Special investigation: TV company takes millions from Malaysian government to make documentaries for BBC... about Malaysia

Corporation suspends relations with leading film-maker accused of conflict of interests over 'palm oil' programmes

(CORBIS)

The BBC has launched an investigation into how it broadcast to millions of people around the world programmes made by a company that had received millions of pounds in payments from the government of Malaysia.

It has suspended all programming from the London-based production company, FBC, which since 2009 has made at least four BBC documentaries dealing with Malaysia and controversial issues such as the country's contentious palm oil industry and its treatment of rainforests and indigenous people.

In a statement, the BBC said: "FBC has now admitted to the BBC that it has worked for the Malaysian government. That information was not disclosed to the BBC as we believe it should have been when the BBC contracted programming from FBC. Given this, the BBC has decided to transmit no more programming from FBC while it reviews its relationship with the company."

An investigation by The Independent has established that entries in the Malaysian government's Supplementary Budget 2010 show that FBC Media (UK) was allocated 28.35m Malaysian Ringgit (MYR) – nearly £6m – for work on a "Global Strategic Communications Campaign" ordered by the Malaysian government in 2009. A similar sum (MYR29.34m) was designated to the company the previous year. Concerns over the arrangements have been raised in the Malaysian parliament.

Documents filed with the United States government's House of Representatives in 2008 show that FBC Media (UK) contracted the Washington-based American lobbying company APCO Worldwide, which it paid more than US$80,000 (£50,000) in 2008 for the purpose of "raising awareness of the importance of policies in Malaysia that are pro-business and pro-investment as well as [showing] the significance of reform and anti-terrorism efforts in that country".

The BBC's guidelines on conflict of interest state: "Independent producers should not have inappropriate outside interests which could undermine the integrity and impartiality of the programmes and content they produce for the BBC."

Having obtained this information on the Malaysian payments, the BBC is conducting an investigation into whether any of the FBC material it broadcast was in breach of BBC guidelines on impartiality. At the same time, CNBC, a business channel owned by the giant American NBC network, has withdrawn "indefinitely" its weekly show World Business, which was made by FBC and featured Malaysia on many occasions. In a statement issued to The Independent, the broadcaster said: "In light of serious questions raised two weeks ago, CNBC withdrew the programme World Business indefinitely and immediately initiated an examination of FBC and its business practices. CNBC has made a formal inquiry to FBC for its explanation in relation to the allegations that have been made."

FBC denies any impropriety in its programmes for any broadcaster and said via its lawyers that "at no time have the television programmes made for the BBC ever been influenced or affected by our client's commercial activities". Its lawyers said that FBC ran both production and commercial divisions, which "are and always have been quite separate and distinct". They added: "Our client, having reviewed its procedures, is now taking steps to ensure that even the merest appearance of bias or overlap is fully avoided."

Last night, media regulator Ofcom said: "Ofcom is currently assessing this matter in accordance with our published procedures. We will shortly decide whether to launch a full investigation of the content in question under the broadcasting code."

Malaysian Prime Minister Najib Razak, right, is interviewed by FBC Group's chairman and founder Alan Friedman

The BBC and palm oil

With its lush vegetation and smiling workforce dressed in polo shirts, the footage from the Tuan Mee palm oil estate, to the north of Kuala Lumpur, gave no obvious reason for BBC viewers to think they were being shown anything more than an exotic travelogue and an intriguing business story.

But the coverage of the workings of one of Malaysia's most important industries, shown on BBC World News's Third Eye series this summer under the title "The Power of Asia", formed part of a much bigger picture.

The programme was made for the BBC by a London-based company called FBC Media, which has been hired by Malaysia to conduct a Global Strategic Communications Campaign, and has paid American lobbyists to raise "awareness of the importance of policies in Malaysia that are pro-business and pro-investment".

