Customs officer goes on RM1.82mil shopping spree – How can this happen?

A Customs officer bought hundreds of items not allocated for, raking up a bill of RM1.82 million, the Auditor-General’s Report 2011 reveals.

The officer, who is not named in the report, had placed a verbal order for the items, some of these costing several thousands of ringgit, without the procurement division’s approval, leaving the Treasury to foot the bill.

He had ordered:

An extra 50 GPS navigation systems when he was only authorised to order 30, costing RM6,174 each;

An extra 100 search lights, when he had obtained approval to order only 50, costing RM1,292.60 each;

60 beacon lights at RM1,311 each;

250 rechargeable torchlights at RM1,217.16 each; and

100 walkie-talkies at RM5,259 each.

The officer had not been authorised to order any of the last three items.

According to the audit report, the purchases were made in 2007 but the supplier, True Target Resources, could not be paid as the bill went beyond the procurement budget of the Royal Customs and Excise Department.

It added that the Treasury in in 2010 approved the payment and an investigation into how the breach of regulations had taken place was started.

The Finance Ministry on Dec 22, 2010, issued a directive to the Customs Dpartment to lodge a police report against the errant officer.

“However, no action was taken against the officer involved as he had given a 24-hour notice of resignation on Feb 26, 2008,” the audit report states.

On May 24, 2012, the Customs Department lodged a police report against the errant officer.

– Malaysiakini

Read more…
Customs officer goes on RM1.82mil shopping spree
Oct 15, 2012

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RM53,525 maintenance contract for one dot matrix printer!

Printer

LQ300 dot matrix printer

The humble dot matrix printer, among the cheaper computer printing options, is under the auditor-general’s spotlight after it was found that the Lahad Datu General Hospital was paying an exorbitant amount maintaining it.

According to the Auditor-General’s Report 2011, the Health Ministry is spending RM53,525 – nearly the cost of a 1.6 manual Proton Waja – for a five-year maintenance contract for each of the Epson LQ300 printers it owns.

The report doesn’t state how many such units are owned by the hospital, but it did state that it cost RM738 per unit and thus maintaining a single unit for five years was 72.5 times the purchase price.

This is however the tip of the iceberg as there are many items on the establishment’s hospital information system (HIS) inventory which recorded highly suspicious maintenance costs.

For example, another printer, the more expensive and advanced Lexmark E332n laser printer which cost RM1,916 a unit, required RM16,455 in maintenance cost for a five year period.

One company, five hospitals

In contrast, maintenance cost of similar equipment in government hospitals in Keningau, Pekan, Sungai Petani and Selayang was a fraction of the price paid by the Lahad Datu hospital.

In a reply to the audit team on June 15 this year, the Health Ministry justified the maintenance cost, stating that the ministry had a “back to back” agreement with the supplier which includes a “comprehensive” maintenance scope.

“The maintenance cost not only includes a ‘planned preventive maintenance’ but also includes corrective (measures) and replacements of the same make or better,” said the ministry.

The Health Ministry also suggested that the variance in cost of maintaining the Epson LQ300 printer could be because the supplier for the Lahad Datu hospital obtained the contract through direct negotiation.

Of the 12 hospitals involved in the HIS maintenance work, a single company – Systematic Conglomerate Sdn Bhd – received directly negotiated contracts to work on five hospitals.

Other than the Lahad Datu hospital, the four others maintained by Systematic Conglomerate were not part of the audit. Contracts for the other seven hospitals were awarded through open tender.

Ministry: We lowered the amount

The total value of tendered contracts is RM334.02 million. Of this amount, two-thirds or RM222.19 million worth of work was given to Systematic Conglomerate.

According to the Health Ministry’s explanation, the direct negotiations with Systematic Conglomerate were done by the Finance Ministry.

“However, the (health) ministry had negotiated for a lower amount of RM222.81 million, which is lower then the price of RM483.78 million sought by the contractor.

