Dr M says he's not responsible for BMF's ‘missing billions’ but fails to explain.

Tun Dr Mahathir Mohamadbrushed aside allegations that he was responsible for the ‘missing billions’ in the Bumiputra Malaysia Finance Limited (BMF) scandal when he was prime minister.

Dr Mahathir said the money that went missing ‘belonged to the bank’ and not the country, and therefore he should not be blamed for it.

“I did not steal any money. No money went missing, what went missing was money belonging to the bank.

“I am not a bank manager, nor am I a bank advisor.

“So many banks lost money during that time. Why should I be blamed for them?” said Dr Mahathir to reporters after speaking at the 19th Perdana Discourse Series at the Perdana Leadership Foundation here.

He was asked to respond to allegations made by former Senator Tunku Abdul Aziz Tunku Ibrahim in the column of an English daily here recently.

The Malaysian Anti-Corruption Commission (MACC) advisory board chairman said Dr Mahathir had made some “outrageously questionable ventures” during his time as prime minister. 

He then did not explain further about the BMF scandal.


BMF SCANDAL
by Hakim Joe

When a bank has too many deposits (excessive funds), what does the bank do? Why, they relax their loan requirements to offer more loans out in order to maximize their profits. What if the national loan requirements are already “very relaxed” due to favorable economic conditions in the country? Why, you loan the excessive liquidity overseas! Bank Bumiputera Malaysia Berhad (BBMB), found itself in such an enviable situation in 1979/1980. This was partly due to the fact that Petronas was “instructed” to remit RM50 million a month into its BBMB banking account. The dilemma that BBMB was facing then was how it was going to lend these excessive cash out when other Malaysian banks were already in the picture. BBMB could of course lower their interest rates but the potential profits could not be maximized and the fact that the other competing banks could also do likewise was not lost on them. Allowing the money to be left in the bank’s coffers is not productive either as BBMB would have to pay interest on it. So, in order to maximize their profits, the top hierarchy within BBMB decided to channel these funds out of the country and Bumiputera Malaysia Finance (BMF) based in Hong Kong, was selected as the vehicle targeting the foreign exchange and money market operations. George Tan Soon Gin of Carrian was more than willing to be the recipient.  After the financial debacle, it was reported that BMF had lost RM2.5 billion and George Tan was charged and convicted. Not one cent was ever realized from these loans but the matter of fact was that BMF gave out loans in amounts that exceeded its capital. This can only happen if strict instructions from BBMB were given to officials in BMF. An Inquiry (with limited powers and restricted terms of reference) was initiated instead of a Royal Commission (just like the MACC case these days). The Inquiry Committee comprising of Tan Sri Ahmad Nordin, Chooi Mun Shou and Ramli Ibrahim produced a 6,000 page (13 volumes) report after two years of intensive investigations. On paragraph 74.2(2) of the BMF Final Report, the committee reported that “apart from few members of the staff, the Committee did not receive the full co-operation and assistance from the Board and Management of Bank Bumiputera Malaysia Berhad (BBMB), which was the Appointing Authority.”  The BMF Final Report started off by stating that “There might not have been Carrian without BMF.” The BMF Inquiry Committee also identified a “Concerted Plan” by various BMF top officials and George Tan “to make use of BBMB funds to make money in Hong Kong” during the property boom of 1979. This plan was divided into three phases where Phase One involve the takeover of a Hong Kong public-listed company (Mai Hon, which was later renamed Carrian Investment Limited), the purchase of Gammon House at US$200 million (to be resold later to Malaysian Government at US$250 million) and the setting up of Plessey Investment Limited (PIL) as the recipient vehicle for the BMF loans.  Phase Two involve the purchase of Grand Marine Holdings Limited (GMH) at HK$800 million to be resold later to the Malaysian Government at HK$1 billion, and the necessary cash flow for the Carrian Group.  Phase Three was never implemented as by now the Carrian Group was facing massive liquidity problems. The murder of BMF Assistant General Manager, Jalil Ibrahim, hastened the end of a sordid chapter involving fraud, CBT, criminal conspiracy and murder. Klang businessman Man Fook Than was eventually convicted of the murder and sentenced to life in prison, a crime he vehemently denies.  In the later Bank Negara Malaysia forex debacle of 1992/1993, we had creative accounting practices to offset the massive losses. Here and now in 1984, no such actions were undertaken as none were deemed necessary. BBMB was going to take the “hit" and the subsequent bailout by the Federal Government means the bank “did not suffer any losses”. In fact all BBMB Chairman Tan Sri Kamarul Ariffin got was a rap on the wrist by TDM for receiving HK$3.3 million in consultancy fees. He was never held accountable for the RM2.5 billion loss even though part of these losses was made on his watch.   