Speech by Parliamentary Opposition Leader, DAP Secretary-General and MP for Kota Melaka, Lim Kit Siang, in the Dewan Rakyat on Tuesday, March 11, 1986 on the Motion of Thanks on the Royal Address
DAP calls for a Royal Commission of Inquiry to follow up on the ‘fresh leads’ and to complete the work of the Ahmad Nordin BMF Inquiry Committee to expose the top political personalities responsible for the $2.5 billion BMF scandal
Malaysia is going through a grave national crisis. Never before in our 29-year history, have we been confronted with so many complex and fundamental problems on virtually all fronts, whether politics, economics, education; religion, nation-building or in our social life.
The Fourth session of the Sixth Parliament was officially opened by the Yang di-Pertuan Agong yesterday under the cloud of the $2.5 billion Bumiputra Malaysia Finance scandal and the Kampong Memali Tragedy.
But these were not the only problems to beset the people and nation. Economically, a bad situation has become worse and the Finance Minister, Daim Zainuddin, had to concede that his budget forecast less than five months ago that Malaysia would register an economic growth of six per cent for this year was utterly unrealistic, and had to be revised down to 3 per cent. This revised estimate may also prove overly optimistic, when we take into account the plummeting commodity prices – and in particular the likely crash of the’ spot price of crude petroleum in the world market from US$28 to below US$10 a barrel in a matter of two months!
Daim Zainuddin’s tenure as Finance Minister was most noted for his attempt to revive the stock market, 1 (to the extent that he was referred in some quarters as the Minister for Shares), and his unmitigated failure. Hopes for a stock market revival after the 22-month MCA Crisis were dashed by
Tan Koon Swan’s Pan E1 Crisis, leading to the unprecedented three-day suspension of the Kuala Lumpur and Singapore Stock Exchanges.
When it is thought that the bottom of the barred in the stock market had been scraped, events like the Singapore arrest of Tan Koon swan for criminal breach of trust, fraud and cheating charges in connection with Pan E1, the attempt by MCA with some support from UMNO quarters to provoke an international crisis in the relations between Malaysia and Singapore to distract national attention, and lately the sudden resignation of Datuk Musa Hitam as Deputy Prime Minister, Home Affairs Minister and UMNO Deputy President on grounds of ‘irreconcilable differences’ with the Prime Minister, Datuk Seri Dr. Mahathir Mohamed, have demonstrated that there is no bottom whatsoever in the Kuala Lumpur Stock Exchange. The biggest victims, in the end, are the small investors who got their fingers badly burnt.
The nation has lost a sense of direction, and the people, have lost control over their future.
In his eve-of-64th Birthday interview, former Prime Minister, Tun Hussein Onn, expressed the deep-seated unease and disquiet of Malaysians.
Tun Hussein said he was particularly ‘disturbed and unhappy’ about the worsening racial polarisation in the country and ‘nervous and concerned’ about extremist views on religion.
It is time that Malaysians of influence and principle should stand up and make their voice heard about the crisis of confidence in Malaysia.
The Government should stop sweeping fundamental problems under the carpet, but must instead grapple with them by taking the people and country into its confidence and convince them that the Government is sincere and serious in wanting to deal with the national crisis of confidence
The Government should have a greater respect for the intelligence of the people, and should resist the present temptation when everybody is expecting general elections to be called a early as middle of next month to resort to pre-election gimmicry as a substitute for problem-solving.
For instance, during this Chinese New Year, which was spared the Chinese Mandarin fiasco and boycott last year, RTV came out with a most commendable Pesta Ang Pow for the occasion. But the question is why RTV and the various government departments and agencies only realise that Malaysia is a multi-racial, multi-cultural, multi-lingual and multi-religious society before general elections, and cleanly forget about this i after the general elections? Only last year, Sudirman and Noorkumalasri’s novel insertion of the Catanese operatic item, ‘Toi Loi Hwa’ in ‘Setangkai Irama’ was scissored out by the RTV authorities for infringing the unofficial guideline that there should be no telecasting of Chinese items with classical constumes or historic background!
I will give another example. Last month, top MCA leaders spread word that at its MCA rally on March 2, the Prime Minister, Datuk Seri Dr. Mahathir Mohamed, would be announcing the repeal of Section 21(2) of the 1961 Education Act, to remove the power vested in the Education Minister to convert Chinese and Tamil primary schools into national primary schools when he deems it fit.
A few days later, top MCA leaders corrected themselves by making it known that the Prime Minister’s announcement would not be on the repeal of Section 21(2) of the 1961 Education Act, but its amendments.
But when the Prime Minister spoke at the MCA rally, he did neither, for there was no policy announcement that Section 21(2) would be repealed or amended. All that the Prime Minister said was that he would ‘consider’ proposals on Section 21(2).
Now, who had backtracked – the MCA leaders or the Prime Minister? Such pre-election gimmicry, which I can reel out a catalogue of them in recent months, underestimate the sophistication of the electorate. I am sure the people can see through the gimmickry of such these incidents, and realise that there are no basic policy changes which are the only surety against even greater erosion of their basic rights after the general elections.
Such pre-election gimmickry, in fact, could only further undermine public confidence in government authority, morality and credibility.
There is of course no single incident which has done more to in the last four years to destroy government credibility, to the extent that if left unchecked, the crisis of confidence arising from the credibility gap of the government could become a crisis of legitimacy.
Ahmad Nordin Committee commended for two years of great national service
The $2.5 billion BMF scandal is the greatest banking and financial scandal in Malaysia and also in Asia as well.
For two years, the BMF Inquiry Committee headed by Tan Sri Ahmad Nordin and comprising Chooi Mun Sou and Ramli lbrahim had laboured and produced the most complete picture to date of the $2.5 billion BMF scandal, of the massive theft, fraud and criminal breach of trust of public monies by a conspiracy of public officials and corporate crooks,
As the BMF Inquiry Committee reported in the Final Report (Para 74,2(2)), apart from a few members of the staff, the Committee did not receive the full co-operation and assistance from the Board and Management of Bank Bumiputra Malaysia Bhd. (BBMB), which was the Appointing Authority.
I am amazed therefore that despite its constraints and limitations, the BMF Inquiry Committee could prepare such a substantive report on the BMF scandal, and the nation and people owe Tan Sri Ahmad Nordin, Chooi Mun Sou and Ramli Ibrahim a great debt of gratitude. The three committee members had rendered the country a great national service. They have not only given up two years of their life to investigate the BMF scandal, but have started the important first step to regain national dignity and honour by understanding the real story of the BMF scandal, how it started and developed, identify the persons responsible, and to cleanse the national soul of the shame and scandal by bringing to book and justice all those responsible for the grand national larceny in the massive theft, fraud and criminal breach of trust of $2.5 billion of public funds.
Before I proceed further; I want to pay a . tribute to Tan Sri Ahmad Nordin, Chooi Mun Sou and Ramli Ibrahim, for their great work. They have proved to be the best exemplars of the dedicated, true and patriotic Malaysian, who are guided solely by the dictates of truth and national good, and who would not compromise their principles to whatever pressure or circumstances.
The offer of Tan Sri Ahmad Nordin and Chooi Mun Sou to accept responsibility for the publication of the BMF Final Report in their memorandum of January 11, 1986, when the Prime Minister and Government was inventing excuses to keep the Final Report from public knowledge, is another example of their public spiritedness and patriotism.
If in the sordid story of the BMF scandal, there had been one public official who had been prepared to take a principled stand for truth and the national interest, regardless of the displeasure or the wrath this would cause to powerful personalities or even the Government, the BMF scandal would not have reached its final magnitude and dimension.
But there had been no Tan Sri Ahmad Nordin or Chooi Mun Sou in the BMF scandal, and the country is the poorer and sorrier for it. But such men will have a pay a high price for the courage of their convictions for they would be treated like pariah by those in power who found that their will are being thwarted or resisted.
This is in fact the fate of Tan Sri Ahmad Nordin and Chooi Mun Sou today. This is why Parliament is not moving any motion to express its thanks and gratitude, and that of the nation, for their work, together with Ramli Ibrahim, to throw light on the BMF Scandal.
Even their BMF Final Report is denied the status of a Command Paper, as was the case with the Price Waterhouse Report on the $150 million Bank Rakyat Scandal in 1979.
BMF Final Report should be a ‘must reading’ for all government officials, bank officers and easily available to the M Malaysian public
The BMF Final Report has all the ingredients of a suspense thriller, and could have provided the plot for an international bestseller or even manual as to how to defraud a country of $2.5 billion.
We could not take it so lightly, however, as it is our monies which are being defrauded. I must confess that I read with increasing shock, consternation and horror at the deceptions dishonesty, immorality, criminality and of course, ingenuity in the various schemes devised to steal and defraud Malaysians of their billions.
The BMF final Report should be a ‘must’ reading for all government officials, bank officers and easily available to the Malaysian public to be a reminder of the price we have to pay when we allow crooks and thieves to occupy public positions of responsibility and trust.
By pricing the BMF Reports at $250 per set with a limited edition of 2,000 copies, the Government
is in fact preventing the bitter and expensive lessons of the $2.5 billion scandal from being widely disseminated. This is a great national disservice. I call on the Government to rush out a printing of at least 100,000 copies and price them at $10 or $20 so that many Malaysians as possible will be able to read and experience the personal horror that such massive theft, fraud and criminal breach of trust of public funds could happen for such a long period of time. The expenses incurred in such printing will be worthwhile for it will inject into the Malaysian psyche a horror, revulsion and greater vigilance against a repetition of the $2.,5 billion BMF scandal.
I can only infer that by refusing to table the BMF Final Report as a Command Paper in Parliament, and making it available cheaply to the Malaysian people, the Government has still got things to hide in the BMF scandal.
This is probably the reason why the Government has backtracked from its earlier decision to have a special debate on the BMF scandal, and its refusal to give MPs adequate time to read the set of BMF Reports, running into 13 volumes and G,000 pages.
I dare say without fear of contradiction that very few Ministers and MPs really have had a grasp of the BMF scandal from 1979 to 1983, for it is humanly impossible for anyone to read , understand and master the materials in the 13-volume, 6,000-page Reports in the few days given to you.
It is important however that Parliament fully understand the content, import and implications of the BMF reports, or Parliament will in our duty as the Supreme Legislature and Highest Political.
Carrian Empire of George Tan the virtual creation of BMF: BMF Scandal Master Plan
The BMF Final Report started off with the very pertinent comment that ‘There might not have been Carrian without BMF.’ It is clear that the Carrian Empire of George Tan was the virtual creation of BMF, not only in the free-flowing funds provided by BMF, but also in the conspiracy to defraud Bank Bumiputra and the Malaysian public.
The BMF Inquiry Committee identified ‘Concerted Plan’ by various BMF top officials and George Tan to make use of Bank Bumiputra funds to make money in Hong Kong during the start of the property boom in 1979. I will call this the BMF Scandal ‘Master Plant.
