The $1.6 billion Co-operative Financial Scandal is the result of the greed, dishonesty of errant co-operative directors and officials and the irresponsibility and negligence of Co-operative Department, Bank Negara and Ministry of Finance

Speech by Parliamentary Opposition Leader, DAP Secretary-General, MP for Tanjung and Assemblyman for Kampong Kolam, Lim Kit Siang, at the first nation-wide mass meeting of co-operative depositors in Kuala Lumpur at Thean Hou Temple Hall, Kuala Lumpur on Sunday, 5.10.1986 at 8 pm.

The $1.6 billion Co-operative Financial Scandal is the result of the greed, dishonesty of errant co-operative directors and officials and the irresponsibility and negligence of Co-operative Department, Bank Negara and Ministry of Finance.

The DAP has decided to launch a nation-wide series of mass meetings for the 540,000 depositors of the 24 frozen co-operatives, so that the affected depsitors can let Cabinet, Parliament and the Government know their intense frustration and impatience at the protracted government delay to come out with a solution for the $1.6 billion Co-operative Finance scandal.

The $1.6 billion Co-operative Finance scandal, tying down the life-long savings of the small-timers – the housewives, the workers, hawkers, petty businessmen – is the result of the greed and dishonesty of co-operative directors and officials who abused their responsibility and committed breach of trust. But what is shocking is that up till now, apart from two directors of KOSATU being charged in court in connection with criminal breach of trust offences, not a single director or official from any one of the other 23 co-operatives had been arrested and charged.

How could the government authorities convince the 540,000 depositors about their seriousness and urgency to deal with the $1.6 billion Co-operative Scandal when not a single director or official from anyone of the 23 co-operatives had been arrested after nearly two months of Bank Negara freeze?

If the authorities could not find any criminal or wrong against the 23 co-operatives and their directors, why did Bank Negara freeze their assets and activities on August 8 in the first place, putting in jeopardy the life-long savings of 540,000 depositors?

The $1.6billion Co-operative Finance Finance Scandal is also caused by the irresponsibility and negligence of the Co-operative Department, Ministry of Finance and Bank Negara for failing in their duty to protect the interests of the depositors.

For the past few years, DAP MPs had been warning the Ministry of Finance and the Bank Negara that they should monitor the activities of the co-operative finance branches, and safeguard the interests of the depositors.

It is a lame excuse for Bank Negara to claim that it could not take action earlier because it had no powers. If this is the case, why then did it have the powers on August 8 to freeze the 23 co-operatives and Kosatu on July 23? If Bank Negara could invoke emergency powers in July and August this year, why couldn’t it invoke emergency powers last year to protect the interests of the depositors?

Bank Negara had also wanted the public to believe that knew nothing about the problem of the co-operative finance branches. I met the Bank Negara Governor, Datuk Jaffar Hussein, early this year in January on the problem of the Setia Timur Credit Leasing scandal, and at the meeting, I brought to his attention the danger of the unregulated activities of the co-operative finance branches.

Furthermore, in the February issue of Malaysian Business, the Director-General of the Co-operative Development Department, Haji Abdul Aziz bin Haji Abdul Wahab, disclosed that officials from Bank Negara had been seconded to his Department to monitor and supervise the credit operations of deposit-taking co-operatives.

It is clear that the government did not take action against the co-operatives for their irregularities and breaches of trust early this year or even last year because of political reasons. This is because it is obvious to the government that many MCA and Gerakan officials and members are implicated in the Co-operative Finance Scandal.

In fact, if the Bank Negara action of August 8 to freeze the 23 co-operatives had been taken before the recent general elections, the Barisan Nasional, and in particular MCA and Gerakan, would have suffered an even greater rejection at the polls.

The Ministry of Finance, Bank Negara and the Co-operative Department had allowed the political and election interests of MCA and Gerakan to sacrifice the $1.6 billion deposits of the 540,000 depositors. This is an act of great irresponsibility.

The MCA and gerakan Ministers and leaders should bear the greatest responsibility for the $1.6 billion Co-operative Finance scandal, but after the freeze of the co-operatives on August 8, the MCA and Gerakan Ministers failed to make amends for their responsibility in the scandal.

Is this because they are in no position to stand up for the rights of the 540,000 depositors?

I had mentioned that a MCA Deputy Minister has a $20 million loan with one co-operative which had not been serviced, and up till now, there has been no response or denial by this MCA Deputy Minister. I am giving him a final 48 hours to explain his action, failing which I will be at liberty to make it into a public issue.

DAP will consider organizing mass demonstration of depositors outside bank Negara offices throughout the country if there is indefinite freeze on the co-operatives without any sign of solution.

Bank Negara has been coming out with various proposals, like “25:25:50”, and recently a variation in the formula of “20:20:60”. But all the while, the 540,000 depositors who are the direct victims of the scandal are kept in the dark about these various proposals.

The depositors are entitled to demand that the various proposals studied by Bank Negara and the Co-operative Department should be made public, as well as the investigation reports of the 17 accounting firms engaged by Bank Negara to investigate into the 24 co-operatives after the August 8 freeze.

It is impossible to quantify the amount of human sufferings caused by the 1.6 billion Co-operative Finance scandal, although the MCA, had the heart to suggest that the government is not morally obliged to help the depositors.

If the Bank Negara and the Co-operative Department continue to drag their feet to work out a early solution to this co-operative finance scandal, the DAP will consider organizing mass demonstrations of depositors outside Bank Negara offices throughout the country. Bank Negara is responsible in ensuring that the 24 co-operatives are put back on their feet again, as it had frozen the co-operatives and the $1.6 billion deposits in the first place.