First we come to the Gammon House deal. The Carrian Group was supposed to make a clean and quick US$50 million profit. According to the BMF Final Report, then BBMB Chairman Dr Nawawi Mat Awin met BNM Governor Tan Sri Abdul Aziz Taha (on 12 November 1982) and Dr Nawawi indicated to the BNM Governor that he was merely acting on instructions by the Minister of Finance (Tengku Razaleigh) to “purchase Gammon House as a centre to house the operations of various Malaysian agencies in Hong Kong”. This was confirmed by Dr Rais Saniman (alternate BMF Director) on 7 August 1984 when he reported to the Inquiry Committee that he was informed by Datuk Mohamed Hashim Shamsuddin (BBMB Executive Director) that Tengku Razaleigh has decided to acquire Gammon House with George Tan acting as the agent for the Malaysian Government. Amongst those present at this meeting were Lorrain Esme Osman (BMF Non-Executive Chairman), Ibrahim Jaffar (BMF GM), George Tan (Carrain Chairman) and a few Carrian “chaps”. When Dr Rais questioned this unorthodox transaction, since the Malaysian Government could have purchased this property outright, he obtained no answer from Datuk Hashim. BTW, the Gammon House deal fell through and George Tan became the beneficiary of Gammon House as the S&P was already signed. In fact BBMB approved a loan of US$292 million (146% financing) to Plessey Investment Limited for the purchase of Gammon House after it was made known to BMF and BBMB that the Malaysian Government was not interested in Gammon House.   BBMB’s single US$292 million loan to Plessey Investment Limited, a HK$2 shell company, represented the largest ever loan ever given out by BBMB at that time. (They eclipsed it with another US$580 million loan later on.) Ever wondered why BBMB approved the loan? When PIL was asked by BNF loan officers just who their major shareholder was, the answer was BBMB. Carrian Investment Limited has by now grown from a nonentity in 1981 to become Hong Kong's sixth largest company by market capitalisation after merely one year in business.  Tengku Razaleigh denied these accusations and said that the Gammon House was never even considered. The Malaysian Government later bought the Lap Heng Building instead. However this does not detract from the fact that George Tan telexed Datuk Hashim on 3 January 1980 that he has been offered US$250 million for the property and needed prompt advice. If the Carrian Group was merely in it for the profits, they could have easily sold Gammon House and pocketed the US$50 million as would have been the case if the property was sold to the Malaysian Government. Why it didn’t do so can only point the finger at “more powerful” people behind the scene with a different agenda.  The implications that Tengku Razaleigh was involved was tabulated inside Special Brief One of the BMF Final Report (2 volumes). However, these two volumes were never distributed to Parliament. What the MPs got were 5 volumes of Special Brief Two and 3 volumes of Special Brief Three. Moreover, the Inquiry Committee strongly recommended that BBMB make a police report as the loan is tantamount to theft. BBMB never did lodge any police report.  As with the Gammon House, Grand Marine Holdings Limited (GMH) was bought with the sole intention of being resold to the Malaysian Government at a profit. Once again BMF became the “sole provider” to the tune of US$580 million in six tranches of US$138 million, US$100 million, US$97 million, US$143.5 million, HK$643.7 million and SD$20 million. This is beside the fact that BMF was over concentrating its loan portfolio on the Carrian Group as up to 65% of its total lending were made to them. Once again George Tan was left standing alone on the line when the Malaysian Government declined the offer to purchase GMH. How in the world did George get the impression that the Malaysian Government had intentions of purchasing GMH, if not under instructions from the BMF management, specifically Dr Rais?  When Ibrahim Jaffar was questioned by the Inquiry Committee, Datuk Musa Hitam’s name came up as the party within the Malaysian Government that was interested in the GMH deal. When Dr Rais was questioned, he denied knowing about the GMH deal. He however admitted much later that George offered to sell the controlling interest in GMH to the Malaysian Government and that he had asked him to act on his behalf to speak to the Malaysian Government, which he (Rais) spoke to the DPM. Datuk Musa confirmed this but said that, “Ada satu kali di mana Dr Rais menyebut serta cuba menghuraikan hal-hal perusahaan/perniagaan personalnya di Hong Kong. Tetapi saya telah menahannya oleh sebab ini tidak ada kaitan langsung dengan tugas-tugas resmi kita. Saya tidak tahu menahu atas apa-apa yang lebih daripada itu.”  