The BMF Scandal can be divided into three main phases:
Phase One: The Start of the BMF Scandal Master Plan, with two major developments: the take-over of a Hong Kong public-listed company. Mai Hon (which was later renamed Carrian Investments Ltd CIL), and various transactions to inflate the price of its shares on the Hong Kong Stock Market; and secondly, the acquisition of Gammon House at US$200 million to resell it to the Malaysian Government at US$250 million. A $2 company, Plessey Investments Limited (PIL), was formed under the control of George Tan to be the vehicle to receive a total sum of US$292 million from BMF, which drew funds from BBMB from its Kuala Lumpur head office and its international branch net-work, from the period between 19/12/79 to 25/6/80.
Phase Two: The second stage of the BMF Scandal Master Plan had as its highlight a series of loans from September 1981 to October 1982 totaling US$580 million. The amounts involved were for the purchase of Grand Marine Holdings Limited (GMH), a shipping line, at HK$800 million with a view to resell it to the I’ll shipping Government at HK$1,000 million; and the provision of the necesarry cash flow for the Carrian Group.
Phase Three: In this phase, where Carrian was confronted with liquidity problems, BMF and BBMB tried to keep Carrian afloat with release of further sums to Carrian in surreptitious ways, attempts to arrange a separate scheme for BMF which amounted to a fraudulent preference and the financing of the purchase of Carrian assets at inflated prices. During this period, Jalil Ibrahim was murdered, followed by the collapse of the Carrian Group and the arrest of George Tan.
Was Tengku Razaleigh implicated in the proposed Gammon Purchase in the BMF Scandal Master Plan?
The biggest question in Phase One of the BMF Scandal Master Flan is whether Tengku Razaleigh, then Finance Minister, it was implicated in the Carrian purchase of Gammon House with the intention of selling to the Malaysian Government for quick profit of US$50 million.
According to the BMF Final Report, Dr. Nawawi Mat Awin, as the then Chairman of BBMB met the Governor of Bank Negara, Tan Sri Abdul Aziz Taha, on 12/11/82 and in answer to the Governor’s query as to how the loans to Carrian reached such a magnitude, said it started with a proposal by the Minister of Finance to purchase Gammon House as a centre to house the operations of various Malaysian agencies in Hong Kong. Bank Bumiputra was asked to finance the transaction, but the deal fell through. Nevertheless, it went ahead with the financing …..”
On 7/8/84, Dr. Rais Saniman, alternate director of BMF during the period in question, had given a written statement to the BMF Inquiry Committee that he first became aware of the ‘Gammon House project’ in August 1979. Rais told the Committee that this took place at a dinner given by George Tan at Swire House attended by Lorrain Osman, Dato Hashim Shamsuddin, Ibrahim Jaffar and Carrian ‘chaps’. He was informed by Dato Hashim that Tunku Razaieigh had decided to acquire Gammon House with George Tan acting as agent for the Malaysian Government. He also stated that all those present at the dinner were aware of the decision of the Malaysian Government to purchase Gammon House.
Dr. Rais also told the Committee the same day that it was impressed upon him that this project was a ‘special exercise’, it was secret and had been approved by Tunku Razaleigh. He stated that he was aware that the Malaysian Treasury policy was to have government agencies, trade offices etc. under one roof and that BBMB had participated in such an exercise in New York when it was asked to find a suitable one-stop building. This made him think that the Gammon House project was genuine. He however said that he hold Datuk Hashim that if the matter became public knowledge it would shake the Government because of the size of the loan and the way it was being handled. Dr. Rais further stated that he was reminded by Dato Hashim of this remark last autumn (1983) when Datok Hashim indicated that he now wished he had originally followed the advice of Dr. Rais.
Dr. Rais told the Committee that he considered the situation to be ‘,unorthodox’, since if the Malaysian Government wished to acquire Gammon House, there was no reason why they should not do so openly rather than through BMF lending to a company controlled by George Tan.
Dr. Rais further said that on his return to Kuala Lumpur he told Dato Hashim he wanted to resign as he was unhappy with the manner the Gammon House project was being handled but he was persuaded to remain which he did.
Dr. Rain further stated in his written statement that on 10th or 11th January, 1980, he met George Tan in Hong Kong and was told that Gammon House had been acquired by a company of George Tan beneficially and not on behalf of the Malaysian Government because the Malaysian Government had changed its mind. Dr. Rais told the Committee that “…George Tan said that first he was asked to do a favour on behalf of the Malaysian Government, which he did, and as the Malaysian Government changed its mind later, he was left with this $200 million (HK) deposit which was at the risk of being forfeited…”
The other Director of BMF as well as BBMB, Dato Hashim Shamsuddin, told the Committee on 4/10/84 that BBMB agreed to lend a sum ‘somewhere in the region of US$200 million’ for the Gammon House Project, which meant 100% financing by BBMB.
Ibrahim Jaffar, the then BMF General Manager, in his interview with Committee Member Chooi Mun Sou on 13/3/85, did not comment on the suggestion that there was a plan in January 1980 to resell Gammon House to the Malaysian Government at the profit of US$50 million.
In the Government White Paper (on the BMF Final Report, Tengku Razaleigh has given a flat and total denial in connection with the references to Gammon House in the Report: Tengku Razaleigh said at the time concerned, ‘Kerajaan Malaysia memang telah membuat keputusan hendak membeli hartanah-hartanah di Hong Kong dan di negara-negara lain untuk kegunaan agensi-agensi Kerajaan Malaysia di luar negeri.’ He said the building the Government had in mind and eventually bought was Lap Heng Building. He said: “Gammon House tidak pernah dipertimbangkang langsung’, dan “Sebarang dakwaan yang mengatakan saya kononnya aA mengetahui ataupun saya kononnya ada kaitan dengan pembelian Gammon House adalah merupakan suatu fitnah besar, yang mungkin bermaksud ,jahat.”
There were also letters from Ketua Setiausaha Perbendaharaan Malaysia, Tan Sri Thong Yaw Hong, as well as Sugar King Robert Kuok and Alias Ahmad, Tengku Razaleigh’s personal assistant, all to the effect that it was Lap Heng Building and not Gammon House ‘- , the Government was interested in buying.
I must state that despite these clarifications, I find the Tengku’s flat and total denial weak and unconvincing. Is Tengku Razaleigh suggesting that Dr. Nawawi was responsible for ‘fitnah besar’ dan ‘bermalasud Jah at’ when he told the Bank Negara Governor in November 1982 that the BMF loans scandal started with Tengku’s proposal to buy the Gammon House, and that BBMB went ahead with the financing of the Gammon House purchase when the Malaysian Government changed its mind?
And is Tengku Razaleigh suggesting that there is a conspiracy by Rais, Hashim, Ibrahim Jaffar and George Tan, and even Lorrafn Osman against him? This is because on 3/1/80, George Tan sent a telex to Hashim informing Hashim that he has been offered Gammon House at US$250 million, asked to be advised on the next action and that the message be conveyed to Lorrain Osmar. George Tan then stated that if he were given the ‘green light’, he would purchase first and discuss later as matter is urgent”.
Two valuation reports on Gammon House on the instructions of George Tan in December 1979 were done on the basis of the resale of Gammon House.
Dato Hashim admitted to the Committee that the US$292 million loan was the ‘largest loan ever given out by BBMB’. In fact as the result of the BBMM financing 100% of Gammon House as part of the US$292 million loan, the total Carrian Group loans shot up to M$459.4 million in 1980, which was 7,939 per cent of BMF’s share capital and reserves, and 129% of BBMB’s share capital and reserves.
What is the basis and justification for BBMB to 100% finance Gammon House’s purchase and to grant the biggest loan ever in the Bank’s history to a $2 shell company, PIL, or to George Tan, who had no track record, or security, unless the transaction was on behalf of the Malaysian Government, or for resale to Malaysian Government at a quick profit of US$50 million.
As Tengku Razaleigh is virtually contradicting Dr. Nawawi, why wasn’t Dr. Nawawi asked to clarify in the Government White Paper his statement to the Bank Negara Governor in Nov. 1982 about Tengku Razaleigh’s interest as Finance Minister in the Gammon House?
According to the Special Brief One, which dealt with the Gammon House Project and the US$292 million loans, there were documentary exhibits attached to the report. If I am not mistaken, there are two volumes of such exhibits appended to Special Brief One. MPs, however, had not been given these two volumes of exhibits, although they had been given the five volumes of exhibits for Special Brief Two and three volumes of exhibits for Special Brief Three. Unless the Government can give a satisfactory explanation for the omission of these two volumes of exhibits for Special Brief One,
it would only reinforce the view that Tengku Razaleigh’s denial is weak and unconvincing.
In the public and national interest, there should be a thorough inquiry into the question as to whether Tengku Razaleigh was implicated in any manner in the Gammon House Purchase in the BMF Scandal Master Plan.
Although there is no dispute that US$292 million was released by BMF to the $2 company PIL under the control of George Tan, but there is considerable confusion as to who was the borrower, what was the purpose of the loan, what were the securities to be provided, loan applications, loan approvals, loan documentation, repayments and the role of the BMF as lender or as agent for the ‘investors’.
On 3/11./82 George Tan wrote to Ibrahim Jaffar stating that “…your parent company, Bank Bumiputra is the major shareholder of PIL.” George Tan also affirmed an affidavit on 4f3/85 in Hong Kong Companies Winding Up No. 298 of 1984 alleging “…that 9 customers of the merchang banking arm
of BBMB became and still remain beneficial owners of a 54% interest in PIL…”
Has George Tan’s allegatio ‘that BBMB controlled the majority interests in PIL any basis?
Regardless of who is the major shareholder of PIL, however, the fact remains that US$292 million was released by BBMB to PIL for the purpose of implementing the first phase of the BMF Scandal Master Plan.
In the Special Brief One, the Inquiry Committee is of the view that the withdrawal and use of the US $292 million and a greater part of the other MM Loans, which resulted in substantial loss to BBMB and BMFt tantamount to THEFT. It also found the accounting records of all the related companies, such as Carrian Holding Ltd., Carrian Investment Ltd, PIL, Extrawin, Max Entry and BMF were so made up as to disguise the true nature of the transactions and tantamount to FALSE ACCOUNTING,
Criminal offences under the laws of Hong Kong and possibly those of Malaysia as well, had therefore been committed.
However, although the Special Brief One was submitte on 7/5/85 to the Chairman of BBMB Tan Sri Basir Ismail, its recommendation that BBMB lodged a report with the Kuala Lumpur Police, placing before them the Special Brief, the BBMB had not turned the Brief over to the local police. What is the reason for the refusal of the BBMB to comply with the recommendation of the Inquiry Committee?
Phase 2: Is Datuk Musa Hitam implicated in the purchase of Grand Marine in the BMF Scandal Master Plan?
The question in Phase Two of the BMF Scandal Master Plan is whether Datuk Musa Hitam was implicated in the second phase of the BMF Scandal Master Plan with regard to the acquisition of the shipping line, Grand Marine Holding, to be resold to the Malaysian Government at a profit of HK$200 million.
