Is the Prime Minister the veto power against the full implementation of the Ahmad Nordin BMF Inquiry Committee recommendations, including police action against former Bank Bumiputera Board, headed by Dr. Nawawi Mat Awin?

PAPER by Parliamentary Opposition Leader, DAP Secretary-General and MP for Kota Melaka, Lim Kit Siang, at the DAP Convention on the BMF Scandal on ‘The Lessons of the BMF Scandal’ held at Petaling Jaye Hilton on Sunday, 29th June 1986 at 11 a.m.

Is the Prime Minister the veto power against the full implementation of the Ahmad Nordin BMF Inquiry Committee recommendations, including police action against former Bank Bumiputera Board, headed by Dr. Nawawi Mat Awin?

The Ahmad Nordin BMF Inquiry Committee Final Report on the BMF Scandal is a historic document for many reasons, one of which is that it marks the divide between the two opposing forces on the issue and principle of public accountability.

On one side are those forces, best represented by the Barisan Nasional component parties and their leaders, who maintain that the BMF Final Report marks the end of government accounting on the biggest banking and financial scandal in Malaysia; and that the whole issue should be forgotten and be left to the court proceedings in Hong Kong and London to run their full course. If, as the Prime Minister, Datuk Seri Dr. Mahathir Mohamed said last week, the Hong Kong trial would take another five years, so much the better, so that the greatest NEP crime and betrayal which started in 1979 would not be adjudicated conclusively overseas until the 1990s.

For the opponents of public accountability, the government had already compromised too much in setting up the three-man Inquiry Committee and made public the 15-volume, 7,500-page Final Report, Briefs and Exhibits, and this is why there is a conspiracy of silence over the nation-wide concern at the government’s inaction and indifference to bring the BMF culprits to book in the past three months.

Taking a diametrical position, however, are the, proponents of public accountability, to whom the BMF Inquiry Committee Final Report is only the beginning of government accounting on the BMF scandal, which should be followed up with full implementation of the recommendation of the Inquiry Committee, as well as the establishment of a Royal Commission of Inquiry to follow up on the ‘fresh leads’ provided by the Inquiry Committee to expose the full story of the BMF Scandal.

They do not want foreign countries to clear up our BMF ‘dirt’, for we must do it ourselves if we cherish and are to regain our national self-esteem, honour and dignity. They cannot accept that the nation’s greatest crooks, who were responsible for the theft and fraud of $2.5 billion of Malaysian taxpayers’ monies, should be scot-free in Malaysia, while they are ‘wanted men’ outside the country. Similarly, they cannot accept that only four persons are responsible for t the greatest theft and fraud of public funds in Malaysian history.

The DAP has organised this Convention on the BMF Scandal for the first lesson to be learnt from the BMF Scandal is that constant and unrelenting public pressure is essential if the government is to be held to the principle of public accountability.

I had said in Parliament and outside that the government action on the BMF Scandal since October 1982, when the BMF¬-created Carrian empire first began to crumble, was a systematic campaign of cover-ups, half-truths and downright lies, first to deny there was anything amiss in the BMF loans in Hong Kong, and finally to sacrifice the BMF Four – Lorraine Osman, Hashim Shamsuddin, Rais Saniman and Ibrahim Jaffar – to take the rap for the Scandal and conceal the identity of the real masterminds.

In the face of unrelenting public pressure made ever more intense by growing sense of outrage, the Government fought every step of the way to resist public disclosure of the BMF Scandal. It set up an in-house Inquiry Committee to deflect public demand for a Royal Commission of Inquiry; and when the Inquiry Committee came out with a Final Report more fulsome that it had ever expected, fought a three-month battle to suppress the Committee’s Final Report. When the government had no choice but to release the Final Report, it mounted a vicious campaign to attack the credibility of the Inquiry Committee Members, with the curious result that Tan Sri Ahmad Nordin, who started as a ‘hero’ of the 2-M slogan of ‘clean, efficient and trustworthy’ government, ended up as a ‘villain’ for being honoured nationally and internationally for the very same virtues.