The Inquiry Committee is of the view that there is insufficient evidence to come to a conclusion that the Malaysian Government is involved in the GMH affair. What is evident is that BMF provided the entire financing for the purchase of GMH, releasing its funds to 7 borrower companies for the purpose of “investment”. That BMF was unable show documented evidence that the bank has done an evaluation into these companies before disbursing the first tranche of the loan of US$138 million is not the matter here. What was terribly wrong then was that all of these 7 borrower companies were HK$2 companies and that 4 of these companies were only incorporated after the loan has been approved. Get it? “After” the loan has been approved.  That BMF tried to recover the loans of US$138 million and US$100 million from these 7 companies was another “mystery” of its own. 7 writs were filed against George Tan but no attempts were ever made to serve these writs on George. When this issue was brought up to BBMB’s attention (after BMF finally served the 7 writs on George’s lawyers), the BBMB hierarchy “over-ruled” this action and instructed BMF to “recover” these writs immediately.  On 26 October 1982, Carrian announced that the company was not in a position to meet current payments and was facing temporary liquidity problems. What is beguiling is that BMF continued to disburse funds to the Carrian Group after such an announcement. Three days after the announcement was made, the BMF Board approved another US$30.2 million loan to Carrian although Carrian Holdings Limited (CHL) only applied for a US$30 million loan (for their US-based Oakland Project). Why the additional “unasked-for” US$200,000? Another thing is that BMF did not ask nor obtained the Oakland project as security against its loan, in fact no security was ever requested. What is even more questionable is that the money is released to a company called Paris Ride and not CHL (the loan applicant).  CHL and CIL were both undergoing restructuring at this time (after the announcement) and the Wardley/Hambro scheme required both companies to lodge HK$250 million (US$40 million) in an escrow account to be used as working capital for both companies. Now, how were CHL and CIL capable of this requirement? All I can say is that within 30 days after releasing the US$30.2 million loan to CHL, BMF released an additional US$40 million into the escrow account at the Bank of Communications. This newest loan is secured by the personal guarantee of one Mr George Tan Soon Gin.  Another US$3 million was released on 9 April 1983 to yet another George’s companies (Fitarget) and again on the 10 June 1983 (US$4.5 million). Both loans are once again secured by the personal guarantee of George Tan. Part of Carrian’s US Assets were meant to be the security for the group’s loans from BMF but since these same assets were initially procured using the same loans offered by BMF, this would defeat the purpose of securitizing it. As only part of it were pledged as security (due to the fact that they were all not fully paid for) and to complete the paperwork allowing all Carrian’s US assets to be pledged to BMF, BMF in fact had to fork out another US$76 million, and do it through a third party (Mr Yap Lim Sen from Ipoh Garden), to complete this undertaking. This is on top of yet another US$7.6 million “loan” made payable to the city of Oakland for the purchase of an Oakland property by the Carrian Group. BTW, Mr Yap paid for a trip to US to check out these properties and reported to BBMB that they are merely slums that nobody wanted.  On 20 May 1983, the BBMB Board approved the proposal to acquire Carrian’s US Assets through a third party. The two nominee companies were Dragon Base and Darton and the agreement allowed for a rescission period of 4 weeks whereby the agreement can be rescinded “in the event of any adverse disclosures about the property.” Jalil Ibrahim personally flew to the US on 7 June 1983 and engaged a renowned property valuer (Levanthol) to value Carrian’s US assets and was told that the properties were nowhere near the US$76 million S&P figure. Another valuer, Perini, valued those properties at US$56 million only. (That’s 36% over-valued at US$76 million.) Jalil promptly informed BMF of his findings and tried to get BMF to rescind on this deal. On 9 June 1983, Jalil wrote to his wife detailing his frustrations about this deal but the letter was never completed or posted. Jalil was also against the release of another US$4 million loan to the Carrian Group for the purchases of China Underwriters Life & General Insurance Co. Ltd (CUL) and the Union Bank Hong Kong Limited (UB). As the deputy GM of BMF, he personally blocked the US$4 million loan. On 18 June 1983, Jalil Ibrahim was found murdered and his body dumped in a banana plantation outside Hong Kong. On the same day, the loan was released to Fitarget. Coincidence? Maybe…(Lorrain Osman broke his silence after 23 years and in 2008 he ventured that Jalil had late night visitors at his hotel room where he was staying, and on the day of his murder, had taken HK$20,000 purportedly for ‘Ibrahim’ to payoff someone.)    