Although BMF became ‘concerned’ with the over-concentration of its loan portforlio to one group of customers and with the inadequate securities given by the Carrian Group for the earlier loans which were still outstanding, BMF released further series of loans amounting to US$580 million to the Carrian Group. These series of loans were substantial: US$138 million, US$100 million and US$97 million and additional loans totalling US$143.5 millions HK$643.7 million and S$20 million. These vast sums totalling US$580 million and provide the necessary cash flow were used to acquire Grand Marine for the Carrian Group.
On or about 15/4/83, acting for some party in Malaysia of HK$800 million. In turn he was at a profit of HK$200 million. In not buy GMH and he was stuck. Dr. money came from BMF. George Tan told Jalil Ibrahim that he was to take over control of GMH at the cost told to sell GMH to the Malaysia Government the end, the Malaysian Government did Rais instructed him to do the deal. The money came from BMF.
Datuk Musa’s name was mentioned by Ibrahim Jaffar, when questioned by the Committee, as the party in the Malaysian Government interested in the Grand Marine deal, because of the `close connection between Dr. Rais and that particular Minister.”
However, in his interview with the Committee, Dr. Rais repeatedly denied that he knew anything about the acquisition of GMH. He admitted that later, in March 1982 George Tan offered to sell the
controlling interest in GMH to the Malaysian Government. Dr. Rais then spoke to the Deputy rime Minister, Datuk Musa Hitam, of this offer and was told that it was up to Dr. Rais and his people to decide whether they would wish to accept the offer, Dr. Rais said he did not follow up on the matter.
In his clarification in the Government White Paper, Datuk Musa said ‘Ada satu kali di mana Df. Rais menyebut serta cuba menghuraikan hal-hal perusahaan/perniagaan personalnya di Hong Kong. Tetapi saya telah menahannya oleh sebab ini tidak ada kaitan langsung dengan tugas-tugas resmi kita.
Saya tidak tahu-menahu atas apa-apa yang lebih daripada itu.”
During the interview with the Committee in London on 9th July 1985, Rais explained that at the 1984 UMNO AGM there was a strong rumour being circulated by the Tunku Razaleigh supporters that the Deputy Prime Minister was involved in GMH. He said this was a mischievous rumour. Rais
had been told that it started with Ibrahim Jaffar flying back from Hong Kong with the note dated 8/5/83 apparently prepared by or on the instructions of GT (George Tan). This note referred to the proposed sale of the US assets and the reference to the outstanding debt of US$500 million to with a breakdown referring to the sum used for the acquisition of GNH alleged to be carried out on the instructions of DRS acting on behalf the Deputy Prime Minister. DRS said that he was asked by the Deputy Prime Minister to return to Kuala Lumpur to be available to explain to the UMNO, General Assembly if necessary. He returned to Kuala Lumpur but was not required to make any explanation. That was why he called on the Committee on 4/6/84 to explain the rumour of the Deputy Prime Minister’s involvement GMH.
The Inquiry Committee is of the view that in the Grand Marine case, the evidence is insufficient for it to come to any definite conclusion as to the involvement of the Malaysian Government or any person acting on its behalf.
However, I would endorse the Committee’s recommendation that there are sufficient grounds for further investigations into the allegations made by George Tan that he acquired GMH for the purpose of reselling to the Malaysian Government at a profit of 8K $200 million and his later allegation that he acquired GMH on the instructions of Dr. Rais acting on behalf of the Malaysian Government.
There is no dispute that the GMF financed the acquisition of GMH, which itself warrants an investigation.
A substantial loan totaling US$138 million was released by BMF to 7 nominated companies of George Tan, which enabled George Tan and as alleged him, the ‘9 overseas investors’ to acquire GMH. The records of BMF merely show that this ‘Loan’ was given to 7 Borrower companies for ‘investment’. There were no evaluation of these 7 borrower companies. They were all HK$2 incorporated after the ‘loans’ were approved were all paid out in a round-about route to companies, 4 of which were and released. The ‘loans’ Carrian Holdings Ltd.
George Tan has been maintaining that this sum of US$138 million together with part of another loan of US$100 million released to another 5 borrower companies were ‘advances’ given by BMF to the borrower companies for them to invest with George Tan take the form of an acquisition of an Hong Kong. This investment was to control over GMH through CIL. “‘
The lnquiry Committee felt that “the manner in which these sums were released (4 of these sums were released to companies not yet incorporated) and the use to which were put to, established the fact that the sums of US$138 and US$100 million were not loans granted banking business,” in the normal course of banking business.”
The Seven Mysterious Writs
There was then the inexplicable and irrational actions to recover the U5$138 million not by suing the seven borrower companies, who are the principal debtors. Seven writs were filed against George Tan as the guarantor of the 7 loans. However, no attempt was made to serve the writs and at the end of the year, although the Board of the BMF resolved that the 7 writs be served on George Tan, the management of BBMB ‘over-ruled’ this decision, and instructed the management of BMF to ‘take-back’ the 7 writs after they had been served on the Solicitors of George Tan.
The Inquiry Committee, in the Special Brief Two, is of the that these two series of ‘loans’, US$138 million and US$100 million not genuine loans. The releases of these ‘loans’ were tantamount to THEFT, The Committee is also of the opinion that another one in the series of the US$580 million loans, US$97 million, also tantamount to Theft, while all the MM loans involved in this series needs special attention and many of them were not genuine and amounted to theft.
The Committee also found fraud on creditors or potential creditors, conspiracy and false accounting in the other loans in this series.
The Committee pointed out a seeming conflict of interest during this period. It was in BMF’s interest to obtain adequate securities over the existing loans. From Carrian’s point of view, it was essential
for it to have available such assets that it could use to secure further funds so as to maintain its liquidity position. However, the abandon with which BMF was releasing substantial loans without any or any adequate security indicate that the BMF was merely putting on a show in its attempt to obtain security over existing loans.
On 26/10/82, Carrian announced that it was not in a position to meet current payments and was facing temporary liquidity problems. Notwithstanding this announcement, BMF continued to effect the
‘transfers’ and to make further releases of substantial sums to the Carrian Group without any or any adequate securities.
Phase 3: Was Dr, Mahathir Mohamed implicated in the fraud, criminal breach of trust and criminal conspiracy
In the third phase of the BMF scandal Master Plan, fraud, criminal breach of trust, criminal conspiracy and even murder committed. The question here is whether the Prime Minister, Datuk Seri Dr. Mahathir Mohamed, was implicated in the fruad, criminal breach of trust and criminal conspiracy of this period.
Although one would expect any lender to the Carrian Group to ‘freeze’ all further loan releases to the Carrian Group as a result of the announcement of liquidity problems, and to review the total position of the Carrian Group before making any further loans, BMF acted in exactly the opposite way. BMF continued to release further loans to the Carrian Group without any or any adequate security.
On 29th October 1983, for instance, three days after the ‘liquidity problem’ announcement, the BMF Board approved a US$30.2 million loan although Carrian Holdings Ltd, applied for US$30. million, allegedly to ‘enable Phase I of the Oakland Project(part of the US Assets of Carrian) to be completed and to meet’ pressing and urgent commitments’.
BMF never obtained the Oakland project as security, (and BBMB had later to spend US$76 million to purchase Carrian’s US Properties), and the US$30.2 million was released in a subterfuge manner by BMF, remitting the funds to another one of the over 200 Carrian nominee companies, Paris Ride, and the funds were in turn channeled back to Carrian Holdings Ltd.
The Inquiry Committee holds that the evidence is ‘conclusive’ to show that BMF released this total sum of US$30.2 million to keep Carrian afloat, BMF did not request any securities and none was offered.
It was one of the pre-conditions to the implementation of the W ardley Hambro Restructuring Schemes for CHL and CIL that George Tan as the ultimate , controlling shareholder of both companies would make available a sum of HK$250 million (approal mately US$40 million) to be placed in an ‘Escrow Fund’ to provide working capital for the two companies.
Within 30 days of the last release of the sum of US$30.2 million BMF released US$40 million to Bank of Communications for on-lending to the Carrian Group. This loan was secured by the personal guarantee of George Tan, who had given several guarantees to BMF exceeding in total US$500 million. No personal evaluation of George Tan’s assets and liabilities was ever carried out by the BMFL.
Further sums of US$3 million and US$4.5 million were released by BMF to Fitarget, a George Tan controlled company on 9/4/83 and 10/6/83, again secured by the personal guarantee of George Tan.
The second pre-condition for the financial restructuring schemes for CIL and CHL was the disposal of assets by Carrian – the US Assets and the CUL and UB shares.
The US Assets of Carrian were meant to be security for the Carrian loans, and the BMF was desperately trying to perfect its security ever these same assets. In agreeing to buy the US Assets, through a Third Party for a sum of US$76 million, BMF was in fact abandoning its efforts to complete its security over the US Assets and coming out with a further sum of US$76 million.
BBMB Board was entitled to rescind the sale and purchase agreement within 28 days should the purchaser discover any adverse facts relating to the US Assets. The BBMB were informed that in the opinion of valuers in the United States, the US Assets were not worth the purchase price. The BBMB went through with the contract.
The apparent purchaser of the US Assets, Yap Lim Sen, of Ipoh Gardens, was acting as ‘nominee of Bank Bumiputra’ and regarded himself as performing a ‘National Service’. The funds for the purchase were provided by BBMB. He was not asked to and he did not sign any trust deed.
According to Yap Lim Sen, it is difficult to place a value on the US Assets. His own estimate is that the US Assets may now be realizable at between US$30 million to US$40 million.
Yap Lim Sen took his ‘National Service’ seriously, and he went to the US to look at the Assets. This is what he told the Committee on 13th Nov. 1985: “I consider my duty to protect the assets. It became very, clear to me – none of these assets were good assets. We had overpaid. On one of the US Properties La Oakland, Yap said it was ‘similar to buying a piece of land at a slump area in Seremban!’
Elsewhere, he said:”If BMF people thought that George Tan could be believed, they must be naive! ……….. The greatest mistake was to allow disaster to manage disaster.”
The Committee is of the opinion that the purchase of the US Assets, like the purchase of the CUL shares and the UB shares, on over¬generous terms were in fact schemes to finance the Carrian Group and to keep it afloat.
BBMB insisted on the confidentality of both transactions, and used subterfuge companids to hide the identity of the real purchaser. This also applied to the disposal of the CUL/UB shares. This time the nominee purchasers were to be Dato Dr. Mohd. Hussain Yusuf and Mohd. Arfffin b Mohd, Yusuf. This deal was aborted because of the chain of events set in motion by the murder of BMF Assistant General Manager, Jalil Ibrahim, which led to the collapse of the collapse of the Carrian Empire and the arrest of George Tan .
In Special Brief Part III, the Committee concluded that the first series of releases by BMF after the announcement of liquidity problems by CIL, the US$30.2 million ‘loan’ to Paris Ride on the instructions of CHL was not a genuine loan, but was THEFT of the funds of the BBMB released through BMF.
The second release involving US$40 million to Bank of Communications for on-lending to Carrian Nominees Ltd and the sum of US$7.5 million were ‘theft or criminal breach of trust’.
