The story at the time was, that his ex-wife, Mariam, was caught in bed with another man - A young, handsome, Indonesian singer. I can't verify how true that story is. But other stories also speculated that she was having an affair/s with other men.
Insiders say: That Mariam was set up for political reasons. She was never popular with H.M's family - Prince Mohammad, particularly, disliked her. It is said that he framed her, so that the Sultan would divorce her.
Another story is that Mariam was tired of the royal lifestyle, and wanted to be free of the golden cage. Her 3 grown up kids are studying in London and she wanted to join them there. Perhaps both factors led to the divorce.
Upon divorce, she was stripped of her title and all her jewellry that had been given to her when she married H.M. Some people think that some of that jewellry may have been passed onto Sarah, as part of her wedding gifts. After all, the Royals are cash strapped since the economic downturn and Prince Jefri's Amedeo crisis. Civil servants were forced to give money for the Crown Prince's Wedding. Private businesses were asked to sponsor money towards it.
The Sultan still visits Mariam's palace regularly, as he did when they were married. Although, she doesnt live there, but in a smaller residence, nearby. Apparently, they do lunch, play badminton and are friends. Hjh Mariam also tends to be in the same places as the Royal Family, whenever they travel - she went to perform the Umrah, in Saudi in 2003, the same time as the Sultan and Raja Isteri. Whether she was invited to be with them, or just wanted to try and get close to them, is another question.
Popular opinion is that the Sultan didnt really want to divorce her, after the affair scandal broke, but that his brothers advised him to. Since the Sultan is still friendly with her, the political reasons theory could have some truth in it.