In the Third Eye programme, one of several productions made on Malaysia for the BBC in the last three years, viewers were told of the key role of the Malaysian palm oil industry in meeting the growing demand for food in countries such as China and India. "Once an efficient production centre for rubber, Malaysia over the years has increasingly turned to oil palm," said the voiceover. "The country is now one of the world's biggest exporters, producing 40 per cent of global supply, and is reaping the economic benefits of higher demand from Asia."

Azman Abdul Majid, of the Tuan Mee estate, was happy to tell his positive story. "The market now is so high that plantation in palm oil is a very good business in terms of profit, in terms of our benefit," he said. The BBC show also featured Kuala Lumpur Kepong, another Malaysian palm oil business, and other Malaysian business figures.

The programme dealt with the growing food crisis in Asia and the economic instability and social unrest that may result. It highlighted failures in harvesting rice in China and contrasted that with the successful Malaysian palm oil industry. "There are now more than 200,000 smallholders depending on the sale of palm oil," the programme stated.

It noted that "stocks in Asia's food companies from Mumbai to Kuala Lumpur are now hotly traded", but stressed the need to expand to meet the vast food demand. Indian companies were anxious to invest in Malaysian palm oil plantations "but land prices are now too high".

Only a brief reference was made to the reasons why the palm oil industry is the subject of fierce debate. Environmental groups complain that its spread has caused devastating levels of deforestation which harm biodiversity, threaten the livelihoods of indigenous people and put at risk the survival of the orang-utan.

The programme took the view that production needed to be stepped up fast: "Asia is now experiencing rising demand and rising prices for grains and oils but production is lagging, as is investment and increases in yield." It concluded with a sense of urgency: "Asia is going to have to grow its way out of trouble – and the clock is ticking."

It was not the first time that BBC viewers had shown programming on Malaysia produced by FBC. In February 2011, BBC World News broadcast on its One Square Mile programme a piece from Sarawak in which presenter Rian Maelzer, who describes himself as the "South East Asia Correspondent" for FBC's CNBC programme World Business, explored the lifestyle of the tribal Iban people and took a boat ride to visit a traditional longhouse.

"Tourism not only brings in money, it also encourages youngsters to keep alive skills that might otherwise have died out," he reported. "For the past 40 years, the Malaysian government has practised an affirmative-action policy aimed at raising the living standards of indigenous groups." The attractive portrayal of Sarawak, and the fight to preserve traditional culture, is at odds with the area's reputation among environmentalists, who have highlighted the battle of indigenous people in Sarawak to preserve the rainforest against logging and the development of palm oil plantations.

Similar subjects were examined in FBC's Develop or Die documentary for the BBC in March 2009. The programme opened with a cartoon that drew comparisons between colonialists who asked "Are the natives friendly?", and modern-day environmentalists who ask "Are the natives eco-friendly?" It examined the benefits of the Malaysian palm oil industry and its value to the economy, quoting smallholders whose lives have been transformed for the better by palm oil production. While it quoted environmentalists, it reported that "the major players in the industry resent the sweeping nature of environmental campaigns". The programme concluded by pointing out the pressure on nations such as Malaysia to develop. "Now that their economies are more likely to fuel global growth in the next few years, they are more than ever questioning why they should be punished by Western-imposed standards." As part of its Develop or Die series, BBC World News also screened an FBC co-production, "World Debate: Islam and Democracy in 2009", featuring Malaysian Prime Minister Najib Razak sitting alongside the host on the panel.

FBC's 'blue-chip service'

FBC is a media company with offices in London, Mumbai and Rome. It told The Independent that the programmes it has made "have always been fair, balanced and impartial". It also said that it was no longer working for Malaysia.

When The Independent first questioned the company about its business at the end of last month, it denied that it had ever done work for Malaysia. Confronted with evidence of contractual arrangements listed in Malaysian public records, the company's lawyers said they had made an "error", having "failed to spot an amendment made by our client to a draft letter that we had prepared".

It stated: "It is no secret that FBC received funds and performed consultancy work and media-buying for the Malaysian government in the past." Of its hiring of American lobbyists to promote Malaysia, it said: "The object of that work involved showing the economy of Malaysia to be attractive to investors and committed to battling terrorism."