As for the acqusition of US Assets, the Committee is of the opinion that “the Board of BB MB including Wong Aun Pui as adviser to the Board and George Tan with Bentley Ho conspired to defraud the shareholders of BBMB to part with the sum of US$85 million for the purchase of the US Assets. The Board of BBMB acted in breach of their fiduciary duties in utilising the sum of US$85 million for a purpose which was ultra vires BBMB and which was disguised in the books and records of BBMB as merely a loan to Marmel for the purpose of investment in the Transpacific Trust in our opinion the conspirators or some of them have, prima facie, committed offences of Criminal Breach of Trust, Breahces of the Banking Act and Companies Act and False Accounting under the laws of Malaysia.”
24-hour ultimatum to BBMB to lodge report against Dr. Nawawi and the other BBMB Directors for conspiracy to defraud and criminal breach of trust and I will do so
The Board of Directors of BBMB involved in the decision-making to acquire the US Assets of Carrian, which was made at a full Board meeting on 20/5/83, comprised:
Chairman: Dr, Nawawi Mat Awin
Members : Dato Mohd. Hashim Shamsudin
Haji K. Munshir Ariff
Tan Sri S,O,K. Ubaidullah
John K,D, Eu
I am giving the BBMB 24 hours to act on the recommendation of the Committee on Special Brief Part III, i.e. lodge police report in Kuala Lumpur against Dr. Nawawi and the Board Members and Advisor for ‘conspiring to defraud the shareholders of BB MB’ and !breach of their fiduciary duties’ as stated in Para 28,8 of the Special Brief. This Special Brief Part III, together with the BMF Final Report, had been submitted to the BBME3 for over three months now, and the Row BBMB Board of Directors would be grossly negligent. of its duties for not acting on the recommendations of the Inquiry Committee.
If the BBMB does not within 24 hours act on the recommendations of the Inquiry Committee as set out in Special Brief Part III, then I will, as Parliamentary Opposition Leader, following study of the Special Brief Part III as handed to me by the Government for Parliamentary purpose, in the public and national interest, act on Recommendation 29.1(2) of the Special Brief Part III, namely:
“In the light of the above we recommend to BBMB that BBMB and/or BMFL take immediate step:
(2) to lodge a report with the police at the appropriate police station in Kuala Lumpur placing before the police this Special Brief together with the Exhibits to enable the
police to commence investigations into the several matters reported in this Special Brief and to take the necessary action to charge in a Court of Law the person or persons responsible for such offences as are evident ….”
Antecedents of Carrian’s US Assets
Carrian’s US Assets had earlier featured in the BMF Scandal. Right from the very beginning of the BMF’s numerous very substantial loans to Carrian Group, US$292 million, US$138 million, US$100 million, etc. to HK$2 companies nominated by George Tan, some of which were not yet incorporated., from 1979 to 1981, the releases were made before proper documentation were prepared or without any or any adequate security. The relationship between BMF and George Tan and the Carrian Group was ‘very special’, not that of banker and customer. Huge loans were given out when there were no loan applications or when there was no such borrower companies!
Despite BMF’s attempts to improve on its unsatisfactory security position, and the repeated advice of the BMF Solicitors, that ‘the outstanding loans were under-secured and the securities were of doubtful value” and that BMF should insist on obtaining, “more enforceable security”, the CHL was not co-operating with BMF in perfecting its securities.
What is shocking is that despite Carrian’s unco-operative attitude to improve the securities held by BMF, the BMF continued to release very substantial sums of “Loans” to George Tan and Carrian Group without any or any adequate securities. These releases were given cut for purposes that were never clearly defined but were for purposes of record described as “general improvement”.
BMF however managed to cause George Tan to execute a personal guarantee for US$500 million. There was no evaluation of George Tan’s assets, BMF appeared to he satisfied with the existing securities after George Tan signed the guarantee.
Following this, BMF was requested to substitute the current Hong Kong securities held by BMF with a charge over the US Assets of the Carrian Group’ which, according to George Tan, was valued at US$560 million. (This was the same assets which BBMB later purchased at the exorbitant price of US$76 million). BMF, with the full knowledge and consent of BBMB agreed to the request. Documentation was duly completed on 4/10/82 to effect this ‘swap’ of securities. However before the Oct. 4 Agreements were signed, the BMF on the instructions of Dato Hashim on 28/8/82 released some of the securities to be replaced. The releases thereafter continued although Carrian did not substitute the US Assets as securities. After signing, the BMF lawyers considered that the October 4th Agreements could possibly be declared a fraudulent preference to encumber the assets of CIL, a public listed company, (which owed US$35 million) to secure the outstanding debts of Carrian Holding Ltd. to an extent in total amounting to US$500 million.
The net result of the scheme to substitute the existing securities was a loss to BMF who surrendered the existing securities which BMF held without taking any security over the US assets!
It was only in April 1983, some six months later, that the BBMB appeared ‘concerned’ over the enforceability of the October 4th Agreements.
On 19th April 1983, George Tan suggested that BMF buy the US Assets , of Carrian for US$76 million. At this period, the City of Oakland made a demand for the sum of US$6.7 million which was owing by CIL. in respect of the Oakland Property which formed part of the US Assets of Carrian. The City of Oakland threatened to foreclose on the Property if payment was not made by 16/5/83.
As the Special Brief Part III stated, Carrian was therefore in a very vulnerable position at this stage of time. BMF could have taken advantage of the situation and could have made George Tan accede to the demands of BMF. We have not seen any demands being made. Instead, BMF proceeded to prepare and submit a Board Paper to BBMB for a loan of US$6.7 million to be given to Carrian for settlement of the amount owing to the City of Oakland.”
Before the Board Paper for the loan of US$6,7 million was put to the Board of BBMB, the management of BMF prepared another Board Paper proposing that BBMB finance a 3rd Party to buy the US Assets for US$76 million.
After the BBMB Board decision of 20/5f83 to approve the proposal to acquire the US Assets of Carrian through a Third Party, the Sale and Purchase Agreement for the US Assets between CIL and CHL, as vendor, and the two nominee companies Dragon Base and Darton as purchaser, was executed on 31/5/83. The Agreement provided for a rescission period of 4 weeks (up to 28th June 1983) for rescission in the event of any adverse disclosures about the property.
On 7/6/83, Jalil spoke to A Neoh (BMF Counsel) who rang him from San Franscisco and informed him that the valuers, Levanthol had advised that the US Assets was valued at below US$76 million ( and later another American valuer Perini reported that .An American buyer …. would be unwilling to pay more than perhaps US$56 million for the property… ‘).
Jalil made the following note in his diary: –
” … Levanthol – has advised not to proceed with the transaction because the properties are not worth so much…”
On 9/6/83,Jalil wrote a personal letter to his wife and all his children which was unfinished and was not posted. In his letter he referred to the purchase of the US Assets by the Bank (not the financing of the purchase by the Bank of a Third Party) and to the signing of the sale and purchase agreement of the US Assets by the Bank. He stated that if the sale was to go through he may be asked to go to the US to manage the project. It is clear from this remark that Jalil was fully aware that the sale was still conditional.
Jalil then went on to write:
“…Honestly T have reached the limit of my patience here„ If I don’t have the contract at the back of my mind – I would give notice of resignation and find a less worrysome, less problematic job. It seems to me that the reward for being a good worker is to load him with more and more problems until he goes mad. The problems in Hong Kong are not my making and from today onwards I am going to think of myself and my family first and put the interests of the Bank, the race and the country behind me. If those directors had thought of the interests of the bank, race and country first they wouldn’t have made all those blunders in the first place. I have sacrificed enough and if I am asked to make further sacrifices, become another mad man by going to the USA then I will not hesitate to give them a piece of my mind. They can recall me to KL on 24 hour notice – that’s fine with me. Basically they must know I have had enough and I mean it.”
Here, we see Jalil’s cry of despair, from the very depth of his soul. He must have been under intense pressure, close to breakingpoint. What could be the cause, One could only hazard a guess, as those responsible for Jalil’s cry of despair and frustration are not going to come clean. A Neoh’s experienae at a meeting with Lorraine Osman, Hashim Shamshuddin and Wong Aun Pui in Kuala Lumpur on 22/6/83 when he brought up the question of the high purchase price of the US Assets, probably throw revealing light on the cause of Jalil’s despair on 9/6/83.
Para 27.27 of Special Brief Part III stated that when A.Neoh raised the matter, he was told by Wong Aun Pui that it was not for him as legal counsel to discuss the matter of the purchase price. It was a business decision and was of no concern to the legal counsel.”
BMF Final Report (p.667), Para , 61.9(5) stated that the next day, 23/6/83, at the office of Lorrain Osman, and Wong Aun Pui “indicated to A. Neoh that he was upset that the matter of values was raised at all and that A. Neoh should stick to legal issues. Lorraine Osman concurred in this view. Thereafter A. Neoh concentrated on the legal issues and suggested that at least an escrow fund of 10% of the remaining purchase price should be sought.”
My guess is that as a honest, conscientious and God-fearing . public servant, Jalil must have rushed to his superiors to bring them the ‘good news’ he had heard from A Neoh that the US Assets were
not worth US$76 million, and that with the period of rescission still available, the BMF could save precious millions of dollars。
Instead of finding joy from his superiors, he must have found indifference, and even annoyed and there could have been a heated argument with Jalil demanding that the sale and purchase contract should be rescinded unless the sale price is lowered to reflect the latest valuation report from the States.
This could have led to a confrontation whereby Jalil could have been told and even warned that he should not ‘rock the boat’, but play along ‘in the interest of the bank, race and country’, or face dire consequences.
This led Jalil two days later, on June 9, 1983, at night at 10 p.m. in his loneliness, frustration and despair, to cry out in protest at the insinuation that in trying to save BMF and country millions of dollars, he was not thinking of the interest of the bank, race and country; which he later decided not to finish and post, which he must have realised would cause his family great alarrn.
The earlier paragraph of his Jalil’s unfinished letter is equally revealing: He said:
“My stay in Hong Kong may end quite soon i.e. if my fears come true. You remember I told you earlier that the Bank is buying certain projects in the USA (office complexes, land under construction, oil exploration companies) – well the Bank has entered into a Sale and Purchase Agreement for those projects – if the sale goes thru they need someone other than the Directors and General Manager who know about these assets/projects is myself – so I anticipate being asked to go to the USA for at least 6 months to a year to manage these assets. So I must now think of a reply in case I am asked-to go.”
This letter was written at 10 p.m. at night, when alone with himself, his frustrations, pressures and anger. This letter confirmed that the whole deal on US Assets was conducted in great secrecy, that he was under great pressure, and he was beginning to feel intensely disenchanted by the rot in the entire BMF scandal, for which he was sent over to Hong Kong.
This would be Jalil’s experience and feelings if the objective of th purchase of US assets was merely a colourable excuse to pump million to try to prevent Carrian Group from collapsing, which is unknown to Jalil.