“The (health) ministry had on Oct 13, 2011 and Feb 22, 2012 appealed to the Finance Ministry to ensure that future HIS maintenance contracts be awarded through open tender,” the Health Ministry told the audit team.

In view of this, the government had on July 9 decided not to proceed with the option to extend Systematic Conglomerate’s contract by another three years.

– Malaysiakini

Read more…
Printer maintenance is 72 times purchase price
Oct 16, 2012 – Malaysiakini

Groundbreaking study details Taib’s US$21bil empire

A ground-breaking report released by Swiss-based NGO Bruno Manser Fund (BMF) estimated the assets of Sarawak Chief Minister Abdul Taib Mahmud’s family at US$21 billion (RM64 billion).

The wealth of Taib himself has been put at a whopping US$15 billion (RM46 billion), making him Malaysia’s richest man, outstripping tycoon Robert Kuok who has US$12.5 billion.

The report entitled ‘The Taib Timber Mafia: Facts and Figures on Politically Exposed Persons from Sarawak, Malaysia’ was released today in Brussels to coincide with a visit by the Malaysian Plantation Industries and Commodities Minister Bernard Dompok to the European Commission.

It is the first report that describes in detail the business activities and personal wealth of 20 members of the Taib family in Malaysia, Australia, Canada, Hong Kong, United Kingdom, United States and other countries.

The report aimed to build international pressure against the Sarawak’s first family and provide investigating bodies, journalists, Sarawakians and interested parties with hard evidence on the Taib financial empire.

BMF estimated the combined net worth of 20 Taib family members at close to US$21 billion, spread over 400 companies around the globe – all built through their near complete political and economic control of Sarawak – one of the poorest states in Malaysia – over three decades.

However, the research is restricted to Taib’s family members and does not include the wealth of Taib’s close associates, all of whom have benefitted from the powerful chief minister’s patronage during his almost 31 years in power.

Taib holds three key posts

In particular, the family of the longest-serving chief minister in Malaysia has established monopolies over the granting of logging and plantation concessions, the export of timber, the maintenance of public roads as well as the production and sale of cement, and a number of other construction materials.

“The Taib family’s business outfits, particularly its flagship company Cahya Mata Sarawak (CMS), have also benefitted from untendered public contracts worth hundreds of millions of US dollars,” said BMF.

CMS is the largest private company in the state with net assets totalling RM2.4 billion in 2010.
It has been awarded some of the state’s largest contracts including the RM300 million construction of the state legislative assembly building in Kuching, a contract over the maintenance of all 4,000km-long state roads in Sarawak and a 15-year concession to maintain 643km of federal roads.

The report claimed that the Sarawak state government enjoys total autonomy as to the use of the state’s forest resources and state lands, while Taib has abused his triple positions as chief minister, state finance minister, and planning and resources minister, to award his family members vast timber concessions, palm oil concessions, state contracts and directorships in Sarawak’s largest companies.

“In 2009, his three ministries controlled 49.6 percent of the state’s operating expenditure of RM1.19 billion and 80 percent of the state’s development expenditure of RM3.08 billion, with the other 10 ministers sharing the rest.”

As Sarawak planning and resources minister, the report explained, Taib has ultimate control over the granting of logging concessions in Sarawak that are worth several billion US dollars.

“Already in the late 1980s, family members and clients loyal to Taib were estimated to control over 1.6 million hectares of timber concessions in Sarawak which constitute more than 10 percent of the total land mass of Sarawak”.

All in the family

The report also zoomed in on Taib’s modus operandi as to how these assets were transferred overseas to countries such as Canada (Sakto group of companies), US (Sakti Corporation and related companies), Australia (Sitehost Pty Ltd), UK (Ridgeford Properties), Hong Kong (Richfold Investment Ltd) and to a number of offshore finance centres, in particular the British Virgin Islands.

“While the above-mentioned companies officially name Taib family members as their shareholders or directors, it is believed that many other companies are held through nominees.”