The US$2.5 billion loss by BMF and the subsequent Carrian Group bankruptcy were in fact Asia’s largest bank losses and largest bankruptcy case at that time. Lorrain Esme Osman became a household name in Malaysia and his intentions to takeover Bank Buruh was now left in tatters.      During the trial of the murder of Jalil Ibrahim, Malaysian Mak Fook Than was found guilty and sentenced to life in prison. Mak vehemently denies the murder charge and told the court that he was merely acting on instructions to dispose the body and that the murder was committed by an unnamed Korean nationality who in turn was taking direct orders from a man named George (no surname). It was later discovered that Jalil was strangled with a white cotton bathrobe belt in his hotel room and his body stuffed into a large suitcase. A porter at the Hong Kong Regent Hotel remembered carting the heavy suitcase through the lobby into a taxi trunk.   Prior to the murder and Carrian’s announcement of liquidity problems, BNM (under Special BNM Investigator Lee Kong Lam) officially investigated the BMF affairs and made a full report to the BNM Governor, Tan Sri Aziz Taha. In the Bank Negara Inspection Report on BMF (as of 30 June 1982), it stated that BMF has over exposed themselves with a total loan amount of HK$5.042 billion of which HK$3.246 billion was offered to the Carrian Group and its subsidiaries, “the bulk of which was granted on an unsecured basis.” The Inspection Report also pointed out illegal payments of Director’s fees and Consultancy fees to the directors of BMF and also to the Chairman of BBMB, Dr Nawawi Mat Awin.  Under normal circumstances, BNM would have immediately “moved in” to clean up the mess without hesitation as with instances dealing with the Oriental Bank, Perwira Habib Bank, D&C Bank and Bank Buruh among others. However, these were extraordinary times concerning a Malaysian Government owned bank (Permodalan Nasional Berhad owns 70% of BBMB) and a bank chairman that has been tipped to become the next Minister of Finance. After many sleepless nights (I’m sure) and six weeks after the stinging Inspection Report has been finalized and submitted to the BNM Governor only did Tan Sri Aziz Taha meet up with Dr Nawawi. Any other banks would have been wrapped up, signed, sealed and delivered to BNM in half that time!  On the 12 November 1982 meeting, Dr Nawawi personally assured Tan Sri Aziz Taha that “everything in under control and that the internal audit team of BBMB was at that moment carrying out its own audit on BMF.” Tan Sri Aziz proceeded to brief TDM on 16 November 1982 and again on 5 January 1983 on the BBMB/BMF issue. On 2 April 1983, Tan Sri Aziz officially wrote to TDM (10 paged letter on official BNM letterhead) to “provide a clearer picture as to how BMF got itself into this predicament.” (Classic case of ass covering but who can blame him?) He ended the letter seeking yet another appointment with TDM to “discuss the BMF affair and how to deal with the accounts of the Bank Bumiputera Group taking into consideration requirements of the company law, banking law, accounting practice, and possible repercussions from these problem loans as far as the public is concerned.”  The time (delay) in which BNM failed to react and his seeking of the PM to settle such issues shows the political clout UMNO has over BNM. The provisions under Part VI of the Banking Act 1973 confer to Bank Negara the absolute power to supervise and control banks doing business in Malaysia. These powers include mandatory provisions to investigate the books, accounts and transactions of each licensed bank and of any branch, agency or office outside Malaysia opened by a licensed bank in Malaysia. The provisions under Part VI of the Banking Act 1973 additionally empower Bank Negara to take appropriate measures to direct the operations of the bank, including the power to assume full control of the bank, in the event that the bank considers that it is likely to become unable to meet its obligations or is about to suspend payment. BNM failed miserably in this aspect of its responsibilities but it can also be said that the BNM Governor was powerless to do anything after UMNO’s intervention, and had to resort to writing a letter to TDM (five months later) to remind him of the magnitude of the BMF problem.  Here comes the kicker – during this period of time when BNM was delaying taking action against the BBMB senior management team, BMF and BBMB released the US$76 million to the Carrian Group to purchase the very same US Assets in which BMF had failed to secure on its loans to George Tan.  The Inquiry Committee’s BMF Final Report also stated that at this juncture of time, the BNM Governor (Tan Sri Aziz Taha) and the Finance Minister (Tengku Razaleigh) have been effectively excluded from handling the BMF affairs and that decisions were now made entirely by Dr Nawawi and possibly Tun Ismail Ali (ex-BNM Governor and then current PNB Chairman) in consultation with TDM.  