However, I have no doubt that we would not have gone as far as we had in demanding public disclosure on the BMF Scandal if not for the conjunction of two fortuitous developments.

Firstly, the BMF Scandal took place in Hong Kong, outside Malaysia, which made it impossible for the Malaysian government to fully control and influence events and-developments; and

Secondly, the murder of Jalil Ibrahim, which led to the Hong Kong Police to seize BMF documents by the lorry-loads and the discovery of the extraordinary relationship between BMF and Carrian.

If Jalil Ibrahim had been murdered in Malaysia and not in Hong Kong, we would still be as much in the dark about the BMF Scandal, as we are now about the Bank Bumiputra’s domestic loans problem. Early in January last year, Petronas adviser and former Prime Minister, Tun Hussein Onn, said that Bank Bumiputra (which had already been taken over by Petronas) had a domestic loans problem as bad as the BMF loans scandal, alleging that certain bank officials had received kickbacks and millions of dollars in domestic loans were given out even though there were ‘insufficient and doubtful security’.

The non-performing loans of Bank Bumiputra, according to one source, is the biggest in the country.

But Bank Bumiputra is able to impose a total clamp on information on its domestic loans problem, with its Chairman, Tan Sri Haji Basir Ismail obliquely replying to my Parliamentary Speech saying that Bank Bumiputra’s investigations found that there were no basis to Tun Hussein Onn’s allegations!

Or what we know about the BMF Scandal would not be very much more than what we now suspect about the 1981 tin-buying mystery in London where Malaysian taxpayers are estimated to have lost $1 billion in the attempt to corner and monopolise the world tin market from July 1981. The operation, which was conducted by a $2 company MAMINCO, collapsed when the United States released its tin stockpile. In fact, MAMINCO would not have come to public limelight if it had not made the mysterious transition from a $2 company to a government department under the Ministry of Finance in the 1985 Telephone Directory, raising the question who would have made the billions of dollars of profit if the 1981 mysterious tin-buying operation had been successful.

The second lesson from the BMF scandal is that public pressure to insist on the fullest and strictest public accountability by the government must never let up, especially as there are still many questions and areas about the scandal still cry out for answer and illumination.

The single most important question in the BMF Scandal is who is George Tan and Carrian. Was George Tan a puppet, or was he a puppeteer, or was he a puppet, who later turned puppeteer? Was George Tan and Carrian the front of an NEP off-shore operation in Hong Kong?

Related to these questions are whether and who are the masterminds or political higher-ups in the BMF Scandal. If the Scandal ends with the BMF Four, and goes no further, why would Lorraine Osman be in fear of his life that for six months of his arrest by the London police pending extradition proceedings to Hong Kong, he preferred the safety of the London police lock-up to release on bail? Who would want to kill and silence Lorraine Osman, unless he is voluntarily or involuntarily taking the rap for the BMF Scandal for some political higher-ups?

The circumstances whereby the BMF Scandal unfolded raises many questions. Why did BMF gave out such a huge loan of US$292 million to a $2 company, Plessey Investment Ltd. (PIL), to fund a 100% purchase of Gammon House, if it is not meant for immediate resale to the Malaysian Government at a profit of US$50 million?

Clearly; the subterfuge of making the loan to a $2 company instead of directly to Carrian indicated that right from the beginning, the BMF loans were part of a conspiracy of theft and fraud, and a criminal breach of trust.

Why is it none of the BMF Four was sued for recovery of the U5$292 million loans? Is this because Lorraine or Hashim would plead that this was in fact meant for the purchase of Gammon House for subsequent resale to the Malaysian Government at US$50 million profit?

Why is the Government unwilling to fully implement the recommendations of the Ahmad Nordin BMF Inquiry Committee, as for instance, in its recommendation in Special Brief Part III that action be taken against the Bank Bumiputra Board under the Chairmanship of Dr. Nawawi Mat Awin for ‘conspiring to defraud the shareholders of BBMB’ and ‘breach of their fiduciary duties’ in connection with the acquisition of Carrian’s US Assets in May 1983, – which was merely another scheme to finance the Carrian Group to keep it afloat and avert liquidation.