Individuals profiled in the extensive 45-page report include Taib’s brother Onn Mahmud, who is second richest family member with an estimated net worth of US$2 billion, while Taib’s eldest son, Mahmud Abu Bekir Taib, a major player in the Sarawak construction, property and energy business, is ranked third at US$1.5 billion.

Next in line are Taib’s Canada-based socialite daughter Jamilah Taib Murray (US$1 billion), Taib’s brother and timber entrepreneur Tufail Mahmud (US$600 million), sister Raziah Mahmud (US$500 million), daughter Hanifah (US$400 million) and son Sulaiman (US$300 million).

Meanwhile, timber conglomerate Ta Ann founder and Sarawak Energy chairperson Hamed Sepawi, a first cousin of the chief minister, has an estimated wealth of US$175 million.

Faced with mounting criticism, Taib had last year took to the Internet to defend his family’s wealth.

In particular, Taib explained that his daughter Jamilah’s (right) business was initially funded from his income as a federal minister, which his daughter through her business acumen expanded into a global empire.

“Well, my children make money, yes, quite big. I don’t know whether what they said 100 million is correct… in Canada,” he said in a four-minute video posted on YouTube a month before the Sarawak state election last year.

“But it all started (when) I gave money to my daughter. I was resigning from the federal government. I got gratuity, I gave some money to her to start a new business, it thrived.

“It is a property development company. When our town was still small, they had foresight to buy pieces of land and sell them quickly,” he said.

BMF compares Taib’s family with the clans of former Indonesian president Suharto and former Philippines president Ferdinand Marcos – the two families had embezzled between US$15 billion and US$35 billion, and between US$20 billion and US$900 billion respectively.

“We believe our research is showing merely the tip of the iceberg as many (Taib) family assets are likely to be hidden overseas or in offshore districts where information is virtually impossible to obtain,” said the report.

“BMF is therefore calling on anti-corruption and anti-money-laundering authorities worldwide to investigate the Taib family’s business activities.”

source:
“Groundbreaking study details Taib’s US$21bil empire”
Malaysiakini – Sep 19, 2012

Eruption of the dormant forex scandal

THE ghost of Bank Negara Malaysia’s (BNM) epic foreign exchange trading losses, said to have run into tens of billions during the 80s and 90s, has reawakened.

Like a dormant volcano whose time to re-erupt has come, the controversy involving the central bank’s infamous speculative practices blew up with such a shudder last weekend that even Tun Dr Mahathir Mohamad was called to respond.

Mahathir, who was prime minister at the time, commented to reporters that he was not afraid to be investigated. The Opposition can open any file they had on him, he said in response to DAP adviser Lim Kit Siang’s assertion that Pakatan Rakyat, should it take over the federal government, must initiate a royal commission of inquiry into the affair.

Other key figures reportedly implicated are the then finance minister Tun Daim Zainuddin and BNM governor during that period, the late Tan Sri Jaffar Hussein. A fourth person, the then BNM deputy governor, Tan Sri Nor Mohamed Yackop, is now a minister in the Prime Minister’s Department.

Although the issue has been raised before, this time it was perhaps more damning and detailed. This is because the individual who spoke about it at a forum organised by the Penang Institute, a state government think-tank, on Saturday was privy to the internal happenings at BNM until 1994.

Dr Rosli Yaakob was a senior manager during the crucial years when the speculative practices were said to occur, and was even on the panel that prepared and presented the bank’s semi-annual brief. He is currently Negri Sembilan PAS deputy commissioner.

Incidentally, Opposition Leader Datuk Seri Anwar Ibrahim, who was finance minister from 1991 to 1998, also spoke at the forum. Anwar maintained that the matter was kept from him after he assumed the post. He has however been accused of covering up for it, including by Lim – the opposition leader and DAP’s Tanjung MP in the early 90s – who held Anwar personally responsible for the losses.