How did this debacle be allowed to occur in Hong Kong where the banking industry is super-duper ultra heavily regulated? Ah, loopholes! In Hong Kong, all Deposit-Taking Companies (DTC) are governed by the Hong Kong Deposit-Taking Companies Ordinance, Chapter 328, and comes under the direct jurisdiction of the Commissioner of the Deposit-Taking Companies (who is also the Commissioner of Banking). Section 22(1) specifically prohibits a DTC from granting loans or credit facilities in excess of 25% of its paid-up capital and reserves (here comes the loophole) unless they are covered by a form of guarantee acceptable to the Commissioner. BMF was effectively exempted from this restriction when BBMB provided a Letter of Comfort to the Hong Kong Commissioner to the effect that BBMB would fully support the obligations of BMF.  However, in 1981 the Commissioner introduced certain changes to the Ordinance whereby only Letters of Comfort officially approved by the parent bank and supervisory authorities of the country of incorporation of the parent bank (in BBMB’s case, the BNM) would be accepted. On 9 April 1981, BBMB issued another Letter of Comfort and this was followed up by an authorization letter by BNM (on 30 April 1981) to the Commissioner of Banking in Hong Kong. The BNM letter was signed by one Mohd. Tawfik bin Abdullah, Pengurus Jabatan Pengawalan Bank, Bank Negara Malaysia, stating that “BNM did not have any objections to BBMB’s issuance of a Letter of Comfort.” From these two letters, BMF was henceforth permitted to operate outside the normal fiduciary controls of the Hong Kong regulatory authorities.  How was BNM able to issue such a letter? A check on BMF’s accounts and commitments would have raised alarms as the Carrian Group’s loans alone amounted to HK$1.063 billion which is 7,939 percent of BMF’s share capital and reserves, and 129 percent of BBMB’s share capital and reserves! If BNM refused to issue the letter, it would have stopped BMF’s loans to the Carrian Group from ballooning to US$3.246 billion.  When the Inquiry Commission interviewed the Hong Kong Commissioner of Banking with regards to the Letters of Comfort issued by BBMB, the Commissioner told them that “the request for a guarantee with respect to DTC under the Deposit-Taking Companies Ordinance to be supported by specific approval of the Board of a parent Bank and with the knowledge of the Central Bank was intended as an indirect hint to the Bank concerned to exercise a greater degree of supervision on the lending activities of its subsidiary DTC.” Basically the amendment to the Ordinance in 1981 was also an indirect hint by the Commissioner of Banking to Central Banks to carefully monitor their banks and their international subsidiaries.  BMF’s auditors (Touche Ross) must also accept culpability as they have failed to make pertinent comments on the disproportionately huge loan portfolio to the Carrian Group in its Audit Report of 1980. Arthur Tse of Touche Ross did however send an internal memorandum to Dato Mat Noor, senior partner of Hanafiah Raslan and Mohammad (BBMB’s auditors) informing that “…we have refrained from commenting on the unduly large portion of loan portfolio to Carrian and associates. It is because we were politely told that it was a management affair, not really an audit matter. In view of the sensitiveness of the situation, we thought that the best course was to keep you informed so as to let the parent bank monitoring the situation…”  In the Audit Report of 1981, Touche Ross told BMF that they were unable to issue an unqualified audit opinion as there remained a lot of unanswered questions regarding the adequacy of collateral securities and values, and that the lack of proper guarantee of borrowers’ obligations forbid them from signing off on the Audit Report. On 15 March 1982, Dr Rais, on behalf of BBMB signed a Letter of Guarantee “undertaking to assume all the liabilities, obligations or commitments” of BMF. As a result, Touche Ross issued the unqualified audit opinion for the BMF accounts for the year ending 31st December, 1981. With this Letter of Guarantee, the responsibility of ensuring whether adequate provisions have been made in the BBMB accounts in relation to BMF was shifted to Hanafiah Raslan and Mohammad as BBMB auditors. (Talk about shifting blame…) Because of Touche Ross’s initial unwillingness to sign off on the BMF’s audit, BBMB’s audit report was also “left hanging”. Two days after Touche Ross signed the BMF’s audit report, Hanafiah Raslan and Mohammad signed the BBMB audit report. There was however no mention of the unsatisfactory security position of BMF in relation to the Carrian loans in the BBMB Audit Report. BTW, Dr Rais’s Letter of Guarantee was never formally ratified by the BBMB Board of Directors and was not mentioned in BMF Audit Report by Touche Ross.  On 21 February 1983, Finance Minister Tengku Razaleigh issued a report stating that “there is nothing amiss in the BMF dealings” and that the loan situation was nothing more than a normal business problem. In the report, Tengku Razaleigh also indicated that the BBMB Board was “responsible directly to the Prime Minister” and that Bank Negara Malaysia had no jurisdiction over BMF in Hong Kong.  