After FBC was contacted by The Independent, most of its website was replaced with a single page, giving only the most basic of information. In its online promotional material for potential clients – now removed from the internet – FBC boasted: "We control blue-chip television editorial time-slots" and can "guarantee controlled messaging from A to Z on the world's leading news channels". Telling would-be customers that "FBC is not a traditional PR firm", it stated that it "can guarantee that your message is endorsed by prestige third-party ambassadors".

FBC also talked of its "broadcast news feeds" and informed clients that "by facilitating independent editorial coverage, broadcast news feeds can raise awareness amongst a highly targeted audience". In another statement on its former website, it said: "FBC specialises in the planning and execution of strategic communications and branding campaigns, helping raise awareness across the international media landscape". It then promised "an elite audience via" and listed a series of prestigious media brands including BBC World (now BBC World News), CNN, CNBC Europe and a number of print publications including The Economist, the Financial Times, Business Week, the Wall Street Journal and the International Herald Tribune.

FBC says that its company is split into two distinct divisions, one for television production and the other for branding. It says its references to "time-slots" were "to paid advertising commercial spots and paid advertorial programming that is clearly labelled as such".

The founder and chairman of the FBC Group, which is the 100 per cent owner of both FBC Branded Content and FBC Media (UK), is Alan Friedman, an award-winning journalist and former banking correspondent at the Financial Times. Friedman was credited as the "executive producer" of three of the FBC programmes featuring Malaysia made for the BBC.

Before the BBC broadcasts, it is understood that FBC, which has made 20 programmes for the BBC, signed the BBC's standard producer guidelines which guarantee to "not accept money or other services or benefits from any individual, company or organisation with a view to endorsing or promoting such services and/or products in the series or series publicity or which could lead to doubts about the subjectivity or impartiality of the series".

In a statement to The Independent, the BBC said: "All independent TV companies who produce programmes for BBC World News have to sign strict agreements to ensure programmes meet the BBC's editorial guidelines, including avoiding any conflict of interest."

BBC World News attracts 78 million viewers a week, is available in more than 200 countries and reaches around 300 million households and more than 1.8 million hotel rooms. The channel's content, which includes advertising, is also available on 57 cruise ships, 42 airlines, 35 mobile phone networks and a number of major online platforms including bbc.com/news.

The American-owned business channel CNBC has also begun an examination of "FBC and its business practices" and "withdrawn indefinitely" the programme the company produces, World Business. In the past two years, FBC has made at least 10 programmes for CNBC's World Business featuring Mr Razak. In other editions, the previous prime minister, Abdullah Badawi, appeared as well as senior figures from Iskandar Malaysia, Malaysia Airlines and palm oil company Sime Darby. In March this year, the channel showed Deforestation in Sarawak, which was syndicated to other broadcasters, including US state broadcaster PBS. The programme featured Sarawak leader Taib Mahmud talking positively about the condition of the state's rainforests and highlighted the area's attraction to tourists.

Eckart Sager, the president of FBC, is a former producer with CNN who, since joining FBC, has personally conducted interviews with Mr Razak, and separately his wife Rosmah Mansor, for CNBC's World Business. Friedman, who is an American and lives in Rome, has also personally interviewed Razak. FBC is also linked to another award-winning journalist, John Defterios, the host of CNN show Marketplace Middle East, since 2007.

Defterios, the former group president of FBC Media, last month conducted an exclusive interview for CNN with Mr Razak during his official visit to London. During the interview, Defterios questioned the Prime Minister on recent mass street protests by democracy campaigners in Malaysia. "Some would say you had 1,600 arrests of some 20,000 protesters. Are you satisfied with the security response to that particular round of protests, yourself?" he asked. Razak responded: "It was quite mild, you know, because although they were taken in, they were released after eight hours and they were treated very well. There was no undue use of force."

CNN issued a statement to say it had "never had an editorial relationship with FBC" and that FBC Media had not been involved in setting up interviews. "FBC has released a public statement that John Defterios resigned from the company," it said.

