The Shocking and the Ridiculous

by P. Gunasegaram
Friday, 17 August 2007 08:32am

IN 1965, prominent opposition politician, D.R. Seenivasagam, made an allegation of

corruption against then education minister Abdul Rahman Talib in Parliament.

Seenivasagam was the more fiery of the two Seenivasagam brothers who founded the
Peoples’ Progressive Party, a force to be reckoned with in Perak, especially in
Ipoh.

Rahman challenged D.R. to repeat the allegations outside Parliament, which the
latter promptly did – in front of a huge crowd, which included Rahman, at the
Chinese Assembly Hall in Kuala Lumpur.

Rahman took D.R. to court for defamation. After a long trial, which has become a
sort of case history for defamation cases right up to this day, Rahman lost.

Then Prime Minister Tunku Abdul Rahman, the nation’s Father of Independence,
declared his belief in Rahman but accepted Rahman’s resignation and then posted
him to Egypt as ambassador.

That may well have been the biggest scandal to hit the Alliance government post-
independence, excluding all those allegations of impropriety made against some
politicians in Sabah and Sarawak with respect to land alienation at the time of
Malaysia’s formation on Sept 16, 1963.

Two things may have distinguished scandals then – they were relatively far and few
in between. And two, there seems to have been more accountability then.

Anwar SackedSince those distant days, the arena has been littered with scandals
with the number picking up during the later days of independence.

Political scandals have made their mark over the years. Perhaps the biggest ones
were the corruption charges laid out against former Umno Youth leader and
respected Selangor Mentri Besar Datuk Harun Idris, and those laid against former
Umno deputy president and Deputy Prime Minister Datuk Seri Anwar Ibrahim in 1998.
Anwar is without doubt the highest ranking leader ever to be prosecuted, and
jailed.

In terms of financial scandals, the biggest one, when it was announced in the
eighties, was the failure of Bumiputra Malaysia Finance (BMF) in Hongkong. With
over RM2 billion worth of losses, it was the largest banking failure in the world
then.

Bank Negara Malaysia’s foreign exchange speculation losses of an estimated RM15-20

billion announced in 1994 was the biggest such loss by a central bank anywhere.
And there were many smaller and not-so-small ones in between.

When Tun Abdul Razak took over the country’s reins from the Tunku following the
May 13, 1969 racial riots, he introduced the New Economic Policy as a tool to
uplift the economic and living standards of bumiputras, especially Malays, to
bridge the gap with non-bumiputras.

For the six or so years he was at the helm before he died of leukaemia in 1976,
there was emphasis on nation building, rural development, and on efforts to
establish a national unit trust scheme – known as Amanah Saham Nasional – under
Permodalan Nasional Bhd.

Some of these projects were completed under the tenure of Razak’s successor, Tun
Hussein Onn. Scandals were rare during this period.

But one stood out during Hussein’s premiership. This was the arrest of Harun in
the late seventies on corruption charges relating to the Muhammad Ali-Joe Bugner
boxing match in Kuala Lumpur in 1975.

There was a tense standoff before Harun was arrested as supporters surrounded his
house in Kuala Lumpur. Eventually, he was found guilty and spent time in jail.

Harun was a controversial and powerful figure in Malay politics. He was Selangor
mentri besar when the May 1969 elections resulted in a tie at the state assembly.
He was also notable as an Umno Youth leader and a champion of Malay rights.

It has been said that Hussein offered him a position as Malaysian ambassador to
Indonesia to entice him away from politics. But Harun refused. Subsequently, he
was charged with corruption which effectively put paid to his political ambitions.

The BMF scandal

It was around the late seventies, too that a unit of Bank Bumiputra Malaysia
started making dubious loans to a property group in Hongkong called Carrian headed
by one George Tan. When the loans were revealed in the early eighties, by which
time Datuk Seri (now Tun) Dr Mahathir Mohamad had succeeded Hussein as prime
minister, it raised eyebrows.

Bank Bumiputra was set up in 1965 to specifically provide credit facilities to the
bumiputra community to help increase their participation in the Malaysian economy.

What was its wholly-owned Hongkong subsidiary, BMF, doing lending money to a
Hongkong property holding company and in amounts that exceeded the bank’s capital?
For a while, Bank Bumiputra continued to lend more money to Carrian in an attempt
to recover the loans but it turned out to be throwing good money after the bad.

Eventually, the more than RM2 billion was never recovered. A Bank Bumiputra
internal auditor sent to investigate the deal was found murdered in the then
British colony and his body dumped in a banana plantation.

Tan was charged for various fraud offences and found guilty in Hongkong while a
director of BMF, Lorraine Osman, was extradited from London to face charges in
Hongkong.

But the key question was never answered: What was Bank Bumiputra doing lending
money in Hongkong, and who approved such huge amounts to so few customers? Where
were the controls?

As large as the BMF scandal was, Bank Bumiputra suffered two further losses and
needed to be rescued three times in all, and on each occasion, the losses were
some RM2 billion. In 1999, it was absorbed into what is currently known as the
CIMB group.

The biggest financial scandal

by P. Gunasegaram
Friday, 17 August 2007
There were other major financial scandals involving plenty of money.

For example, there was the deposit-taking cooperatives scandal of the mid-80s
involving several hundred million ringgit of depositors’ funds.

Before that, the Malaysian government was implicated in attempts to corner the
London tin market through a company called Maminco. And then it tried to cover up
losses of a few hundred million ringgit by setting up a company called Makuwasa
which took up the Employees Provident Funds’ allocations to new issues of shares.

Taking ControlBut all of these will be dwarfed by the biggest financial scandal of
them all – Bank Negara’s huge losses of an estimated RM15-20 billion from foreign
exchange trading, which came to light in 1994 when the central bank released its
1993 annual report.

Mahathir had been complaining over the preceding years that Third World countries
were disadvantaged by currency movements, citing the 1985 Plaza Accord between
developed countries which resulted in a sharp appreciation of the Japanese yen and
subsequent increases in ringgit terms of yen loans.

He had tacitly advocated that the central bank manage forex reserves in a more
aggressive manner. Bank Negara took positions in the forex market and lost badly
in 1993. Its governor then, Datuk Jaffar Hussein, and the head of forex trading,
Nor Mohamed Yakcop (now Tan Sri and Finance Minister II), resigned in the wake of
the scandal.

The stock market then was still in the grips of a bull run and continued to move
up despite the scandal but eventually succumbed to the Asian financial crisis of
1997/98.

At the height of the crisis, in August 1998, Mahathir imposed capital controls and
dismissed his deputy and finance minister Datuk Seri Anwar Ibrahim. A few days
later, Anwar was held without trial under the Internal Security Act, the highest
ranking politician ever to be detained under the ISA.

Subsequently, he was charged with committing sodomy, a rare charge to be

instituted against anyone, as well as for various corruption offences, culminating
in the biggest scandal that this country has ever seen.

There have been many other political and financial scandals since.

A mentri besar was caught carrying more cash than was allowed into Australia, a
chief minister was accused of having an affair with an underaged girl, businessmen
went unpunished for obligations they did not fulfil, contracts were given out
without proper bidding, incompetent and unknown contractors were given jobs,
council members were clearly benefiting from their positions, local councils
signed dubious contracts – the list just goes on and on. The latest of course is
the one involving the brutal murder using explosives of a Mongolian model, the
lover of an aide to the deputy prime minister.

Besides the aide, two members of an elite squad, charged with protecting the
country’s highest officials, stand accused of the murder of Altantunya Shaariibuu,
clear indication, if indication is needed, that scandals are here to stay and to
proliferate – for a long, long time.