Sarawak Economic Development Corporation
(S.E.D.C. Sarawak)
The decision by InterConnect Technology Sdn Bhd, Malaysia ("ICT") to build and operate a modern semi-conductor fabrication foundry, in Kuching, was made upon a project proposal presented by D.J. Hill of Hill and Associates, U.S.A. He subsequently came up with a business plan drawn up by a US based financial consultant who acted under his instructions.
Under D.J. Hill's business plan, the total investment costs would be US$1.2 billion. The capital outlay would be funded by shareholders' equity of US$700 million and US$500 million in loans. D.J. Hill assured the authorities in Sarawak that he would undertake to procure a technology partner, as well as wafer partners whose total equity contribution would amount to US$450 million including intellectual property contribution. D.J. Hill was paid fees exceeding US$1.5 million as a project promoter.
On the basis of D.J. Hill's representation that he would procure the technology and wafer partners, ICT was able to secure the support of the relevant authorities from the State and Federal Governments, to embark on this project. Meanwhile, Sarawak Economic Development Corporation provided the full extent of the equity which the Corporation was to contribute in accordance with that business plan.
Following the presentation of his first business plan, D.J. Hill recommended that a plant in Sunnyvale, California, U.S.A. be acquired through InterConnect Technology Inc, a US registered company, for training of personnel who would later be assigned to operate the foundry in Kuching, Sarawak. His original estimate for taking over the lease of, and to equip such a plant in Sunnyvale, would be US$25 million. However, based upon "Purchasing Orders" already issued by D.J. Hill and Dr. Klaus Wiemer and others recruited by D.J. Hill, the total financial commitments for the Sunnyvale plant have exceeded US$150 million. D.J. Hill wants ICT (the Malaysian Company) to pay for these commitments. These commitments were made without full knowledge or approval of ICT's Board of Directors.
In the meantime, no wafer or technology partners were procured by D.J. Hill, although total fees of US$1.5 million had been paid to him as a project promoter. What he managed to do, through Bentley Hall, was to get Sharp Corporation as a technology provider (and not a technology partner), to whom substantial fees for technology transfer, use of its intellectual properties and training of personnel would have to be paid. The fees payable to Sharp Corporation were those recommended by D.J. Hill.
Even before the questions of equity partners and their equity contributions have been resolved, D.J. Hill and the management proceeded to enter into financial and contractual commitments without proper authorisation or approval from the Board and despite the fact that the project financing had not been put in place and wafer partners have not been identified.
Besides, the project cost based on D.J. Hill's original estimates have substantially been exceeded. For instance, D.J. Hill's second Business Plan presented to the Board of Directors in June 1997 highlighted a change in the original estimated project cost from US$1.2 billion to US$1.4 billion. Recommendations for payment to the building contractor of the Kuching foundry were made by D.J. Hill and Dr. Klaus Wiemer, before a formal contract was signed, and further, without proper certification or any regard to the progress of work attained at that time. Since the departure of Messrs. Hill and Wiemer, the building contractor has agreed to adopt a more functional design for the wafer fabrication foundry resulting in a cost savings of more than US$300 million.
ICT was only aware of the amount and nature of the financial and contractual commitments made by D.J. Hill and his subordinates after claims were received from third parties. After the Board of Directors of ICT were made aware of the same, D.J. Hill and his subordinates offered to take over the Sunnyvale facility including the alleged US$20 million in obligations for US$1 which the Board found utterly preposterous and unacceptable as a lot of money has been spent on the said facility.
As a result of the state of affairs described above, and the inability of D.J. Hill to secure technology and wafer partners, as well as the uncertain market trend for wafer products, the Board of ICT decided that the wafer fab foundry project in Sarawak should be temporarily suspended, so that a thorough evaluation thereof could be carried out. It is the firm intention of the Company to proceed with the project after a complete revamp of its management and organisational structure and agreements have been concluded with potential investors.
Finally, ICT, as a responsible Company, is seeking legal advice
on its recourse against those responsible for damaging its creditability
and reputation. ICT is also studying measures to resolve the
various financial and contractual complications arising from the
action of its previous management.
ICT STATEMENT IN REPLY TO FURTHER ALLEGATIONS FROM MR. HILL AND
DR. WIEMER
Menara SEDC, Jalan Tunku Abdul Rahman, P.O.Box 400, 93902 Kuching, Sarawak, Malaysia. Email: ssedc@pop1.jaring.my
Telephone: 082-416777 Fax: 082-424330 Telex: MA 70063 Cable: "SEDC" Kuching.
Page last updated September 22 1997.