In the Audit Report of 1982, Touche Ross indicated on its Audit Report (note number 8) that the provisions for bad and doubtful debts were inadequate, especially the HK$4.325 billion to the Carrian Group. Touche Ross was asked by BMF to drop Note 8 from its Audit Report and it was agreed between them on 28 February 1983 that BMF would provide Touche Ross with a Letter of Indemnity endorsed by the Malaysian Central Bank (BNM) against any liability arising from the removal of Note 8 from its BNF Audit Report of 1982.  On the next day, Dato Hashim informed Touche Ross that BBMB Group Chairman, Dr Nawawi considered the bank to be unable to issue such a Letter of Indemnity to them as the Malaysian Companies Act forbids it. However, BBMB was prepared to issue a formal Letter of Undertaking regarding the liabilities of BMF in return for Touche Ross dropping Note 8 from their Audit Report. On 17 March 1983, Dr Nawawi wrote to Touche Ross giving them the BBMB Board of Directors’ guarantee undertaking to assume all the debts and liabilities of BMF in connection with loans given out to customers who become insolvent. Once again BMF’s report on such liabilities was shifted to Hanafiah Raslan and Mohammad. In the BBMB Audit Report of 1982, it was stated that, “…the Government of Malaysia has given an undertaking that it would back the Bank fully in case the Bank faces any difficulties in meeting its obligations…” However, this time around, BBMB’s auditors were not as easily convinced as in 1982 (maybe they were taking a cue from Touche Ross). The BBMB Audit Report was only signed by Hanafiah Raslan and Mohammad on 13 June 1983 which caused BBMB to defer their AGM.  In the Report of the Auditor-General on the 1982 Federal Government Accounts, there was a reference to this purported BBMB Guarantee which states, “The notes to the account relating to these balances (BBMB 1982) indicate that the Government had given an undertaking that it would back the Bank fully should the Bank face any difficulties in meeting its obligations. The Treasury has however informed me that it has not issued a written statement of such undertaking other than the statement to that effect given by the Minister of Finance in reply to questions in Dewan Rakyat on 15 March 1983.”  Touche Ross was sacked by BBMB after signing off on the 1982 Audit Report. In the same year, the Carrian Group filed for bankruptcy in Hong Kong. SHKPIL, Kevin Hsu’s public listed company followed suit.   The Carrian Group was not the only recipient of BMF funds though it was the biggest. Kevin Hsu and Eda Investment Limited were among others of such recipients of BMF loans. However, the Inquiry Commission was unable to investigate them as such due to the fact that they were excluded from the terms of reference of the Inquiry Committee as BBMB as the “Appointing Authority” only specified the Carrian Group. It was known then that as of September 1982, the Kevin Hsu Group of Companies had loans from BMF to the tune of HK$586 million and had close business dealings with specifically four companies, namely Asiavest, Knife & Dagger, Silver Present and Hi-Heated. Asiavest and Knife & Dagger were owned by BMF General Manager Ibrahim Jaffar, Silver Present was owned by BBMB Executive Director Datuk Mohamed Hashim Shamsuddin and Hi-Heated was owned by BMF Alternate Director Dr Rais Saniman,   As with the Carrian Group’s loans, Kevin Hsu’s loans were also obtained without the necessary and adequate loan securities. In fact Kevin Hsu had to apply for a HK$120,000 loan on 15 November 1984 from BMF just to pay off its auditor fees before they can hold an AGM, and we are talking about a public listed company!   With over 6,000 pages of incriminating evidence, Malaysian Attorney-General Tan Sri Abu Talib Othman “could not find” any “substantial” evidence to prosecute and moreover his office was not prepared to prosecute any Malaysians for alleged crimes committed outside the country. Prime Minister Dato Seri Mahathir Mohammad (now Tun) called the BMF scandal a “heinous crime” but made no mention of the heinous criminals.  The Inquiry Commission finished their BMF Final Report in January 1986 consisting of 13 volumes. The BN machinery was up in arms when the full implications of the report were revealed as nobody (not even the Opposition) had expected such comprehensive, unbiased and detailed findings, especially with such a narrow term of reference. A concerted attempt to suppress it was initiated but to no avail after a public outcry. However, only a limit of 2,000 copies was printed and each priced at RM250 per set were offered to the public (Parliamentarians get the copies free except without the 2-volume Special Brief One – Ha! Ha!) and RM250 in 1986 is quite a sum to pay for a report. The Government of Malaysia even attempted to renege on its promises to print the 2,000 copies, quoting General Orders 17 which prohibits written or oral statements that could undermine the Government, and finally agreed to do so only after reclassifying the BMF Final Report as a non-parliamentary paper and to be specifically published in English only. Additionally, because the BMF Final Report is now not a parliamentary paper, the Government of Malaysia need not recognize the Inquiry Commission’s recommendations, let alone implement them.   