Speech by Parliamentary Opposition Leader, DAP Secretary-General, MP for Tanjung and Assemblyman for Kampong Kolam, Lim Kit Siang, in the Dewan Rakyat on Tuesday, Dec. 2, 1986 on the Committee Stage of the estimates for the Ministry of National and Rural Development estimates for the 1987 Budget on the motion to cut the salary of the Director General of Co-operatives by $10
Demand that the Registrar-General of Co-operatives exercise his powers under Section 47 of the Co-operative Societies Act to surcharge the irresponsible or corrupt Directors to compensate the 588,000 depositors for misapplication of funds, dishonesty or breach of trust
I am moving a $10-cut motion on the salary of the Registrar-General of Co-operatives because of his gross dereliction of duty for two reasons.
Firstly, it is with regard to his role in the $1.6 billion Co-operative Finance Calamity whereby 588,000 depositors of 24 co-operatives are placed in the tragic position of losing the bulk of their entire life-savings, which has already caused the loss of two lives, and the enactment of so many sorrows and tragedies in entire townships and new villages.
The Government White Paper on the 24 Deposit-Taking Co-operatives, submitted by the Ministry of Finance, tried to exonerate the Registrar-general of Jabatan Pembangunan Koperasi (JPK) on the ground that there were ‘inadequate regulatory powers’ provided in the co-operative laws.
This is completely unsatisfactory, Datuk Haji Mohamad Tajol Rosli Ghazali in the Ministry concerned said in response to the White Paper, “there is no need to tighten existing co-operative laws as the present ones are tight enough.”
If this is the view of the Jabatan Pembangunan Koperasai, then why did it allow the $1.6 billion Co-operative Finance Calamity to occur when it could have ripped the whole problem in the bud five years ago in 1981, when public complains were first with the JBK about irregularities and dishonest conduct in various deposit-taking co-operatives?
Reports were also lodged with the Police, but although there were investigations, both the JPK and the Police did nothing despite ample evidence for action to be taken to protect the interest of the depositors.
Here, I wish to refer to the Sunday Mail report of 10th August 1986, which recounted how two reporters, R. Nadeswaran and Frankie de Cruz had in 1982 pursued the story of one such co-operative director, and had reported that the police were ready to take action, but eventually nothing happened.
These are the opening paragraphs of this Sunday Mail story:
“They called him the ‘Paper Tycoon’. He moved around in style but few knew the cops were on his trail.
“The money he had was not his. It belonged to thousands of depositors who had placed their faith in the co-operative he headed.
“The Commercial Crime Division of the Kuala Lumpur Police had been hot on the trail of the leader as early as July 1982 following allegations that he had siphoned off millions from the co-operatives under the guise of ‘investment’.
“These two reporters carried out their own investigations for over six months and in the process collected documents to prove that the leader had set up $2 shell companies to mislead depositors.
“On completion of our investigations, we handed over the documents to the authorities and in the Malay Mail of Oct. 1, we wrote:
‘The police and other authorities are closing in on a senior official of a co-operative society alleged to have used its name and goodwill to set up a string of $2 companies which raked in millions by selling shares in them.’
Let me tell Parliament that this ‘Paper Tycoon’ who was supposed to be exposed and arrested in 1982 was Tee An Chuan, who has now pleaded guilty to criminal breach of trust charges, but not after his KOSATU co-operative had collected $156 million deposits from 52,566 people – ending in being $109.5 million insolvent, with each dollar of deposits with net asset backing of 30 cents.
The co-operative authorities as well as the police were forewarned about the fraud, criminal breach of trust and dishonesty committed on the depositors in KOSATU, and if the co-operative department had taken action then, they would have saved not only the 52,566 depositors to do their duty in 1982, the Co-operative Department had directly contributed to the present-day Co-operative Finance Calamity of the 588,000 depositors.
In 1981, I even asked for an appointment and met the then Registrar-General of Co-operatives, Shaya Basheer, to impress on him and other officials on my grave concern about the malpractices and irregularities in the co-operatives affecting public money.
I just cannot understand why the JPK and the Registrar-General did nothing to stop the rot in the deposit-taking co-operatives, especially as the JPK officials were aware that officials of a co-operative, referring to KOSATU, could not account for the disappearance of some $30 million, and which was reported in the local press in 1982.
In 1982, KOSATU had collected a total of $12 million by end of April, which probably exceeded $20 million six months later. There had been no mass deposit-collecting by other co-operatives like SAKAAP, FORTISS and others.
This is why in my motion to cut the Finance Minister’s salary by $10, I had demanded an Independent Commission of inquiry to investigate how the negligence and irresponsibility of the Government had been the single biggest cause of the $1.5 billion Co-operative Finance Calamity today.