The problem with this whole affair is that there has been neither an official investigation nor an inquiry into the matter to assuage public confusion and concerns. No one, aside perhaps from the perpetrators, knows how much money, if any, was lost or how this was done.

Rosli’s account, delivered to a packed hall seated in stunned silence, would have raised more curiosity about what could have occurred.

Even the volume of money that was supposedly involved has come into question. Lim has put the losses at about RM30 billion. Rosli, however, pointed out that it was once reported that at the height of the speculation BNM had spent RM270 billion. “This is no small amount,” he said.

According to Rosli, the market norm then was to trade in lots of US$1 million, US$5 million or US$10 million, but that BNM traded in US$50 million lots (up to 5-10 lots per call) and sometimes, a few “yards” (US$1 billion per yard) a day.

Its closest rivals were Japanese fund managers who also traded in lots of US$50 million, but only once or twice a year, he said.

…read more
BNM saga reawakened
6 June 2012 – The Sun

The subsidised “privatised” Senai-Desaru Expressway

One of the privatisation project covered by the 2010 auditor general’s report is the Senai Desaru Expressway Project in Johor. The purpose of this 77 km highway is to link Johor Bahru to the Desaru tourist areas. A concession company was appointed to build, collect tolls, operate and maintain the highway during the concession period.

The agreement was signed between the government and the concessionaire in July 2004. Construction is supposed to take 3 years and should have been completed in 2008. However, due to various difficulties three extensions had to be given until Dec 31, 2010 for it to be completed.

The cost to build the highway is RM1.37 billion and the original estimate of land acquisition cost was RM365 million which means the original total cost is RM1.735 billion.

Cost to build highway: RM1.37 billion
Land acquisition cost: RM0.365 billion
Total cost: RM1.735 billion

The interesting thing is although this project is privatised, the land acquisition cost is fully borne by the government!

And the more interesting thing is that the land acquisition cost “has increased from RM365 million to RM740.60 million due to payment for compensation that exceed the market price, high injurious affection and severance payments and interest payment of 8% due to payments not made within the stipulated period.”

So now what is the total cost of the highway? RM2.11 billion out of which 35% is paid for by the government (which means the taxpayers).

Cost to build highway: RM1.37 billion
Land acquisition cost: RM0.740 billion
Total cost: RM2.11 billion

Something is not right. The taxpayers contribute RM740 million to have this highway built but the public will still have to pay toll to use the highway for 33 years. Yes, the concession company is given the right to collect toll for 33 years.

OK the government will get a share of the profits – but only AFTER 15 years and only gets 20% of the profits! This doesn’t sound like a good deal for the country. If the government want to privatise the highway, privatise it all the way and let the concessionaire pay the full costs including the land acquisition. Otherwise, why privatised?

Just like the other highway concession agreements, the agreement for this subsidised “privatised” Senai Desaru Expressway probably contains some interesting details. For example, is the concessionaire guaranteed a profit? If the tolls collected are not enough will they get any compensations?

Apart from the doubling of the land acquisition cost, the auditor general’s report also highlighed the following shortcomings

– The project was not in accordance with the specifications causing damages to the road surface. Some stretches of the highway were built to less than the minimum depth of 95mm.

– The road surface is undulating at certain stretches and erosion-prevention measures at five bridges over rivers have not been incorporated.

– The highway is still considered “unsatisfactory and a danger to road users.”

– The concession agreement did not specify any liquidated and ascertained damages to be imposed in the event of delays. Aren’t these standard clauses in such agreements?

The concessionaire is Senai Desaru Expressway Bhd (SDEB) a company incorporated by Ranhill “which has long been described as UMNO-linked”.
The other main shareholder of SDEB is Yayasan Pendidikan Johor (YPJ) an arm of the Johor State Government.

The Perwaja Steel Scandal

Estimated losses: more that RM10 billion

You may have seen online somewhere the long list of scandals in Malaysia that has resulted in the country losing billions and billions of ringgit. Time Magazine quoted an economist at Morgan Stanley in Singapore as saying that the country might have lost as much as US$100 billion since the early 1980s to corruption.