The aftermath  Lorrain Esme Osman fled to London in 1983 to avoid being extradited to Hong Kong to face corruption charges. On 6 December 1985, the British police entered the uptown home of Lorrain Osman to arrest Datuk Hashim who was there on a visit and Lorrain Osman. Less than a year later in 1986, waiving his rights to a Hearing on a Writ of Habeas Corpus in order to avoid extradition to Hong Kong, Datuk Hashim Shamsuddin admitted to assisting in the defrauding of Bumiputera Malaysia Finance Ltd of about HK$1.05 billion. He also admitted that he had accepted HK$15 million in bribes for his corrupt activities. He was initially sentenced to a jail term of 4½ years in Stanley Prison, Hong Kong in 1987 but the Court of Appeal increased his jail term to 10 years after a successful appeal by the prosecution team.  In that same year, George Tan Soon Gin and Bentley Ho, along with Rogerio Lam and Stephen Lam, the Chairman and a Director of publicly listed Bylamson and Associates (Enterprises) Limited respectively, David Begg and Anthony Lo, both of the accounting firm of Price Waterhouse, as the firm was then known, were all charged with conspiracy to defraud between 1st January 1981 and 31st July 1982.   The charges against these 6 defendants were that they had conspired to defraud shareholders, or potential shareholders, of Carrian Investments Limited, and/or creditors, or potential creditors, of any other person or company, who might have been induced to accept shares in Carrian Investments Limited as collateral for loans to the 6 defendants or to Carrian Investments Limited, Carrian Holding Limited, or any company in which the 6 defendants had a legal or beneficial interest, by false and misleading statements and by concealments as to the profits, liquidity and financial integrity of Carrian Investments Limited.   The trial judge was a former Court of Appeals Justice, Mr. Justice Barker QC, who after reading the 25,000 pages of the Crown’s case against the 6 defendants was of the opinion that the defendants had no case to answer. He was proven correct because in 1987 and after a 281-day trial, which cost Hong Kong taxpayers more than $HK40 million, he stopped the trial and delivered his determination: “The defendants had no case to answer.” This is despite a mountain of irrefutable evidence and the fact that gathered evidence also revealed that loans were given without proper collateral. In some instances, they were secured only by post-dated cheques. Additionally, almost 70% of lending by BMF was to the Carrian Group. The bibulous Barker's decision was later trashed by a judicial review of his peers and he was asked to resign from the bench, but there was no going back on his verdict on George Tan. It was later revealed that Barker was good friends with George Tan. Barker retired to Malta where he died.  Less than one year after the trial in 1988, a former executive of Barclays Asia Limited, the Hong Kong subsidiary of Barclays Bank PLC, was tried for accepting bribes in relation to the Carrian Case. Stuart Leslie Turner was convicted and sentenced to one year jail (1½ after appeals by the prosecution team).  A leading German banker Dr. Uwe Rameken escaped to Latin America and is still, in theory, wanted by Hong Kong authorities, while his local deputy did 3 years for corruption.  Lorrain Esme Osman was held at Brixton Prison in UK for 90 months, awaiting extradition to Hong Kong while his lawyers filed one writ of Habeas Corpus after another to keep him out from Hong Kong. ICAC submitted over 30,000 pages of evidence to the British High Court, the Court of Appeals and finally to the House of Lords. This continued until Lorrain exhausted all his legal avenues and was escorted by Scotland Yard on a plane back to Hong Kong in 1992.  ICAC proffered 43 charges against Lorrain but despite the mountain of evidence, they knew that this was not a cinch-pipe affair. Lorrain was after all only the non-executive Chairman and was not directly involved in the day-to-day operations of BMF. So they offered a deal. One ICAC officer asked of Lorrain, “You have been fighting all this while for the benefit of others. Isn’t it time to do something for your own benefit?” So a deal was concluded. As Lorrain would not plead guilty to corruption and certainly not to all the 43 charges, the Hong Kong prosecutors suggested 1 single charge of financial negligence, which Lorrain finally accepted.  George Tan was again charged with corruption and fraud in 1992 but his team of top legal representatives kept him out of jail once again. In 1996, he finally pleaded guilty to 2 charges of conspiracy to defraud and received three years in Stanley Prison. He walked out from prison in 1999 a free man.  