"While we appreciate that John Defterios's relationship with FBC during his tenure with CNN could present the appearance of an editorial conflict, we have been reviewing the situation and have found no indication that CNN's editorial standards were – or are in any way – compromised by that prior relationship."

The movers and shakers at the TV company

Alan Friedman, chairman and founder of FBC Group

The award-winning journalist, who studied at Johns Hopkins University, New York University and the London School of Economics, describes himself as a "media entrepreneur". He has worked for the Financial Times, the International Herald Tribune and the Wall Street Journal. In FBC material he is described as "one of Europe's most respected economic and political commentators". He is the author of books on the Italian industrialist Gianni Agnelli, and on America's arming of Iraq. Friedman was the executive producer of many of FBC's programmes for the BBC and has conducted some of FBC's interviews, including with Malaysia's Prime Minister Najib Razak.

Eckart Sager, president and head of production for FBC

German-born and educated in the US, Sager is a former senior producer for CNN, based in London. He previously worked for CNN in New York, travelling the world profiling leading business figures. He is the executive producer of many of FBC's documentaries and also "provides key strategic communications advice and support on behalf of FBC clients". Sager has also personally interviewed Mr Razak for FBC.

John Defterios, former group president of FBC Media from 2000-2011

Since 2007, he has been the presenter of CNN International's Marketplace Middle East programme and is a journalist with 25 years' experience. He is a CNN news anchor and former Reuters bureau chief. In July this year he conducted an exclusive interview with Mr Razak for CNN during the Malaysian Prime Minister's visit to London, CNN said the interview did not involve FBC. Defterios resigned from FBC in March, the company has told CNN.

The money trail

* Malaysian budget records show that MYR28.35m (nearly £6m) was allocated to FBC Media (UK) for a "Global Strategic Communications Campaign" in 2009. A similar allocation was made in 2008. FBC Media (UK) is a subsidiary of FBC Group Ltd

* Documents filed with the United States House of Representatives show that FBC Media (UK) hired the Washington lobbyists APCO Worldwide in 2008 for the purpose of "raising awareness of the importance of policies in Malaysia that are pro-business and pro-investment as well as the significance of reform and anti-terrorism efforts in that country"

The palm oil industry's history of misleading claims

The Malaysian palm oil industry has a history of offending the authorities by making false claims on BBC World.

Three years ago, the Advertising Standards Authority (ASA) criticised a campaign from the Malaysian Palm Oil Council (MPOC) for carrying "misleading" claims about its impact on the environment. The advertising from the MPOC, which was not made by FBC, appeared on BBC World in 2007 and showed a palm oil plantation interspersed with shots of a rainforest and wildlife. In a voiceover, it asserted that "its trees give life and help our planet to breathe, and give home to hundreds of species of flora and fauna. Malaysia palm oil: a gift from nature, a gift for life." The MPOC also claimed that palm oil had been "sustainably produced" since 1917.

A second advert showed a man running through a forest, cut with shots of a palm oil plantation and wildlife. The voiceover said of the palm oil industry: "Its trees give life and help our planet breathe. Its fruit provides vitamins for our bodies and energy for our daily lives." But the ASA upheld a complaint from Friends of the Earth International and Friends of the Earth Europe that the advert was misleading on the grounds that much palm oil was produced in a way that was not socially or environmentally sustainable. The advert was made before the Roundtable for Sustainable Palm Oil completed a verification system for sustainable palm oil.

The ASA ruled that the advert "was likely to mislead viewers as to the environmental benefits of palm oil plantations compared with native rainforest". It also said viewers were misled "because there was not a consensus that there was a net benefit to the environment from Malaysia's palm oil plantations".

In July this year, another campaign from the MPOC was banned by the advertising watchdog in Belgium for once again claiming that the production of palm oil is "sustainable". The Jury d'Ethique Publicitaire ruled that production had impacts on the environment and the campaign was in breach of its environmental advertising code.