One of these scandals is the Perwaja Steel project which is usually associated with a loss of RM2.56 billion. But it seems like RM10 billion is a more likely figure. In fact, Mahathir himself had admitted publicly in 2002 that Perwaja lost RM10 billion in a dialogue with Malaysians in London where he also admitted that there were possible misappropriation of funds and mismanagement in Perwaja.

Perwaja Steel started in 1982 as a joint venture between the government-owned Heavy Industries Corporation and the Japanese company Nippon Steel Corporation. This was supposed to be a showcase project in Mahathir’s push for industrialization. A steel plant costing RM1 billion was built in Terengganu to supply the domestic needs for steel products.

However, Perwaja encountered production problems and was saddled with large debts. Since the borrowings were in yen – which appreciated significantly at that time – interest payments were getting higher. In 1987 Nippon Steel pulled out of the project. Mahathir then brought in his friend Eric Chia in 1988 to run Perwaja and to turn it around. He was given full authority to do what was necessary to reverse Perwaja’s performance and reported directly to Mahathir.

Another RM2 billion was pumped into Perwaja with government funding and loans from Bank Bumiputra (RM860 million) and EPF (RM130 million). New facilities were built in Terengganu and in Kedah. Eric Chia helmed Perwaja for seven years.

Initially, he seemed to have succeeded in turning around Perwaja but after he resigned abruptly in 1995 it became clear that that was not the case. Total losses had increased to RM2.49 billion from RM1 billion when Eric Chia took over. Perwaja was crippled by additional debts amounting to RM5.7 billion.

The new management of Perwaja prepared an internal report where it claimed the following among others:

– inaccurate accounting records
– unauthorised contracts amounting to hundreds of millions of ringgit
– alleged misappropriation of funds
– dubious maintenance contracts amounting to RM292 million (including a contract amount of RM200,000 per month to a company for gardening, cleaning and vehicle maintenance)
– award of RM957 million contract to companies of a long time associate of Eric Chia

In 1999, Anwar made a police report which stated that “He (Eric Chia) in fact repeatedly claimed that his actions had the support and under the directions of Prime Minister Dato Seri Dr. Mahathir. And this is further substantiated with letters written by the Prime Minister himself. With the so-called mandate, the Board was sidelined, tender procedures were blatantly ignored and there were quesitonable, ‘unsatisfactory’ payments made to certain parties.”

After many years of inaction by the ACA and the police, Eric Chia was finally charged for dishonestly authorizing (not pocketing) a payment of RM76 million (0.076 billion) in 2004. This only happened after Mahathir stepped down as PM and Badawi took over. RM76 million is a lot of money but it is miniscule compared to the total loss estimated to be more than RM10 billion. Eventually, Eric Chia was acquitted by the courts in 2007.

The following sums up quite well this costly Perwaja misadventure,

“Perwaja looked like no more than a shining example of a politically conceived, commercially questionable and poorly executed enterprise that predictably failed. Despite lavish funding, a robust economy much of the time and protection from competing imports in the form of both tariffs and quotas, the company was never able to produce steel profitably. It suffered from chronic operating problems and a crushing debt load, including stiff foreign-exchange losses on heavy borrowing abroad. Even after the government decided to swallow RM9.9 billion in accumulated losses and privatize Perwaja in 1996, it continued to flounder.

Yet there was a more sinister side to Perwaja that guaranteed it an exalted place in the pantheon of Malaysian financial scandals. An unknown portion of the RM15 billion or more that the company consumed was ripped off in various rackets and ruses. Although both internal and external reports confirmed that the company was bled white, almost nothing was done to bring the culprits to justice and recover the funds.” – Barry Wain

Sources:

1. Barry Wain (2009) “Malaysian Maverick – Mahathir Mohamad in turbulent times”

2. Lim Kit Siang (2002), “DAP calls for Royal Commission of Inquiry into RM10 billion Perwaja scandal with former ACA director-general Zaki Husin appointed to assist the inquiry to ensure that Malaysia does not get into the Guinness Book of Records in having the most heinous mega scandals without criminals”

The forex scandal in early 90s

Estimated losss: As high as RM30 billion!