Thus, the Inquiry Committee conclude:

“As for the acquisition of the US Assets, we are of the opinion that the Board of BBMB 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 fad ciary 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 Breech of Trust, Breaches of the Banking Act and Companies Act and False Accounting under the laws of Malaysia.”

This is a very strong recommendation, but neither the Bank nor the Government has done anything about it.

It is significant that when the government was pressed as to why it had not acted on the Inquiry Committee’s recommendation to take action against Dr. Nawawi and the Bank Board of Directors, the Finance Minister, Daim Zainuddin, finally admitted on 20th March in Parliament that the Bank had lodged a police report against the former Bank Board two weeks earlier on 6th March 1986.

But nothing has been heard of this police report up till now. I cannot help getting the impression that the March 6 report was made specifically with the objective of enabling the Finance Minister to reply to criticism that the Bank had in fact taken action as recommended by the Inquiry Committee – ¬which is to lodge a police report – but which was not meant to be acted upon further.

The Prime Minister, Datuk Seri Dr. Mahathir Mohamed, should answer whether he was the veto power against the full implementation of the Inquiry Committee’s recommendation, in particular over the purchase of the Carrian’s US Assets?

It is clear from the BMF Final Report and the Exhibits that after November 1982, Dr. Nawawi was reporting directly to the Prime Minister over the so-called Carrian rescue operation Did the Prime Minister authorise or had foreknowledge of the Bank Bumiputra’s purchase of the US Assets, which will lead the responsibility for this ‘conspiracy to defraud the BBMB shareholders’ and ‘breach of fiduciary duties’ directly back to the Prime Minister himself?

Would this have been Dr. Nawawi’s defence, that he was acting on the directive of the Prime Minister, and is this the reason why no action has been taken against Dr. Nawawi so far?

The Attorney-General has emerged from the BMF scandal with his office and reputation quite tarnished, for to date, not a single person had been prosecuted in the biggest banking and financial scandal in the country.

Has the Attorney-General decided to reject out-of-hand all the recommendations of the Ahmad Nordin BMF Inquiry Committee on criminal prosecutions, or is he still sitting on the recommendations without having made up his mind? The Attorney-General seems to be more interested in political issues, like the amendments to the Official Secrets Act to make a mandatory minimum one-year jail sentence for any offence under the Act; the refusal to prosecute the Sabah bombers, arsonists, and political leaders involved in the conspiracy last March to topple the Sabah elected government and the attempt to disqualify Mr. Justice Mustapha Hussein in the habeas corpus application by Kampong Memali detainees than in bringing the BMF culprits to book.

The profession of auditors also suffered a grave blow in the BMF scandal. Last month, the Hong Kong court-appointed liquidators of Carrian Investments lodged a civil claim against Carrian’s auditors, Price Waterhouse & Co. claiming damages “for negligence and/or breach of duty” in accounting and auditing services.

But no action had been taken whatsoever against the auditors of Bank Bumiputra although the Inquiry Committee had very caustic and critical remarks about its auditors, Hanafiah Raslan & Mohamad.

The BMF Scandal brought to the fore the question whether Bank Negara could effectively supervise a Government bank especially where the Chairman or chief executive of such banks had more political clout than the Bank Negara Governor.

The BMF Scandal, where the Bank Negara Governor, Tan Sri Aziz Taha, was virtually shunted aside and removed from any meaningful supervisory role, is not an isolated instance in Malaysia.

I cannot believe for instance that Bank Negara could have recommended for approval the two UMBC transactions in 1984 and 1985 where clear conflict of interest between the Finance Minister, Daim Zainuddin, and his family companies raised serious ethical, legal and political questions.

Surely Bank Negara must be aware that there would be conflict of interest or illegality in the 1984 transaction where the Daim Family companies acquired 41% control of UMBC when Daim was already Finance Minister, as under Section 24 of the Banking Act, it was the Finance Minister’s legal duty to decide on whether to approve any reconstruction or rearrangement of bank equity?