If my supposition is correct, then it could only be one of two persons who could have given Jalil the telling off, either Lorrain Osman or Hashim Shamsuddin. ”
One cannot draw any conclusion from A Neoh’s two experiences where he was told off for raising the question of the high price for the US Assets, where Lorraine Osman was present, but this I feel is an important illumination about Jalil’s despair and agony, and even the circumstances leading to Jalil’s murder on 13th July 1986.
Investigations into Jalil’s Murder should be re-opened
The Special Brief Part III stated that the release of US$4 million by BMF on 18/7/83 to Fitarget was ‘inextricably connected with the murder of Jalil’. It said: “In our opinion the authorities involved with the investigation of Jalil’s murder should take – further look at the events of 18/7/83 and the roles played by all the persons connected with the release of the US$4 million to establish the link between the murder of Jalil and the release of the US$4 million. This will enable them at the same time to establish whether there was in fact a ‘Korean’ who actually did the killing and whether the ‘Korean’ took his instructions from anyone connected with the release of the US$4 million.”
The Committee feels that the events of 18/7/83, although consistent with the total evidence at the trial of Mak Foon Than to warrant his conviction, also ‘gives rise to many unresolved events and inferences as to the actions of the others involved. It is therefore necessary that this matter be further investigated.”
I fully endorse the Committee’s proposal for the re-opening of investigations into Jalil’s murder, which should be a joint operation between the Hong Kong and Malaysian Police forces. In all likelihood, the order for the killing of Jalil could have emanated from Malaysia, because of Jalil’s failure to take into account ‘the interests of bank, race and country’.
It is clear from the evidence of the witnesses at the trial of Mak that Jalil was against the release of the US$4 million loan without the clear approval of the Supervisory Committee, although the money was partly for the ‘secret’ project to buy the CUL (China Underwriters Life & General Insurance Company, Ltd.) and UB (Union Bank Hong Kong Ltd,) assets through off-shore companies subterfuge means, in the same manner as the Carrian’s US Assets.
At the time that Jalil was being murdered on 18th July 1983, the US$4 million loan which he had blocked was being released.
Prime Minister must accept full personal responsibility for the third phase of the BMF Scandal Master Plan
In the Government White Paper, the Prime Minister, Datuk Seri Dr. Mahathir Mohamed, said:
“Mengenai kes BMF ini saya mula-mulanya mengetahui hal ini apabila ianya dilaporkan di dalam akhbare Selepas itu saya telah diberi taklimat secara kasar mengenai perkara ini oleh Pengerusi Bank Bumiputra dan Bank Negarao Dalam salah satu daripada taklimat itu, Pengerusi Bank Bumiputra memberitahu saya tentang tindakan-tindakan bank tersebut untuk mendapat semula wang sebanyak yang mungkin daripada George Tan sendiri dan syarikat¬syarikat yang berkaitan dengan beliau dan daripada mereka yang bertanggung¬jawab meluluskan pinjamap-T,i-ijamar_ tersebuto Saya bersetuju dengan tindakan itu. Walau bagaimanapun, saya tidak diberitahu mengenai butir-butir dan tidak terlibat dalam apa cara sekali pun dalam pelaksanaan tindakan itu. Ini adalah perkara dan tanggungjawab paTa Eksekutif Bank tersebuta Apa yang dapat saya katakan ialah saya percaya pihak Pengurusan Bank itu telah bertindak demi kepentingqn bank tersebut dalam usaha usaha mereka mendapatkan kembali semua wang yang mungkin diperolehi oleh mereka dengan mengambilkira keadaan keadaan yang terdapat daiam kes ini.”
I presume that the Prime Minister was referring to the first newspaper break on the BMF story, which appeared in the Asian Wall Street Jourhal on 10th November 1982, which reported about troubled BMF loans in Hong Kong involving Carrian, Eda and Kevin Hsu, but which was denied by the BBMB Chairman, Dr. Nawawi Mat Awin.
On 12/11/1982, the Bank Negara Governor, Tan Sri Aziz Taha called the first meeting with Dr. Nawawi to express his concern with the situation of BMF, A Bank Negara inspection team led by Lee Kong Lam from Bank Negara had completed its inspection report on BMF with the date of reference as at 30/6/82, and had submitted it to the Governor on 30/9/82.
I note that it was six weeks after the receipt of the Bank Negara inspection report that Tan Sri Aziz Taha called a meeting with Dr.Nawawi to discuss the grave problems in BMF. Would the Governor delayed longer if not for the Carrian announcement of liquidity problems .” On Oct. 26, 1982
which heralded the likely crash of Carrian, bringing down with it the BMF.
This is because the Bank Negara Inspection report on BMF as on 30/6/82 would have indicated that the BMF had dangerously over-exposed itself, and threatening the parent bank itself.
The Bank Negara Inspection Report showed that as on 30/6/82, BMF’s total lendings amounted to HK$5.042 billion, out of which HK$3.246 billion was to Carrian Group, which was ‘undesirable and imprudent’.
The Inspection Report also found improper banking and financial practices, that there was a ‘special relationship’ between the BMF and Carrian Group which ‘stretches beyond that of normal banker/customer relationship’ resulting in the substantial loans and advances amounting to HK$3.246, the bulk of which was granted on an unsecured basis. It also pointed out payments of directors fees and consultancy fees to the directors of BMF and to the group chairman of BBMB.
Under normal circumstances, such a stinging Inspection Report would have justified the Bank Negara Governor bringing out his artillery and moving in to clean up the mess in the BMF. Bank Negara had flexed its muscles without hesitation in many other instance, as Oriental Bank, Perwira Habib Bank, D & C Bank and Bank Buruh among others.
But in the case of BMF, not only the Bank Negara failed to intervene, it seemed even hesitant to summon the Bank Bumiputra Chairman to put him on the carpet. Is this because like the BMF, which was described as a ‘special baby’ in Bank Bumiputra, BBMB was ‘no ordinary bank’ in the country; as Dr. Nawawi was no ordinary Bank Chairman as well.
At that point in time, in October 1982, Dr. Nawawi was the brightest star among bumiputra businessmen/professionals in the UMNO political firmament, and he was tipped to be the next Finance Minister of the country should Tengku Razaleigh step down from the Treasury post. It is understandable therefore that Tan Sri Aziz Taha should have considerable constraints in dealing with someone who might become his political master in the not too distant future.
Dr. Nawawi assured Tan Sri Aziz Taha that everything was under and that the internal audit team of BBMB was at the moment carrying own audit of BMF.
On 16/11/82, the Bank Negara to brief him on the BMF situation, and Prime Minister for the second time for Governor met the Prime Minister six weeks later on 5/1/83 met a second briefing.
On 2/4/83, The Governor wrote to the Prime Minister, referring to the two earlier briefings which he gave to the Prime Minister on 16/11/82 and 5/1/830 The Governor said he wanted to ‘provide a clearer picture as to how BMF got itself into this predicament’ and to keep the P rime Minister informed of the latest developments. He ended his 10-page letter asking for an appointment with the Prime Minister to discuss the BMF affair and how to deal with the accounts of the Bank Bumiputra group.
I find Tan Sri Aziz Taha’s letter of 2/4/83 to the Prime Minister, together with Jalil’s unfinished letter of 9/6/83 the two most important and remarkable documents in the eleven volumes of exhibits (although I must confess I have not yet gone through five other v of exhabits ) .
The duty and powers of Bank Negara, under Part VI of the Banking Act 1973, is to supervise and control banks carrying on business in Malaysia, These powers include mandatory provisions to investigate, under conditions of secrecy, the books, accounts, and transactions of each licensed bank and of any branch, agency or office outside Malaysia opened by a licensed bank incorporated in Malaysia.
The provisions of Part VI of the Banking Act 1973 also empowers Bank Negara, in the event that a bank, considers that it is likely to become unable to meet its obligations or is about to suspend payment and informs Bank Negara of its inability, to take all appropriate measures to direct the operations of the bank including the power to assume control of the bank.
The Bank Negara Governor responsibilities is not to write plaintive letters to the Prime Minister to remind him of what he had briefed him previously about BMF but to take vigorous actions to straigthten out wayward banks or financial institutions.
It is clear from the events that in the five months since his first briefing of the Prime Minister in the BMF scandal, there was nothing drastic the Bank Governor could do.
During this period of time., BMF released further sums to Carrian and BBMF joined in and released a sum of US$76 million for the purchase of the very same US Assets which BMF had failed to secure on its outstanding lendings. When Carrian collapsed, both BMF and BBMB suffered further losses.
What steps could Bank Negara have taken after it had completed its inspection on 30/9/82? The Committee felt that Bank Negara could have taken steps to cause the removal of the persons in control of BMF and not merely rely on the assurances given by Dr. Nawawi that everything was under control and the statement by Dato Hashim that BMF would not suffer any loss.
The BMF Final Report made a significant statement: “Tan Sri Aziz Taha in his interview with the Committee on 2/12/85 stated that in the circumstances then prevailing Bank Negara was not in a position to intervene any more than what had been done, It had done all that was possible in reporting the matter to the Government, for the Government is the ultimate shareholder of BBMB and it had been briefed on the serious situation. The chairman of BBMB was also in direct contact with the Government.”
In the judgement of the Inquiry Committee, in Special Brief Part III (Para 28,3); “The ‘monitoring, role of Bank Negara was ineffective. Bank Negara had completed its inspection and had discovered very serious defects in the management and control of BMF. The Governor and the Deputy Governor called in the Group Chairman, Executive Directors and executives of BBMB and BMFL for meetings. The Deputy Governor noted that no one understands what was going on’, and yet Bank Negara did not intervene. In our opinion, if Bank Negara had intervened after it had completed the inspecytion it could have been in a position to prevent further releases to Carrian.”
The picture that has emerged from the BMF Final Report, and the Governor’s letter to the Prime Minister on 2nd April 1983 is very sharp and clear. The Bank Negara Governor had been shunted aside in the handling of the BMF scandal, to the extent that he had to resort to ccrrespondence five months later to try to remind the Prime Minister of the magnitude of the BMF problem.
Even the Finance Minister, Tengku Razaleigh was Cut the picture, or the Bank Negara Governor should have dealt directly with the Finance Minister, especially as in October 1983, the Prime Minister said the Bank Bumiputra and BMF was under the contract and charge of the Finance Minister, and not the Prime Minister’s Department.
It is clear that in the third phase of the BMF Scandal Master Plan the Bank Negara Governor and Finance Minister had been excluded from the centre of things, and the entire affair was handled by Dr. Nawawi, who report regularly and directly to the Prime Minister, and possibly a third person, Tun Ismail Ali former Bank Negara Government and Chairman of PNB, which hold 70% controlling share of BBMB.