Some of you may have heard of the case of Nick Leeson whose exploits as a financial trader caused the spectacular collapse of the British bank Barings in 1995. He was based in Singapore and was making unauthorized speculative trades on the Japanese stock prices and interest rates. Unfortunately for him, the Kobe earthquake struck and caused the Asian markets to plunge resulting in Leeson and the bank losing more than US$1 billion. Barings could not sustain such a hugh loss and was declared insolvent. Leeson was eventually jailed 4 years for fraud and forgery in Singapore.

The case above illustrates the high risks involved in trading in financial instruments. Large profits can be made but monumental losses can result if the trades go sour.

A few years earlier in 1992-1993, Malaysia’s very own Bank Negara was also involved in risky forex trading which landed it in serious trouble and resulted in a loss estimated to be as high as RM30 billion. It is not clear exactly when such activities started but bank was supposed to have the most sophisticated trading rooms in the world which impressed Mahathir who was the PM then when he toured the trading rooms. He had given approval for Bank Negara to continue its speculative currency trading after he was informed about it.

Bank Negara’s forex trading activities were well-known at that time and a source of concern to banks across Asia. “It became the most awesome currency trader in the world” said the author of the book “Vandals’ Crown: How Rebel Currency Traders Overthrew the World’s Central Banks.” On some days, it traded US$1 billion to US$5 billion which is very unusual. Even the Bank of Japan rarely traded more than US$1 billion and only when it had wanted to intervene in the foreign exchange market to protect its currency. Central banks normally enter the forex market only to influence its own currency rate.

However, Bank Negara was trading in other currencies and was profiting from their movements. In other words, it had become a profit centre for the government using the country’s reserves to speculate in the currency market. Surely, that is not the role of a central bank. Why is Bank Negara undertaking such profit-making activities putting the country’s reserves at great risk?

Just like in the Nick Leeson’s case, it just needed an unfavorable event to cause monumental losses. Bank Negara was holding large positions betting on the pound sterling to go up. However, Britain withdrew from the European Exchange Rate Mechanism causing the sterling to collapse. This resulted in losses estimated to be between RM16 billion and RM30 billion in just 2 years in 1992-1993.

Can you imagine how much is RM30 billion? If you strike the first prize in the lottery draw of RM3 million – every single draw of the year and every year for 80 years you will get near to that astronomical figure!

Up to this day, a full account and disclosure of the forex fiasco has not been forthcoming despite the persistent efforts of Lim Kit Siang in bringing up this issue in parliament on many occasions. The following is his favourite quote from the Vandal’s Crown by Gregory J. Millman:

“Using all the resources a central bank commands – privileged information, unlimited credit, regulatory power, and more – Malaysia’s Bank Negara became the most feared trader in the currency markets. By trading for profit, Bank Negara committed apostasy against the creed of central banking. Instead of working to ensure global financial stability, Bank Negara repeatedly shoved huge sums of money into the most vulnerable market situations in order to destabilize exchange rates for its own profit” (p.226)

“(Bank) Negara operated behind a thick veil of secrecy. The bank seldom spoke publicly about its controversial trading activities. Yet it was increasingly clear to foreign exchange traders that Bank Negara’s operations in the foreign exchange markets went far beyond simple self-defense. It became the most awesome currency trader in the world.” (p. 227)

“(Bank) Negara’s market manipulation was so egregrious that one American central banker said, ‘If they tried this on any organized exchange in the world, they’d go to jail.’ However, in the unregulated international currency markets, there were neither police nor jailers. The only rule was the rough justice of the vandals, and it was this rule that eventually brought (Bank) Negara down.

