On January 14, Prime Minister Dr Mahathir Mohamad attended an Integrity Forum hosted by Bank Rakyat at its prestigious gentrified location in Bangsar, Kuala Lumpur.
The press and media covered the event well and quoted the prime minster as saying that the situation in Malaysia had improved since May 2018 when his Pakatan Harapan government assumed power. It has to be admitted, as the prime minister affirmed, that the quality of freedom has improved considerably. This can be observed in the way news portals are publishing opinions, letters and comments that are critical but mostly constructive.
The focus on accountability, transparency and good governance is also gaining traction. If such trends continue Malaysia will make notable and impressive progress in the management of its political, economic and financial affairs.
It is interesting that Bank Rakyat is in the news for good and great reasons. Its chairman, Datuk Noripah Kamso has endeavoured to strengthen the integrity and image of the Bank. Their commitment to not accept or provide gifts is a radical first step in weeding out corrupt and unhealthy practices.
Bank Rakyat Case
In 1977 three key officials of Bank Rakyat, a cooperative bank, were sentenced to varying terms of imprisonment and fines for forgery of documents and criminal breach of trust. One of them was a former Menteri Besar; it was the first time a person of such high standing had been convicted in Malaysia. On appeal, the country’s Supreme Court enhanced some of the sentences. An eminent jurist, Tan Sri Eusoffe Abdoolcader in sentencing the accused initially at High Court level had said, inter alia
‘The activities and workings of the Bank …. have disclosed a deplorable, sordid and scandalous state of affairs and a blatant and outrageous disregard for the Ordinance, Rules and By-laws, with virtual carte blanche to the 1st and 2nd accused , …..not unaided by apathy and acquiescence of the directors, including the Government watchdogs or official sentinels…….’
This was a well reported, high profile and sensational case and one would have thought that in view of the harsh sentences and admonition of the courts all bankers would have been extra careful with their fiduciary duties.
But barely three years later Bumiputra Merchant Bank(BMF) was involved in a financial scandal in Hong Kong which resulted in wrongful losses to the Bank and wrongful gains to its directors. BMF suffered losses amounting to US$1billion (then RM2.5 billion) at a time when the term billion was not in much usage in Malaysia.
Some 30 years later 1MDB, supposedly a sovereign wealth fund, seems to have become enmeshed in criminal activities that have also run up huge losses, inestimable currently but running into tens of billions of Ringgit. The astronomical losses suffered by both BMF and 1MDB were the consequences of authorised, influential and powerful players in these entities illegally and inappropriately delegating trust and responsibilities to rather dubious, despicable and dishonest characters.
Two surreal characters, almost of mythical, fictional fame, had been given sufficient mandate to upend Malaysia’s fiduciary system. The two characters are George Tan Soon Gin, a civil engineer and Low Taek Jho, a Wharton Business School product.
The latter is popularly known as Jho Low. Who are these characters and how did they worm themselves into a fairly well run, incorruptible and transparent governance system, one that used to be among the best in Asia? Their nefarious activities which involved the smooth cultivation and subversion of key personalities in Malaysia cost the country billions in losses, loss of reputation and irreparable loss of prestige to an otherwise sane, sober and spectacular country.
Malaysia, lying in the heart of Southeast Asia is an oasis of peace, stability, relative freedom, essentially democratic rule and success in the region with the celebrated diversity of its people, a consistent growth trajectory and is a somewhat unique country. In a region which has had dictatorships, authoritarian rule, people’s revolutions, military rule and massive poverty, Malaysia was certainly different It is certainly no tinpot country although it has provided refuge to a discredited religious bigot like Dr Zakir Naik.
Both Tan and Jho Low fawned frivolously on their favoured targets with gifts, gratification and their gift of their gab, were fastidious with their pawns and fast in milking the system and caused unbelievable billions in losses for Malaysia. They achieved cult-like figure status with their pawns who carefully cloistered them from public scrutiny and were willing to go the extra mile to shield, save and salvage them even when their game was almost up.
Their names became, for a time, mantras for success and splendour. Instead of being treated with the contempt they deserved they were protected and conferred privileged status as go betweens, as financial mahagurus, as secret treasures and trustees who were perceived as the antidote to the country’s incapacity to make quick money.
They offered nirvana to that select group of Malaysians who had got to know them. The notable thing is that while the country was bled, the collaborators of these two felons realised substantial gains in their private wealth.
The commodities that the two traded in to impress their principals included corrupt payments, choice investment properties, commissions, gambling chips, celebrities, collectibles, classic cars, luxury cruises, contacts in the highest places and a contrarian narrative to what was commonly known.
The contrary narratives had the effect of casting aside the norms of conventional risk management and established fiduciary conduct. The two fraudsters seemingly enjoyed the status of oracles in all business transactions both locally and internationally.