In his letter to the Prime Minister, Tan Sri Aziz Taha tried to raise the alarm, On ‘Financial Impact on Dank Bumiputra Accounts’. the Bank Negara Governor wrote:
“33. In the light of these problem, it is necessary to make an assessment (though tentative at this point of time) of the Financial Impact on Bank Bumiputra’s Accounts should these problem loans become irrecoverable. Based on unaudited accounts for the year ended December 31, 1982, BMF made a net profit after tax of HK$20.9 million. It had made a provision of HK$100 million for bad debts for the same year. The profit for 1982 was arrived at mainly because interest charges on the three problem loans were taken to Income account. Since the three borrowers were faced with liquidity problems and have not only rescheduled their debts but also stopped paying the interest, the standard banking practice is to suspend the interest and not to recognise it as Income. On this basis, BMFL would incur a large loss for the year ended December 31, 1982. As the Interest Income of these problem, loans is approximately HK$600 million, a loss of about HK$500 million (about M$170 million) would completely wipe out BMFL’s shareholder’ funds and consequently affect seriously the financial position of Bank Bumiputra as the parent of BMFL. Bank Bumiputra made a profit of M$63.9 million in 1981. Its 1982 accounts are being audited and profit for 1982 is not expected to differ greatly from its 1981 results. Therefore if interest on the problem loans is suspended in accordance with normal accepted accounting practice, Bank Bumiputra would be showing a substantial loss for the year 1982.”
The Bank Negara Governor ended with request for an to discuss with the Prime Minister ‘the BMF affair and the how to deal with the accounts of the Bank Bumiputra Group consideration requirements of the Company law, banking law, appointment question of taking into accounting practice, and possible repercussions from these problem loans as far as the public is concerned.’
It is indeed most shocking that the Bank Negara Governor has been reduced to a position where he had to ask fur an appointment with the Prime Minister to discuss how to present the annual accounts
of a Bank. I do not blame the Governor, for clearly he does not have the political power of the Prime Minister.
But he is wrong when he said that he had done ‘all that was possible are reporting the matter to the Government, for the Government is the ultimate shareholder of the BBMB and it had been briefed on
the serious situation..’ Dark Bumiputra should be treated just like any other bank, with no preferential treatment or protective ‘Godfathers’ as far as banking regulations and practices are concerned.
From the 1982 Accounts of the BBMB and BMF, it is clear that Tan Sri Aziz Taha’s views had not mattered. When the integrity of the office of Bank Negara Governor was compromised, Tan Sri Aziz Taha should have resigned – and through this courageous act, help avert Malaysia from the colossal losses which we eventually suffered and restore to the office of Bank Negara Governor the respect and credibility it is entitled – even from the Prime Minister himself.
As the Prime Minister had abused his powers in virtually excluding the Bank Negara Governor and the Finance Minister in the handling of the BMF scandal, removing all the external controls and limitations on the BBMB and BMF so that in the last phase of the BMF Scandal, the BBMB and BMF Management took part in a conspiracy to defraud, commit criminal breach of trust, and aiding and abetting in the commission of theft of public funds, the Prime Minister must bear full responsibility for this shocking turn of events.
Bank Neqara must assume full responsibility for the BMF Scandal
Although I understand the predicament faced by Tan Sri Aziz Taha when the Prime Minister and Dr. Nawawi usurped his powers and duties, Tan Sri Aziz Taha and Bank Negara cannot nevertheless absolve themselves from final their full responsibility in allowing the BMF Scandal to reach its magnitude and dimension.
Bank Negara must explain why it came into the BMF Scandal only three years after the start of the BMF Scandal, as the first loan BMF issued to Carrian was on 3/7/79, The Bank Negara watchdogs and hounds must have been dozing away that far three years they were not aware of the greatest banking and financial fraud in Malaysia, and I was told yesterday, even for the whole world for a single banking or financial institution!
Bank Negara had ample opportunities to monitor and prevent the BMF Scandal from reaching its final magnitude and dimension, but it failed. A vigilant and fearless Bank Negara would have stopped the BMF scandal latest by April 1981, when the Second Phase of the BMF Scandal Master Plan had not yet unfolded. But Bank Negara failed the nation and people.
As the BMF Final Report said: banking is one of the most heavily regulated industries throughout the world. Governments, through supervisory agencies or central banks, limit the structures banks operating within their jurisdiction can adopt, the kinds of services they can offer, and the risks they can take. The principal objective of such regulation, supervision and control is to maintain public confidence in the banking system as a whole and in individual financial institutions.
In Hong Kong, all Deposit-Taking Companies are governed by the Hong Kong Deposit-Taking Companies Ordinance, Chapter 328 and comes under the jurisdiction of the Commissioner of Deposit-Taking Companies (the Commissioner) who is also Commissioner of Banking.
Section 22(1) of the Hong Kong Deposit-taking Companies Ordinance, Chapter 328, prohibits a DTC from granting loans or credits facilities to any one customer or group of customers in excess of 25% of its paid-up capital and reserves. However, this restriction shall not apply to transactions to the extent to which they are covered by a form of guarantee acceptable to the Commissioner. BMF was exempted from this restriction as BB MB had provided a Letter of Comfort on 9/12/77 to the Commissioner to the effect that BBMB would fully support the obligations of BMF.
In 1981 the Commissioner introduced certain changes whereby only Letters of Comfort approved by the parent bank and supervisory authorities of the country of incorporation of the parent bank would be accepted. Consequently the Board of Directors of BBMB approved the issue of such a Letter of Comfort on 9/4/81. Bank Negara Malaysia, in a letter dated 30/4/81. Bank Negara Malaysia, in a letter dated 30/4/81, and signed by Mohd. Taufik bin Abdullah, Pengurus Jabatan Pengawalan Bank, Bank Negara, stated that it did not have any objections to the issuance of such a Letter of Comfort.
This Bank Negara letter tantamounts to approval being granted to the BMF in Hong Kong to operate outside the normal controls of the Hong Kong regulatory authorities, and imposes on Bank Negara an even greater responsibility to monitor closely the operations of BMF.
In fact, a responsible Bank Negara would have caused a full and thorough inspection of the BMF operations before issuing approval to the second Letter of Comfort of BBMB in April 1981.
The Inquiry Committee reported that during the interview the Inquiry Committee Members had with the Commissioner of Banking of Hong Kong in February 1984, the Commissioner told them that ‘the request for a guarantee with respect to DTC under the Deposit-Taking Companies Ordinance to be supported by specific approval of the Board of a parent Bank and with the knowledge of the Central/was intended /Bank as an indirect hint to the Bank concerned to exercise a greater degree
of supervision on the lending activities of its subsidiary DTC.
I would add that it was clearly also an indirect hint to Bank Negara to monitor more closely the lending activities of BMF.
Before the Bank Negara issued approval for a second Letter of Comfort, it should have done two things:
Firstly, inspect the operations of BMF; and
Secondly, impose a limit on the lending powers of BMF.
A Bank Negara examination of the operations of BMF before issuing its approval, 30/4/81 would have warned the Bank Negara it should not only withhold such authorisation, but take immediate corrective remedial measures to stop the massive theft, fraud and criminal breach of trust of public funds which had been taking place for 21 months.
This is because an examination of the BMF Accounts for the year ended 31st December 1980 would have shown that Carrian Group’s total loans and advances stood at HK$1,063 million, which is 7,939 per cent of BMF’s share capital and reserves and 129% of Bank Bumiputra’s share capital and reserves.
Furthermore, after issuing the authorisation for the BBMB to issue its Letter of Comfort, Bank Negara should have conducted six ¬monthly inspections of BMF in keeping with its greater responsibility over BMF.
All this was not done. In the citadel of Bank Negara, Bank Negara officials had been found wanting in their responsibility, not only during the final Phase III of the BMF Scandal Master Plan, where the Prime Minister intervened, but as far back as April 1981, when there could have keen no such political intervention. Or was there?
Up till now, Bank Negara exudes the image that it is all-powerful, all-knowing and always right. But the BMF Scandal has shown this to be a myth, that those who play God in Malaysian banking and finance are mere men of clay, with their weaknesses, failings and shortcomings. Who is to supervise and monitor them to make sure that they are carrying out their duties to supervise and monitor the country’s banking and financial system and institutions?
The BMF Scandal is also a Bank Negara Scandal, for it is because of Bank Negara’s incompetence and negligence that the BMF is now so monstrous.
The time has come for the first full investigations into the operations of the Bank Negara so that it would not fail at the crucial moment as it did in the BMF scandal. I would I call on the former Bank Negara Governor, Tan Sri Aziz Taha, to explain to Parliament and Malaysians why Bank Negara had been found so wanting in the BMF scandal.
Auditors’ Responsibility in the BMF Scandal
Many people had contributed directly or indirectly, to the making of the $2.5 billion BMF Scandal. The auditors are among those who must also bear a great responsibility for the scandal.
Touche Ross, the auditors of BMF first became aware of BMF’s roverconcentration of loans to the Carrian Group when they carried out the special interim audit for the six months ended 30/6/80. In a draft letter of recommendations to the directors of BMF, which was sent on 27/10/80, they drew the management’s attention to the fact that the “…..Total Loans and term lendings granted to the Carrian Group amounted to HK$1,58 million as at 30/6/80 and HK$1,583 million was lent through term lendings….”
However, Touche Ross had refrained from commenting on the unduly large portion of the total loan portforlio of BMF granted to the Carrian Group in its audit report. According to an internal memorandum from Arthur Tse of Touche Ross to Dato Mat Noor senior partner of Hanafiah Raslan & Mohammad, Auditors of BBMB, dated 13/4/83, he stated “…. we have refrained from commenting on the unduly large portion of loan portforlio to Carrian and associates. It is because we were politely told that it was a management matter not really an audit matter. In view of the sensitiveness of the situation, we thought that the best course was to keep you informed so as to let the parent bank monitoring the situation…”
Dato Mat Noor told the Committee that he met the BBMB Chairman, Tan Sri Kamarul Ariffin sometime in November 1980 and recommended that “advances be spread and not to place in practically one basket, considering the risks.”
Tan Sri Kamarul Ariffin however denied that there was any such meeting, and expressed surprise that Dato Mat Noor being an experienced auditor did not make a written report to him if there had been such a serious matter.
There were more problems however in the audit by Touche Ross of BMF for the year ended 31/12/81. Touche Ross raised many questions during the course of their audit of BMF’s accounts for 1981 regarding the adequacy of collateral securities and values. In the absence of satisfactory responses and documentation, they advised officers of BMF that unless a proper guarantee of borrowers’ obligations could be provided, they would be unable to issue an unqualified audit opinion.
On 15/3/82, Dr. Rais, on behalf of BBMB, signed a letter of guarantee ‘undertaking to assume all the liabilities, obligations or commitments’ of BMF. As a result, an unqualified audit opinion was given for the BMF accounts for the year ended 31/12/81. HRH was immediately informed of BBMB’s guarantee by Touche Ross.
As a result of the issue of the guarantee by Dr. Rais (with the authority of BBMB), the responsibility of ensuring whether the adequate provisions have been made in the BBMB Group accounts for the year ended 31/12/81 in relation to BMF was shifted to Hanafiah Raslan Mohammad as auditors of BB MB.
The committee was of the opinion that the issue of the guarantee by Dr.Rais and earlier issue of a form of guarantee by BBMB to the Commissioner of DTC pursuant to Section 22(1)(b) of the DTC Ordinance, placed a duty upon Hanafiah Raslan & Mohammed as auditors of BBMB to pay special attention to ensure that adequate provisions have been made in the accounts of BBMB and of BMF.