“In 1992, (Bank) Negara took on a large pound sterling position, apparently expecting Britain to maintain the discipline required by the European Exchange Rate Mechanism. It was a bad economic and political judgement. (Bank) Negara lost approximately $3.6 billion when Britain withdrew from the ERM, letting sterling collapse. The next year, (Bank) Negara lost an additional $2.2 billion. By 1994, Bank Negara was technically insolvent and had to be bailed out by an infusion of fresh money from Malaysia’s finance ministry.” (p.229)

When will the country get the whole story of this biggest financial scandal in its history? Specifically, when will we get answers to some of these questions:

Why was Bank Negara speculating in the risky forex market to make profits?

Was it a proper policy for a central bank to use country’s reserves to make profits?

Who was reponsible for authorising such activities?

What were the limits on how much of the bank reserves can be used for currency speculation? Were these limits adhered to?

Was the cabinet aware that the country’s reserves were used for such risky speculation?

Wasn’t there a mechanism to monitor the currency trading?

Why wasn’t serious actions taken against those responsible for such huge losses?

Past Scandals – The Maminco-Makuwasa Affair

Estimated losses: RM 1.6 Billion

Malaysia used to be the world’s leading tin producer accounting for 31% of the world’s output. It was a major contributor to the country’s economy providing employment for more than 40,000 people.

In 1985 the world tin market crashed with the price plunging by 50%. Many tin mines in Malaysia had to close as it was no longer economical to operate the tin mines. One of the factors that contributed to the collapse of the tin market is the ill-fated attempt by the Malaysian government to corner the tin market and to prop up the tin price.

This is the Maminco scandal that is usually found at the top of the lists of scandals and bail-outs plaguing Malaysia since Mahathir became the PM. This is probably because it was the earliest scandal occurring immediately after Mahathir became the PM in 1981. Although not the largest loss in terms of value, it still caused a loss estimated to be RM1.6 billion or more.

In this crooked scheme, a RM2 company Maminco Sdn. Bhd. was set up and was used to secretly buy tin future contracts and physical tin in order to push up prices on the London Metal Exchange. To finance its covert activities, Maminco obtained financing from Bank Bumiputra – naturally. At one point, this RM2 company was borrowing astronomical amounts from the bank – as much as RM1.5 billion.

Initially, they succeeded in pushing up the tin price artifically. But the higher prices stimulated increased tin production and resulted in the US releasing its strategic stockpile. The tin price could not be maintained at the artificially high level for long and eventually it collapsed.

Undertaking this Maminco scheme is already bad enough. But instead of admitting their mistake, Mahathir and his merry band cooked up another scheme to hide the losses incurred by Maminco from the Malaysian public. Another RM2 company called Makuwasa was set up.

The idea was new shares reserved for bumiputras allocated to EPF were diverted to Makuwasa at par value! Can you believe this? These cheaply acquired shares could then be sold for a profit at market price! Instant profits made by Makuwasa can then be used to cover the Maminco’s losses. Effectively, Makuwasa is used to raid the savings of Malaysians to help pay for Maminco’s losses!

In 1986 Mahathir publicly admitted that Makuwasa was created to recoup the government’s losses from the Maminco debacle and to repay its loans to Bank Bumiputra.

W T F

Past Scandals – Bank Bumiputra

Bank Bumiputra was incorporated in 1965 and was supposed to provide credit and financial facilities to the rural areas in Malaysia. As a government-owned bank it is the preferred bank for deposits of state funds and it grew rapidly and became the largest bank in SE Asia. However, usually UMNO politicians or UMNO-linked civil servants were appointed to run the bank instead of independent professional managers.

It is not surprising that it became a source of cheap funds and questionable loans for well-connected businesses. This includes a RM200 million loan to UMNO in 1983 to build its headquarters.