A Vibrant Hongkong
From the middle of 1978 to December 1981. Hong Kong was perhaps the most vibrant city in Asia with fast escalating property prices, a corruption free environment, an excellent education system, good and constantly improving infrastructure and tiny Hong Kong then accounted for about a third of Mainland China’s economy. The biggest business in the city was China-watching.
It was both to explore opportunities for business in China and to see how China would emerge from the post-Mao period. The Gang of Four, which included Jiang Qing , Mao’s widow was being tried in China. Two reputable regional weeklies, Far Eastern Economic Review and Asiaweek also operated from Hongkong.
Rise of Deng Xiaoping
Following the deaths of Mao Zedong and Chou Enlai and the sidelining of Hua Guofeng, Deng Xiaoping emerged as China’s paramount leader. The Four Modernisations long in the pipeline since the early 1960s was to see the light of day.
Deng had formally announced China’s Four Modernisations in December 1978 with an emphasis on science and education at the conclusion of the 3rd plenum of the 11th central committee of the Chinese Communist Party. It meant China was coming out of its isolation. Special Economic Zones were set up in Southeastern China across from Hongkong.
Meanwhile the US was also moving secretly towards normalisation of relations with China. President Jimmy Carter announced the intention to normalise diplomatic relations in mid-December 1978 and set January 1 1979 for the commencement of full diplomatic relations. Hong Kong provided the first class stall seat to watch and invest in developments in the mainland.
Business people and investors from all over the world, especially overseas Chinese began flocking to Hong Kong to take advantage of the attractive opportunities that became somewhat easily available under Deng’s enlightened rule which encouraged private entrepreneurship.
Hong Kong, given its long history of trading and banking relationships with Mainland China and the Guangdong area was the natural and logical staging point and base for entree to China. Malaysia’s Bumiputra Merchant Finance Bank(BMF) went into territory and quickly set its sights on extending loans to the booming property sector.
George Tan, a former bankrupt from Singapore with an expired stay permit in Hong Kong saw in the leadership of BMF those weaknesses for high living, showing off and a proclivity to bend rules to make some money on the side.
The four Malay men who led BMF had non-Malay spouses and some of these spouses’ names figured in their trials. When BMF made its first big unsecured loan amounting to US$292 million on December 19 1979 to one of Tan’s $2 dollar companies to acquire Mai Hon it would seem that there was no board resolution.
One of the directors actually saw Tan’s companies as belonging to one and the same BMF family. This was because almost all those associated with BMF were given shares, loans, commissions and gifts by Tan. BMF had even accepted post dated cheques for Tan’s loans as collateral.
What triggered the initial investigation into BMF-Tan dealings was the gruesome murder on July 18, 1983 of Jalíl Ibrahim, a trained auditor who had been designated assistant manager at BMF, Hong Kong. There is still speculation as to what really prompted the murder. The authorities in Kuala Lumpur also took a more keen interest in the bank’s insolvency after it ran into liquidity problems.
Problems relating to the 1MDB affair became public knowledge in Malaysia largely because of the reporting by the Wall Street Journal, Sarawak Report and other foreign newspapers and news portals.
The July 2016 press briefing provided by the then US Attorney General, Loretta Lynch was the most authoritative piece of information on the grand larceny that affected 1MDB. In Malaysia the Edge was forthright and frank from the beginning about reporting on the 1MDB and its curiously conceived investment strategy.
Teh Yik Koon in her ‘ From BMF to 1MDB , a criminological and sociological discussion’ (2018) has covered the management changes and the controversial activities of the development fund and its officials. These matters are still being adjudicated in Malaysia and Jho Low who held no official position in 1MDB realised wrongful gains for himself and his principal collaborator. Jho Low is now a fugitive along with another Malaysian. If both of them return to Malaysia and provide evidence it would facilitate the progress of the case.
Two felons defraud a country
Both these individuals, Tan and Jho Low were entrusted with huge financial assets when they had not been subjected to adequate vetting and due diligence. They were clearly, in hindsight, not worthy, competent, or qualified and worse, they could not be controlled, monitored or supervised. Both of them realised that they could bribe, offer blandishments to the top players in the hierarchy and bamboozle and bully those underlings they came across in their daily dealings.
An aura of their closeness to the top echelons was created and periodically these felons were given a boost by the principal accused in these cases. Given Malaysia’s highest power distance ratio the underlings, including some toothless watchdogs surrendered the main narrative to these two masterful manipulators.
Both the cases extended to jurisdictions beyond Malaysia and this had posed some difficulties initially in gathering evidence. By no means is it suggested that these two con men had a monopoly of such access. There were others who, although discovered, could not be acted upon.
The words of the late eminent jurist, Eusoffe Abdoolcader as stated at the beginning of this piece were forgotten quickly and the result is that a former prime minister is on trial for 42 charges that verge almost on treason.
Dato M Santhananaban is a retired ambassador with 45 years of public sector experience
The views expressed here are those of the author/contributor and do not necessarily represent the views of The Independent Singapore. /TISG