At the end of 1982, the Jalan Bandar Commercial Crime Division in Kuala Lumpur, headed by ASP B.S Dhillon, was in charge of investigate into KOSATU and Tee An Chuan, and was working closely with the JPK. What happened to Dhillon’s investigations? Did he submit his papers to the Bukit Aman and the Attorney-General’s Chambers?
As a result of the widespread public concern about the deposit-taking co-operatives, the Registrar-General of Co-operatives, Sya’aya Basheer, issued a tough directive on Sep.22 1982 to all deposit-taking co-operatives that they should not collect deposits from the public without the authority and permission of the JPK.
As the Co-operative Development Department and other government authorities did not follow up with any other action, the public were led to believe that there was nothing amiss in the deposit-taking co-operatives, resulting in the $20 million total deposits in KOSATU in Oct. 1982 ballooning to $156 million in June 1986, and the total deposits in the co-operatives mushrooming from not more than $100 million in Oct. 1982 to $1.5 billion in June 1986.
In trying to ‘white-wash’ the guilt of the JPK in the Co-operative Scandal. The White Paper said that under the co-operative laws, “It is not easy to prosecute directors for mismanagement because the law under Section 57A protects those who claim to be carrying out the aims of the Act and have acted in the ‘economic interest of the members’”.
I have read Section 57A of the Co-operative Societies Act 1948, and I do not find this defence of ‘acting in the economic interest of the members’ to justify any mismanagement, let alone criminal breach of trust and misappropriation. Section 57A provides the defence in any prosecution if the action is made ‘bona fide’, and I cannot imagine how criminal breach of trust, fraud and dishonesty could be done ‘bona fide.
In the Star report of 18th August 1986, the present Registrar-general, Haji Abdul Aziz Abdul Wahab, had said that he could not suspend or freeze the co-operatives. Because under Section 37A(1)(a), he must consult all creditors and consider their objections before suspending any co-operative society.
I agree with him, but the Registrar-General of Co-operatives must explain why he had not invoked Section 47 of the Ordinance to surcharge the irresponsible or corrupt directors and officers of co-operatives to restore and compensate the co-operative for any loss arising from any “misapplication, retainer, dishonesty or breach of trust”. This is a vast power to give the last protection to the co-operative members and depositors, and why hasn’t the Registrar-General of Co-operatives exercised this power at all?
Under Section 37, the order of the Registrar-General of Co-operatives to a director or official of co-operative “requiring him to repay or restore the money or property or any part therefore with interest…. or to contribute such sum to the assets of such society by way of compensation in regard to the misapplication, retainer, dishonesty or breach of trust as the Registrar-General thinks just” shall be enforced in the same manner as if the order had been a judgement of a Session Court. Further, this section applies notwithstanding that the act is one for which the offender may be criminally responsible.
This means, for instance, that regardless for whether Tee An Chuan has pleaded guilty to criminal breach of trust charges involving $603,700, it the Registrar-General of Co-operative is satisfied that he is responsible for the $109.5 million loss of KOSATU, he could issue an order to Tee Ann Chuan to compensate KOSATU and its members and depositors to the tune of $109.5 million. Why hasn’t he done so?
If the Registrar-General of Co-operatives persist in his refusal to exercise his powers under Section47 of the Co-operative Ordinance, to protect the 588,000 depositors, then the DAP lawyers will consider filling legal action to ask for a mandamus to compel the Registrar-General of Co-operatives to perform his statutory duty.
At it is, the 588,000 depositors of the 24 co-operatives are left in the lurch, for three months after the Bank Negara freeze in August and one month after the White Paper in November, there are no signs that immediate help and relief is on the way for the depositors. At the rate that things are being dragged out, the depositors’ hard earned savings in the co-operatives would be reduced to nought when a solution is finally worked out many many months after. Is there a deadline that a solution for the 588,000 depositors and 24 co-operatives must be completed and implemented by the end of this year by 31st December 1986?
Finally, on this first reason for the $10 cut motion, I have no doubt, and I accuse, Co-operative Department and Police officials of having been corrupted by corrupt co-operative directors to enable such defraudment of public money to go unchecked until the collapse of the co-operative finance system in August this year.
Take-over of Fortiss headquarters by Fortiss depositors indication of the desperation of depositors about the protracted delay in a solution to release their monies.
Yesterday, about a hundred depositors of Fortiss ‘took over’ the Fortiss headquarters in Jalan Ipoh after the Fortiss Directors failed to honour their undertaking last Friday to let the depositors know the details of their rescue plan and memorandum to Bank Negara.