After a series of scandals the bank has to be bailed out by the government with the help of Petronas not once, not twice but three times resulting in a total loss estimated to be as high as RM10 billion (ref. Barry Wain’s book “Malaysian Maverick”).

“In July of 1983, what was then the biggest banking scandal in world history erupted in Hong Kong, when it was discovered that Bumiputra Malaysia Finance (BMF), a unit of Bank Bumiputra Malaysia Bhd, had lost as much as US$1 billion which had been siphoned off by prominent public figures into private bank accounts. The story involved murder, suicide and the involvement of officials at the very top of the Malaysian government. Ultimately it involved a bailout by the Malaysian government amounting to hundreds of millions of dollars.

Mak Foon Tan, the murderer of Jalil Ibraim, a Bank Bumi assistant manager who was sent to Hong Kong to investigate the disappearance of the money, was given a death sentence, and Malaysian businessman George Tan who had participated in looting most of the funds, was jailed after his Carrian Group collapsed in what was then Hong Kong’s biggest bankruptcy, and a handful of others were charged. No major politician was ever punished in Malaysia despite a white paper prepared by an independent commission that cited cabinet minutes of Prime Minister Mahathir Mohamad giving an okay to a request to throw more money into the scandal in an effort to contain it.

That was just the first Bank Bumi scandal. The government-owned bank had to be rescued twice more with additional losses of nearly US$600 million in today’s dollars. Ultimately government officials gave up and the bank was absorbed into CIMB Group, currently headed by Nazir Razak, the prime minister’s brother. That scandal, which stretched over several years before its denouement in 1985, set the tone for 24 years of similar scandals related to top Malaysian officials and was the first to prove that in Malaysia, you can not only get away with murder, you can get away with looting the treasury as well.”

(ref. “Grand Theft Malaysia”, Asia Sentinel)

Nauseous dung from the cow project

Last week the PM and the agriculture minister claimed that the soft loan of RM250 million given to the National Feedlot Corporation (NFC) controlled by Shahrizat’s family has not been fully disbursed to the company. However, on Tuesday (8 Nov) PKR has released documents and financial statements filed with the Companies Commission of Malaysia which show that the soft loan has already been fully drawn down in two installments: RM130 million upon signing of the agreement and RM120 million on 31 March 2009.

If PKR’s claims are true, it means that both the PM and the agriculture minister had lied to Parliament. Why are they desperately trying to cover up the truth? Are they expecting NFC to default on the loan and losing RM130 million of taxpayers’ money is better than losing RM250 million? Actually, it doesn’t matter whether the loan has been fully disbursed. What the taxpayers want to know is who will be accountable for approving the huge soft loan to a company without a track record.

The agriculture minister, Nor Omar has attempted to stave off the persistent queries by PKR MP’s by saying that money could be in an escrow account without really understanding what it would mean if it were an escrow account.

The financial records referred to by PKR showed RM81.22 million was transferred to another company National Livestock & Meat Corporation Sdn Bhd (NLMC) as a loan. NLMC is supposed to be the “marketing agent” for NFC. Lets get this straight. NFC gets a soft loan of RM250 million from the government and it gives out a loan of RM81.22 million to its “marketing agent”? And the money is supposed to be in an escrow account?

There is a simpler explanation. NLMC is also majority-owned by Shahrizat’s family!

NFC is also very generous in giving discounts to its customers. The documents released by PKR revealed that NFC gave a discount totalling RM2.96 million to Real Food Company Sdn Bhd (RFC), which operates a chain of luxury restaurants including Meatworks. And surprise, surprise. RFC is also controlled by Shahrizat’s family.

If the stink hasn’t made you nauseous yet, it was also alleged that more than RM800,000 was spent on an overseas trip for the NFC directors using company funds and claimed as entertainment allowance. If you are a shareholder of a listed company, you would be concerned if the company pays RM800,000 directors’ fees if the company is not making a profit. But in this case, no profit but the directors have the audacity to spend more than RM800,000 for an overseas trip not for business but for entertainment?

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