The accounts of BBMB were approved and signed by Hanafiah Raslan & Mohammad, on 17/3/82, two days after Dr. Rais issued the guarantee and Touche Ross signed the audited accounts of BMF (although the accounts were dated 2/2/82). There was no mention of the unsatisfactory security of BMF relation to the Carrian loans.
In Special Brief Part Two, the Committee said “there is a prima facis case to question the issue of a clear audit report by Touche Ross for the 1981 accounts as the ‘guarantee’ by Dr, Rais on behalf of BBMB which was not formally ratified by the main Board of BBPRB, was not disclosed in the accounts of BMF.
“The Committee is also of the opinion that the audited financial accounts of BBM did not give a ‘true and fair view of the state of affairs of the Bank and the Group as at 31/12/81, and of the results of their operations’ as stated by Hanafiah Raslan & Mohammad, unless adequate provisions have been made for possible losses arising from guarantees given by BBM to the Commissioner and to Touche Ross with regards to loans granted BMF. They have accordingly committed offences under Common Law.”
Audit of BMF and BBMB for year ended y 31/12/82
In auditting the BMF Accounts for the year ended 31/12/82, Touche Ross was of the view that the provision for bad and doubtful debts was inadequate. Up to a sum of HK$4,325 million Was considered doubtful for the loans to the Carrian Group, Kevin Hsu Group and EIL, as compared to the total provision for loans of HK$100 million and HK$60 million for contingency.
BMF had requested Touche Ress to delete Note 8 to the Accounts for 1982 which dealt with the parent bank’s undertaking to assume all liabilities of the subsidiary arising when the receivables become uncollectable, To BMF, this note was politically sensitive.
At the meeting between BMF officials and Touche Ross on 28/2/83 it was agreed that BBMB would issue a letter of indemnity to Touch; Ross, endorsed by the Malaysian Central Bank; against any liability arising from dropping Note 8.
However on 1/3/83 Touche Ross was advised by Dato Hashim that the Group Chairman Dr. Nawawi considered the Bank (BBMB) could not issue such a letter of indemnity under the Malaysian Companies Act, the bank was prepared to issue liabilities of the subsidiary. to consider the note to be deleted. Touche Ross was further advised that a formal undertaking regarding the In return, BMF requested Touche Ross.
On 17/6/83, Dr. Nawawi wrote BBMB Board guarantee undertaking to liabilities of BMF in connection with loans given become insolvent. to Touche Ross to give the assume all the debts and out to customers who become insolvent.
As a result of the letter of undertaking by Dr. Nawawi, the responsibility of ensuring whether adequate provisions have been made in the BBMB Group accounts for the year ended 31/12/82 in relation to BMP was shifted to Hanafiah Raslan Mohammad as auditors of BBMB.
The Chairman of BE MB, Dr, Nawawi., in his statement in the published accounts of BBMB referred to the sharp fall in the property market in Hong Kong resulting in liquidity problems for property companies and said:’… Bumiputra Malaysia Finance Limited(BMFL), a wholly-owned subsidiary in Hong Kong, had its share of such loans and, in accordance with normal practice, such provisions as were considered prudent and necessary have been made in the accounts of BMFL which thus showed a net loss of HK$3.07 million (M1/31.08 million) in 1982.”
Dr. Nawawi further stated in the Chairman’s statement:”….The has given and will continue to give, its full support to BMFL to ensure the continued strength and future progress of this subsidiary company. This backing is made possible because of the inherent strength of the Bank, Furthermore, the Bank is privileged to have the full support of its shareholders and the Federal Government which has declared its unequivocal backing for the bank……”
In the Notes to the Accounts it was stated that:” …. The Government of Malaysia has given an undertaking that it would back the Bank fully in case the Bank faces any difficulties in meeting its obligations…”
In Special Brief Part ITI, the Committee said:”With reference to the audit of BMFL for the year ended 31/12/82, the Committee questions the auditors’ statement in the Annual Report and audited accounts of BBMB in relation to BMFL that they show a ‘true and fair view of the state of affairs of the company as at 31st December 1982”.
The Committee said in the Final Report that it had not sighted the Guarantee which was stated in the Annual Report of BBMB as having been given by the Federal Government of Malaysia.
In the Report of the Auditor-General on the 1982 Federal Government Accounts, there was also a reference to this purported Guarantee to BBMB by the Government, and it said:
“The Notes to the accounts relating to these balances (BBMB 1982) indicate that the Government had given an undertaking that it would back the Bank fully should the Bank face any difficulties in meeting its obligations, The Treasury has however informed me that it has not issued a written statement of such undertaking other than the statement to that effect given by the Minister of Finance in reply to questions in Dewan Rakyat on 15 March 1983.”
I am very shocked by such governmental, atttitude to serious national problems. If a Minister’s reply to a parliamentary question, in this case to my question on the BMF scandal, could constitute firm legal guarantee to BBMB, then I will like to read back all the Parliamentary answer and statements, for I am sure I can collect volumes of broken promises and assurances given in this august House.
The 1983 Accounts of BMF is public history, where BMF sacked Touche Ross as auditors because of its heavily-qualified audit certificate, and its qualifications include:
• Evidence available showing that certain transactions
(by the former board) were not reflected in the company’s books and records thus casting doubts on representations made by the former management;
• Inability of the auditors to obtain independent confirmation of the accuracy of the accounting record;
• BMF’s breach of the Hong Kong colony’s Deposit-Taking Companies Ordinance for at least four days in December, this relating to liquidity requirements of BMF;
• Late adjustments to BMF accounts which had the effect of¬reducing reported net assets by HK$510 million; and
• Inability of auditors to obtain evidence of financial support coming from the parent company (BBMB) or that the parent company has the financial capacity to do so in future.
The last qualification, doubting BBMB’s financial capacity to cope with the BMF scandal must have hurt the BB1KB most, but it was most perceptive and right – for the BBMB would have gone , into liquidation because of the BMF loans scandal if the Petronas had not been directed by the Government to bail it out with the nation’s bill multi-billion petro-dollar reserves.
Corruption and Malpractices
We also find in the BMF Final Reports instances galore of corruption, malpractices and betrayal of public trust.
The BMF Final Report gave ample evidence of the conflict of interest of the directors, the general manager and staff of the BMF in the BMF Scandal.
Lorrain Osman, the Chairman of BMF was dealing in Carrian shares and warrants and a part of the of the proceeds of the sales were remitted hack to Malaysia.
D ato Hashim, through Silver Present was buying and selling Carrian shares and warrants; while Dr. Rais has his Hi-Heated company, and Jaffar Ibrahim the company called Knife and Dagger.
George Tan also gave as `gift’ two million CIL shares to the entire-local staff of BMF, purportedly to establish a ‘Pension Fund’, Although this ‘gift’ was lost in the stock market, it is up to anyone’s imagination to visuarise how much the Chairman, the Director and the Managers of BMF would be worth if the staff are already worth two million CIL shares. When the first million shares was given
in December 1981, the price of CIT was quoted on the Hong Kong Stock Exchanges at the average price of HK$4.90 – making the first one million CIL shares worth about HK$4.9 million!
In the section on Malaysians and Malaysian companies which had received payments and benefits from the Carrian Group, the Committee had a long list of transactions involving many individuals and companies. Although the White Paper had published some explanations end denials of the persons named, like the denials or explanations of Johore UMNO by the Johore Mentri Besar, Dato Abd. Ajib Ahmad, Dato Junus Sudin, this aspect of the Report should not be allowed to be left alone following the White Paper’s publication.
As the Committee recommended in its Special Brief Part II: “The several payments to Malaysians and Malaysian Companies reported in this Special Brief Part II require further investigation by the Police or the appropriate Anti-Corruption Agency.”
Government White Paper is a mere Government Blank Paper on the BMF Final Report
I am very disappointed by the Government White Paper on the BMF Final .Report as it is more fitting to be called ‘ a Government Blank Paper.
Its 21-page seven chapters are mostly redundant reproduction of material to be found in the BMF Final Report. Another 17 pages is taken up with reproduction of the Committee’s terms of reference, the list of BBMB and BMF Board members over the years,. The only relevant part in these 17¬page appendix is the table on what action the BBMB had taken to date on the various reports and briefs of the Ahmad Nordin Inquiry Committee.
The last 38 pages belong to the clarifications, denials or explanations of persons mentioned in the BMF Final Report.
The BMF Final Report runs to 1,057 pages, accompanied by three Special Breifs and over 6,000 pages of Exhibits, were handed over to BBMB and the Government three months ago, and some of the Reports and Briefs were submitted earlier, like the Brief on US$40 million which was submitted on 9/11/94. and the Interim Report which was submitted on 3/11/84.
The BMF Reports, which had taken the Committee two years to complete and cost some $2 million} covered a huge spectrum of subjects. Surely the Government is not going to dismiss the reports and findings of the investigation into the biggest banking and financial scandal in Malaysia. and probably in the whole world, with a Government White Paper. which says nothing!
I had expected the Government to state in the White Paper clearly what actions it intend to take not only to deal with persons and causes of the BMF scandal, but how to prevent a recurrence, in areas affecting not only BMF, BBMB, but also Bank Negara, Ministry of Finance, Auditors, Corruption, Principle of Public Accountability, Jalil’s murder. But the Government seemed to be terribly embarrassed by the BM? Final Report, virtually regard the Inquiry Committee members as dangerous elements, and want just to banish the BMF Report from its mind.
In 1979, at the UMNO General Assembly, the then Prime Minister , an Hussein Onn said that “a country will be destroyed if its leaders are dishonest, untrustworthy and corrupt” and expressed the hope that the Bank Rakyat fiasco would be a ‘bitter lesson to other government institutions and agencies including companies and subsidiaries set up by the Government”.
The Bank Rakyat scandal involved $150 million, but ironically at the very time that he was warning the country against corruption and the national ruination it could bring, the BMF scandal, which would be twenty times bigger than the Bank Rakyat scandal, was just about to rear its evil head.
If the Government and nation is not prepared to firmly recognise that the BMF scandal must be thoroughly exposed, and those persons involved in one way or another brought to justice, then the next time round when another banking or financial scandal rocks the country, it will be 10 or 20 times more serious the BMF scandal.
The BMF White Paper, and the paucity of the Government’s and on the numerous big questions raised by the BMF Inquiry Committee reflects badly on the government, and latest in a series of Government cover up of the BMF scandal.
I find it very shocking and unbelievable that up till this late stage, with the publication of the BMF Final Report, the Government is still engaged in the operation of massive cover-up, although it had surrendered certain areas to public disclosure.
