poxy company linked to Kitingan himself, but was shrouded in confidentiality over all its terms.

As such the Sabah carbon deal must qualify as one of the world’s largest ever resource grabs and in terms of theft of public assets it makes Najib’s 1MDB scam (worth a mere$5 billion) look distinctly paltry.

So, instead of threatening the people who have made this public and suing those who have sought to criticise ought Mr Kitingan not at this very moment be clad in an orange jump suit explaining himself and this agreement he has overseen, clause by clause, to the MACC?

But, of course, Mr Kitingan reckons he is the man in charge in a state which the backdoor coup PN government went to great lengths to destabilise and then take over with the help of his own support.

He must consider himself safe from prosecution and perhaps this to be his reward. Yet, this pernicious secret contract, which Sarawak Report is happy to now publicise in full, contains so many clauses that are disadvantageous to the State Government and the people it represents as to qualify as criminally negligent at the very least on the part of all its signatories.

First, the contract states its secret provisions can never be reversed or discontinued even if a new government comes into office and discovers what was secretly signed up to by Kitingan and his colleagues:

It is the intention of the Parties that this Agreement shall:

  1. (a)  be an international legally binding instrument to regulate the activities of each party, to ensure that it complies and support the SDGs;
  2. (b)  be binding upon the Parties for the entire Term and the Renewal Period; and
  3. (c)  continue regardless of any change in government, agencies and ministers including the constitution of the Sabah State Legislative Assembly and the Cabinet of Sabah, as formed from time to time shall have no effect on the validity and continuation of this Agreement.

All this is unless, of course, the second provision is abided by in what is possibly the most outrageous compensation deal ever allowed for a severance. This entitles the carbon cowboys from Hoch Standard to claim their projected 30% profit for the entire 100% years of the agreement – potentially without having lifted a single finger to earn that money. As the key clauses confirm:

“In the event SG seeks to terminate this Agreement prior to the A end of the Term, SG undertakes, as a primary obligation …[to] indemnify HSPL for all loss, expenses, and damages that HSPL suffers. These losses are to be calculated based on a discount cash flow model on the years remaining in the Term by any one of the big four audit firms.”
“Notwithstanding the clauses above, HSPL will be entitled to terminate this Agreement if SG commits an Event of Default and does not rectify it within 14 days from the Default Notice. If HSPL terminates this Agreement under this clause, SG must indemnify HSPL for all loss, expenses, and damages that HSPLsuffers as set forth….”

We are talking about HSPL being in a position to claim three generations worth of obscene profits from the State of Sabah totalling a possible $24 BILLION potentially for doing next to nothing!

A Classic Cancellation Scam?

Given these provisions it is obvious that the simplest and speediest next move for Kitingan’s friends would be to now exit smartly, either through just such a cancellation or by selling on these unbelievably generous rights.

Indeed, why would anyone think these unqualified operators have the slightest intention of labouring to extract their obscene profit potential, now they have effectively cornered the rights to the equivalent of Sabah’s future oil and gas?

For full flexibility on that front the further terms of this deal signed by Harvard educated Kitingan have carefully made just such an exit extremely easy. The contract specifically allows for Hoch Standard to sell on their valuable rights to a third party of their choice without the State Government having the slightest say in the matter.

All HSPL are required to do is notify the Sabah Government they have done so. No veto, nothing.

There is another provision which is equally comforting for HSPL. This provides for any expenses that might be involved in the conservation management or carbon assessments of the vast forest area to be designated to their control (eg costly international compliance requirements) to be shouldered by the state. So, we have a classic situation where the public pays for everything and the private contractor can’t lose.

None of the above provisions would have lasted an open tender process since competition for this lucrative management role handed to HSPL would have achieved a far better deal for the people of Sabah (from companies qualified to perform it as well).

Yet the representatives of the people of Sabah were not even notified that the rights were being auctioned off, let alone of the provisions of the contract which have been kept so deadly secret under its own provisions.

“Confidential Information” includes the terms and conditions of this Agreement and all information provided by one Party to another Party while negotiating the terms of this Agreement or for the purposes of any of the provisions of this Agreement, including but not limited to, information concerning the business and affairs of a Party and its affiliates and customers, and any data, analysis, information, pricing, or any other information relating to that Party or to the NCMP…..


12.1  Except as permitted by clauses 12.2 each Party must keep confidential and must ensure that each of its respective directors, officers, agents, or employees, keep confidential, the terms of this Agreement including, all negotiations between the Parties in relation to the subject matter of this Agreement and all other information given to it under this Agreement.

If Mr Kitingan believes that there has been wrongdoing in the publication of the terms of this contract then he should come to the State Assembly and justify what he has negotiated and for whose benefit rather than hiding behind legal threats and attacks on critics. He should explain why the Sabah Attorney General abstained from signing off on the agreement (and so should she).

Conservation Mirage

Meanwhile, Sabah’s ‘conservation’ and ‘carbon credit’ deal is rapidly developing into one of the greatest scandals ever in the short history of carbon trading, where even the actual area designated for this bogus ‘conservation’ project has yet to have been specified.

To be clear, the Government of Sabah has signed up to a carbon and conservation deal that includes a massive cancellation penalty, without the ‘conservation area’ in question even having been properly identified.

One can only conclude that, as ever, the question of conservation remains of zero genuine importance to the returned forces around UMNO in Sabah.  That the only interest in signing this contract was to monetise the potential for future carbon trading by assigning the rights that could then be swiftly cashed in at the expense of the people of the state.

It is not the first time such a situation has arisen. In fact, it is an established Malaysian scam to license contracts to friendly parties, which are then promptly cancelled with penalties against the state. In other words this fits a pattern of many a raid on the public purse by those entrusted to protect it.

That this case appears to be on an even more grandiose scale than normal perhaps befits the general dash to the trough that has characterised the coup government’s seizure back of power since 2020?

If such conclusions are entirely wrong and this appalling series of events can somehow be justified or explained as an innocent mistake, then as a public figure the Deputy Minister of Sabah must come and explain why he saw fit to sign off this secret proposal involving a massive as yet unidentified chunk of Sabah’s landmass.

He should do so without seeking to threaten and vilify opposition politicians, NGOs and journalists who have have a perfect right, nay legal and moral duty to call him out and demand he do so.

Not only the people of Malaysia but the entire world is watching this latest Malaysian outrage, just one of far too many embarrassments of apparent gross corruption and kleptocracy that Kanga Kitingan may find he has trouble hopping out of this time.

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