Again, surely Bank Negara must be aware that there would be conflict of interest or illegality in the 1985 transaction where the Daim family companies increased its 41% share to 51% majority control of UMBC on the same grounds.

The Bank Negara Gavenor, Datuk Jaffar Hussein, had said that the Cabinet and not Daim Zainuddin had approved the UMBC transactions, but surely a Minister’s conflict of interest cannot be evaded by transfering the decision-making to the Cabinet, and then getting an Acting Finance Minister to give the approval?

Furthermore, Bank Negara could not have recommended the approval of the acquisition of 51% control of UMBC when it is finalising new regulations limiting individual ownership (including family companies) in banks and finance companies to not more than 10%?

The Prime Minister, Datuk Seri Dr. Mahathir Mohamed, had stood firmly by Daim Zainuddin in the UMBC transactions even accusing an international Jewish conspiracy of trying to discredit the Malaysian Government’s image by blackening the reputation of its leaders, although he had refused to fully explain the various serious ethical, legal and political issues raised by the BMF Scandal.

Clearly, it is asking too much to expect the Mahathir Government to give the Malaysian people a full accounting on the BMF Scandal, when they themselves are not prepared to give a full accounting to the people on the UMBC Scandal, involving the Finance Minister himself?

In these circumstances, where powerful political leaders are involved in big stakes, what role could the Bank Negara play?

In the UMBC case, there was also the question as to whether there was any conflict of interest, impropriety or abuse of authority, where the Daim Zainuddin family companies made use of Daim’s influence as Finance Minister to secure $164 million loans from a foreign bank to acquire 51% majority control of UMBC without having to come out with a single cent of its own capital. In deciding whether to approve the loans to the Daim companies the consideration the foreign bank took into account included:

“Positive factors:

Mr. Daim is the Finance Minister and a close personal aide of the Prime Minister of Malaysia…

“Negative factors:

No definite source of repayment…”

Instead of investigating to decide whether there was conflict of interest, impropriety or abuse of authority in the granting of such a $164 million loan to Daim family companies to help acquire 51% UMBC control, Bank Negara is more interested in warning banks to take steps to protect their internal documentation from general circulation.

In 1984, Bank Negara found from its inspection that the chief executive of a bank had committed serious abuse of trust and powers, contravening the Banking Act 1973, Income Tax Act, 1967, Companies Act, 1965, but because he was an influential political leader of a Barisan Nasional component party, no criminal action was taken against him because of strong political intervention.

No wonder, MIC President, Datuk Samy Vellu said on Friday that “business and politics cannot be separated and treated as different entities.” He said that in the past, business was business and politics was politics. “Now, they are interwoven.” Or as he put it succintly, “If there is no political influence, even a company with a paid-up capital of as much as $200 million will not be able to make 20 cents.”

Datuk Samy Vellu is downright frank, and this is why a company with a paid up capital of $100,000 associated with powerful political leaders, incorporated only on 25th August 1982; could have credit facilities of over $20 million, could have government job contracts running into hundreds of millions of dollars.

But what is shocking about the statement of the MIC President, the government’s conduct and attitude on the BMF Scandal and other Scandals, is their failure to differentiate between right and wrong, integrity and corruption, morality and decadence.

A government which preaches a ‘clean, efficient and trustworthy’ administration has lost its moral moorings, and this is why an unremitting struggle for the full accounting of the BMF Scandal is not only to reveal the whole story of the BMF Scandal, and to bring the BMF thieves, robbers, criminals and traitors to book, but to restore to the nation’s leaders the necessary moral moorings and underpinnings without which the country will be cast adrift in a sea of corruption and decadence.

If this convention can ensure that the BMF Scandal remain in the forefront of national consciousness as a reminder that without a full accounting of our public duties and responsibilities, we are in danger of losing our moral fibre and national integrity, then we can still check the slide down the slippery slope to a Malaysia where there is no more distinction between holding public office and making money – the Malaysia that is now being glorified by Datuk Samy Vellu.