In Chapter VII Para 47 of the White Paper on ‘Ringkasan dan Kesimpulan’, it said: Dari Laporan Akhir dan Laporan Kes ‘Prima Facie’ Rasuah, Jawatankuasa Penyiasat BMFL telah mgnghuraikan perbuatan menipu dan manipulasi yang dilakukan di antara 19 hb„ Disember 1979 hingga 12 hb.Uctober 1982 oleh ahli ahli Lembaga Pengarah dan pegawai-pegawai BMFL yang bersuhahat dengan Kumpulan Syarikat Carrian dan mereka yang ada kaitan dengan George Tan. Ini termasuklah penipuan yang dipanggil ‘Concerted Plan’ melibatkan pinj,sman US$292 juta (di antara 19 hb, Disember 1979 hingga 25 hb. June 1980) dan US$580 juta( di antara 27 Ogos 1981 hingga 12hb. October 1982) yang diluluskan kepada Kumpulan Syarikat Carrian.”
There is no reference in the white Paper to the work of the Inquiry Committee encompassed by Special Brief Part III covering the period after the announcement of Carrian’s liquidity problems.
In this Third Phase of the BMF Scandal Master Plan, covering the period of one year from Oct. 1982 to Oct. 1983 with the collapse of Carrian following George Tan’s arrest, the Inquiry. Committee had recommended that the BBMB should take action against the various loan transactions of BMF involving ” U5$30,2 million, US$40 million, US$7.5 million, US$4 million as they are ‘Theft of funds of BBMB taken out through BMF’.
The Inquiry Committee also recommended police action against the Board of BBMB and its Adviser, wong Aun Pui, for conspiring to defraud the shareholders of BBMB to part with US$85 million in the transaction involving the BBMB purchase of US Assets through nomimee off-shore companies.
I cannot believe that the Government and BBMB seems to take a posture that the BMF scandal ends on Oct. 12, 1982, that it was. a two-phase scandal, rather than a three-phase scandal!
The Government had been involved in a systematic campaign of cover-ups, deceptions and lies right from the very beginning of the BMF scandal. Cabinet Ministers had come to this House committing serious breach of parliamentary privilege by telling lies and untruths about the BMF scandal.
On 21st Feb. 1983, the Finance Minister, Tengku Razaleigh, said there ‘nothing amiss’ in the BMF dealings, the loan situation was nothing more than a normal business problem. All these are lies.
It was in this report where Tengku Razaleigh said that the Bank Bumiputra board was responsible directly to the Prime Minister, Tengku / might have been telling the truth in that he meant political responsibility, rather than Ministerial responsibity That was why when in October the Prime Minister said that Bank Bumiputra was under the charge of the Finance Minister, Tengku Razaleigh made the remark that if the Prime Minister said he was in chzrge, then he was in charge!
Tengku Razqieigh also said that Bank Negara had no jurisdiction over BMF as it was located in Hong Kong and therefore responsible ” the island’s monetary authority. This is an outright lie or sheer ignorance, especially as by Feb. 1983, the Bank Negara had carried out its inspection on BMF, and the Bank Negara Owernor had seen the Prime Minister twice on the BMF, Furthermore, Bank Negara had in a letter in April 1981 given approval for BMF to be exempted from the Hong Kong Deposit-Taking Companies Ordinance; which implies a direct assumption of responsibility of BMF by Bank Negara.
On 15th March 1983, Tengku Razaleigh, in reply to my parliamentary question, said it was still unclear at that stage whether the finance company., and the bank, would actually suffer losses because Bank Bumiputra’s accounts for the year ended Dec. 31, 1982 were still being audited. Tengku Razaleigh was making a statement of fact, about the 1982 Accounts being audited, but he was either telling a lie or completely uninformed when he said `it was still unclear’ whether the Bank and BMF would suffer losses.
In fact, at this point of time, the Bank Negara Governor was getting so panicky about the BBMB and BMF situation that he was moved two weeks to write to the Prime Minister warning about the dire consequences, where the entire BMF shareholders’ funds could be wiped out, and affecting seriously taken the financial position of BBMB In fact, if Tengku Razaleigh hasn’t taken a look at the Bank Negara inspection reports, he would not mislead Parliament that it was unclear whether BBMB and BMF would suffer losses.
On 3rd April 1983; the Prime Minister was reported as saying that it was not necessary for him to interfere J n the BMF as the matter was now very well-handled by the Bank Bumiputra officials. This was also the tame time that the Bank Negara Governor had decided to write to the Prime Minister about the BMF loans, L which was virtually an appeal for Prime Ministerial and to put on record the inability of Bank Negara to intervene in the matter.
In his second- anniversary interview with the press on assuming the Prime Ministership, Datuk Seri Dr. Mahathir was questioned on the BMF scandal said that what happened in the BMF was the direct result of the collapse in the Hong Kong property market. Explaining why BMF gave out a large amount of loans to three companies, he said during the boom time in Hong Kong, banks were anxious to land money and when somebody who is established comes to you to borrow money, you don’t look too closely although by right you should.
The BMF Final Report have nailed the truth of both these statements. Firstly, happened in BMF was ‘ bound to happen, sooner or later, because the was a mere house of cards. and the BMF-Carrian tie-up was a massive joint operation of fraud and deception right from the beginning. Secondly, When BMF started with its first series of seven term loans, followed by the huge U5$292 million loan which was the biggest loan ever in the entire BBMB Group), George Tan was a nobody and clearly cannot be described as ‘somebody established wham you don’t look too closely.
In his first full statement on the BMF scandal on Oct. 11,1983, when Carrian had collapsed with the arrest of George Tan in Hong Kong, Dr. Mahathir described the BMF scandal as atheinous crime’ and a ‘betrayal of trust’. He said the priority was to recover the loans – “there was no point catching the goose that laid the golden eggs and wringing its neck. All bankers Involved tried to keep the goose alive and hoped to get at least some golden eggs.”
Firstly, Carrian was never the goose that laid the golden eggs for BMF . It was the BMF which was the goose that laid the golden eggs for Carrian. The BMF Final Report has shown beyond a shadow of doubt that during the period, including 1983; the BMF not only failed to recover any money to reduce BMF ‘s losses, BMF issued more loans to Carrian and BBMB also authorised more outlays, like $35 million 5 concerning the US Assets.
Datuk Seri Dr. Mahathir’s statement of 11.10.1983 gives the people the impression that the most ‘heinous’ crime was the HK$3,3 million of consultancy fees taken by the former BBMF Chairman, Tan Sri Kamarul Ariffin and Board members;, when this is mere chicken-feed compared to the $2.5 billion involved in the BMF scandal.
It is clear that the Government would have succeeded in a cover-up of the BMF scandal if not for two factors outside the Government’s control:
Firstly, the BMF scandal took place in Hong Kong outside Malaysia, which made it impossible for the authorities-to fully influence events and developments;
Secondly, the murder of Jalil Ibrahim, which led to the Hong Kong Police to seize BMF documents and the discovery that there had been a separate arrangement between BMF and Carrian, that BMF had been under-stating its loans to Carrian, which doomed the Wardley-Hamro Rescue Schemes for Carrian George Tan was arrested and Carrian collapsed.
Royal Commission of Inquiry
I said yesterday that the BMF Final Report is an important first step in the process to regain national dignity and honour and cleanse the national soul of the shame and lgnominy of the BMF scandal.
This is because the BMF Inquiry Committee has not been told the final story of the BMF scandal. 2n its thred special briefs, the Inquiry Committee recommended further investigations.
The biggest mystery that still awaits unravelling is who is actually George Tan and the Carrian Group, whether he was the Master Puppeteer who could make BBMB and BMF do his bidding, pouring hundreds and hundreds of millions of loans, advances or ‘simply take-aways’ for 40 months which cost the country eventually $2,5 billion.
Or was he the Puppet who was used as the front to carry out their massive grand plan of thievery of the funds of BBMB and the people of Malaysia , If George Tan was a mere Puppet, then woos the Puppeteer, or were there more than one Puppeteers? Or was there a different Puppeteer for different times?
This is the key question to the entire BMF scandal: Was George puppet or puppeteer in the nefarious plot to defraud and cheat Malaysia $2,5 billion. Or did George Tan start as a puppet, but as his power grew with the vast sum sunder his charge and command, he turned Puppeteer?
Let me make it clear that very few Malaysians would believe that the BMF Chairman, two BMF Directors and the BMF General Manager, could defraud Malaysia of $2,5 billion without the complicity, collaboration, directive or approval of powerful people.
As the BMF had very limited financial resources in Hong Kong, it had to call on its funds from Bank Bumiputra headquarters and the other Bank Bumiputra branches. BMF’s Inter-Branch Placement Limit (IPL) – i„e. the limits that an overseas BBMB branch or KL can lend to BMF – increased from US$40 million in July 1979 to US$470 million in Sept, 1980, US$430 million in January 1982 US$660 million in November 1982.
The Ahmad Nordin Inquiry Committee had opened a large window to throw light into the BMF scandal, but there are still many areas ,hidden away, such as:
1. What is the Master-mind in the BMF Scandal Master Plan
2, Where had the $2.5 billion in the BMF scandal gone to.
3. Who are the individuals who had got these ill-gotten gains, and in particular whether UMNO, whether for party funds or UMNO Building Fund, had been a recepient of this BMF Scandal money.
Although the Prime Minister said in his explanation in the White Paper that ‘UMNO Malaysia tidak pernah menerima sebarang -iv sumhangan dalam apa bentuk sek lipun sama ada daripada George Tan, pegawai-pegawai BMFL atau syarfkat-syarikat yang berkaitan dengan mereka atau sesiapa daripada merekao’ this must be the subject of the most thorough investigation to satisfy public demand.
The DAP therefore calls for the establishment of a Royal Commission Inquiry to follow up on the ‘fresh leads’ and to complete the work of the Ahmad Nordin BMF Inquiry Committee to expose the top political personalities, if any, responsible for the $2.5 billion BNF scandal.
I had said yesterday that if the BBMB does not act on the recommendation of the Inquiry Committee to submit the three special briefs to the local police, especially the Special Brief Part III with regard to Dr. Nawawi and the BBMB Board on the US Assets, I would lodge a report with the police.
I was outraged that three months after the submission of the Special Brief Part III, the BBMB had not acted.\
I have now decided not to go to the Police at this point, for the responsibility to implement the recommendations of the Inquiry Committee must lie firmly and sqqarely on the present BBMB Board.
If the BBMB Hoard refuses to comply with the Committee’s recommendations then I expect the BBMB Chairman, Tan Sir Bashir, the Board members and the Government to explain to the Malaysian people why they are obstructing the course of justice.
In fact, the Attorney-General should establish a special prosecution team to pursue the leads given by the Inquiry Committee with regard to criminal offences. I suggest that the Attorney-General should consider appointing Chooi Mun Sou to head this special prosecution team.
In all the three Special Briefs, the Committee had volunteered their assistance in such manner as may be required to the Attorney-General in Hong Kong and the Police in Malaysia.
The Committee had said at the end of its Final Report:
“Irregularities and crimes such as we have recounted occur because of failings in the system or in the individuals who operate it. We do not consider that there were failings in the Malaysian banking system. Conventional banking procedures and controls existed and were generally used satisfactorily
by those concerned. But in the cases on which we reported the individuals, including some at the very top of the system, failed to take appropriate control measures when they had, discovered at least a part of what was going wrong. If they themselves disregarded or circumvented the controls which they had been charged to exercise then who else could ensure that the control system is effective?”