Fortiss, which was registered on 17th May 1980, and had nine braches operating throughout West Malaysia with about 18,400 members, collected a total of $50,000 million. The Bank Negera estimated that its net asset value per dollar of deposit at 39 cents.
All co-operative directors, the Bank Negara and the Government should realize that there is a limit to the patience of the 588,000 depositors, who have $1.5 billion of their ‘blood and sweat’ money frozen in the 24 co-operatives. How can the Government, and in particular the JPK, shirk its responsibility for the tragedy of 588,000 depositors, especially as the announcement of the formation of the 3Ks, – Credit Control Co-operatives – by Deputy Prime Minister, Ghaffar Baba, in May 1986 further assured the depositors that their deposits are safe, and need not be withdrawn, and misled others to put their savings with the co-operatives.
I must warn the Police to be sympathetic to the depositors whose desperation is making them more and more aggressive in demanding a proper accounting from the directors of co-operatives who had defrauded them. The real crime and criminals are the directors and officials of co-operatives, with the 588,000 depositors the victims. The Police must never put themselves in a position of defending corrupt and criminal directors and officials, for this will make the 588,000 depositors victims at the hands of the Co-operative Development Department, the corrupt co-operatives and the Police.
Parliament should in fact express sympathy, understanding and support for the action of the depositors of Fortiss who had ‘taken over’ Fortiss headquarters to demand a satisfactory explanation from the Fortiss directors.
According to latest newspaper reports, the Bank Negara plan to get banks and finance companies to take over the assets and liabilities to take over assets at half the value assessed by the Bank Negara as contained in the White Paper. Is there any wonder that the depositors are getting more and more desperate?
The second reason is with regard to the JPK’s role in the Co-operative Central bank Scandal with its estimated bad loan portforlio of $500 million.
I had warned during the Royal Address debate that I would pursue this matter if the government, despite ample opportunities, refused to give full and satisfactory explanation of the CCB Scandal.
The $45 million Wang Choon Wing loan is the badge of CCB Scandal
Despite being repeatedly raised in this House, neither the Government nor the Deputy Minister for Youth, Culture and Sports, Wang Choon Wing, could explain the propriety of his two loans, amounting to $45 million, from CCB using a piece of land worth $9.6 million as collateral. As both loans charged at 16 per cent had not been serviced, Wang Choon Ming’s debt to CCB should exceed $50 million.
It is because of such Wang Choon Ming loans, and the irresponsibility of the Registrar-General of Co-operative to monitor co-operatives, which had been the cause of the $1.5 billion Co-operative Calamity.
But in the CCB Scandal, Wang Choon Ming is only one of many in the long sordid tale of conflict of interest and mismanagement.
The DAP had asked in parliament why the former CCB external auditor, and current auditor for CCB subsidiary, BKP Credit & Leasing Sdn. Bhd., was allowed to stand personal guarantee for a$13.2 million loan with CCB? No answer has been forthcoming, and this is even more condemning that an answer.
The JPK and CCB have also failed to explain about the $300 million loans giving out to over 20 individuals, without proper collateral and not being serviced. I understand that the CCB has given out a $12 million loan to Lorraine Osman of BMF Scandal fame. What has happen to this loan?
There have been serious allegations that senior government officials, including those in the Ministry of National and Rural development which is in charge of JPK, had either directly or through their spouse, had received huge loans, which have not been serviced, to buy their silence about the CCB Scandal.
I call on all Ministry of National and Rural Development and JPK officials to declare publicity the loans that they had taken from CCB in the past five years, including those who were in service during this period, to demonstrate their integrity and uprightness.
Several JPK officials left government service, some on optional retirement, to join the CCB as senior CCB officials. This throw suspicion about their integrity while in government service, as to whether there had been a conspiracy to keep the CCB Scandal under wraps. I challenge the Minister to name the JPK officials who had left the government service to join the CCB in the past five years, and the roles they had played in monitoring CCB while in government service.
I am surprised that the JPK allowed the top management of the CCB such free rein in running a co-operative bank, where the Chief Executive is paid $20,000 a month with commission of one per cent of the net pre-tax profit of CCB.
Another subsidiary of CCB is The Federation of Housing Co-operative Ltd. (FHC) whose chairman is K.R. Somasundram, which is building the million 28-storey headquarters of National Land Finance Co-operative Society (NLFCS) in a joint-venture with SOMEC, a Portuguese company.
The CCB is fully-financing this NLFCS building project, and this raises the question why this joint-venture project is not between FHC and a local company instead of a foreign company, I hope I have said enough about the CCB scandal to get satisfactory explanation without having to further develop the subject in future.