Dr Rais Saniman fled to France to avoid being extradited to Hong Kong and remained a fugitive from law but was arrested by French authorities in Paris in 1987. As France did not have any anti-corruption laws, Rais was released as the extradition order fell through. The Hong Kong prosecution team had to amend the initial charges from “corruption” to “conspiracy to defraud” before the gendarmerie rearrested him in 1990. Although the French courts had ruled that the man should be extradited back to Hong Kong for trial, the French government considered extradition unnecessary and revoked the courts’ ruling. Only after repeated extradition applications through French lawyers that the Hong Kong Government was able to persuade the French Constitutional Court to grant leave for them to challenge the French government's refusal. On February 1994, Rais was finally extradited to Hong Kong to face charges of corruption and pleaded guilty to 2 charges and was sentenced to 5 years imprisonment.  Ibrahim Jaffar was never convicted, even after he admitted to receiving bribes, because he turned Crown witness in the Carrian Case and was offered immunity from both criminal and civil prosecution (from the Hong Kong authorities) and civil liability from BBMB. He was also permitted to keep his job with BMF/BBMB and the bribes he admittedly had taken while he was the GM of BMF were never asked for or returned.  Warwick Reid, the State Prosecutor who initiated the prosecution of Lorrain Osman was himself sentenced to 8 years imprisonment in March 1990 for financial corruption.  Mak Fook Than’s lengthy 24-paged statement about his “ministerial business” trip to Hong Kong went missing during the trial. During his interrogation by the Hong Kong police, Mak has admitted that he was in Hong Kong at the behest of a senior Malaysian Minister to collect “some money” from a Malaysian nationality residing in Hong Kong. He denied having said so after the disappearance of his 24-paged statement.  George Tan Soon Gin of the Carrian Group is not a Hong Kong resident but a Singaporean civil engineer working in Hong Kong (he arrived in 1972) as a project manager for a land development company before he started his own pest-control company and prior to his establishing the Carrian Group. Mr. George Tan continues to be involved in business in Hong Kong and has a house in the New Territories, which he built at a cost of about HK$200 million.   Gammon House is the current Bank of America Tower in Hong Kong’s CBD.   Lorrain has retired to London after formally serving 2 months in Stanley prison. (He had in fact already served 6 months at the Lai Chi Kok Detention Centre while awaiting trial, and another 4 months for remission.)   The Carrian Case is the longest criminal case in Hong Kong judiciary history spanning over 17 years at a cost of HK$210 million and with over 4 million pages of exhibit.   Rais Saniman is currently an active UMNO member and pro-NEP activist.     Lorrain breaks his silence The former chairman of Bumiputera Malaysia Finance (BMF) Lorrain Esme Osman speaks for the first time in more than two decades about the country’s biggest bank scandal and his trials and tribulations. R. Nadeswaran and Terence Fernandez have the exclusive. FOR 23 years, he remained silent. Having served almost seven years at the Pentoville Prison and later at Brixton in the United Kingdom and at Stanley Prison in Hongkong, earning the dubious honour of Britain’s longest-serving remand prisoner, he never uttered a word. Having been brought from London, he appeared before a Hongkong court in a flak jacket. He nodded his plea and said no more. His lips were not exactly sealed. If people were expecting him to spill the beans, they were utterly disappointed. If there were those who expected him to exact vengeance on those who did him in, he perhaps embraced the adage: "love thy enemy and drive him crazy". In a London pub, Lorrain Esme Osman, the former chairman of the now defunct, Hongkong-based Bumiputera Malaysia Finance (BMF) broke his silence on Malaysia’s biggest financial scandal of which he was faulted for – the RM2.5 billion collapse of BMF which preceded the murder of the bank’s assistant general manager, Jalil Ibrahim, who was conducting an audit in Hongkong. Lorrain spoke about the trials and tribulations; the heartache and the heartbreaks; the friends who suddenly disappeared and his dogged determination to fight for justice and fend off the allegations against him. Incarcerated for almost seven years, the 76-year-old lawyer-turned banker (part-time non-executive chairman) is not bitter about the events that changed his life and perhaps shaped the political landscape in Malaysia. Despite his low-profile existence in a house in an upmarket residential area in London, and in the company of a few friends, he has not been left alone. As much as he wants to stay out of the limelight leading a life with a coterie of close friends, Lorrain, for no apparent reason found himself in the news yet again early this year, on yet another false assumption and bad detective work by the journalistic fraternity. Four months ago, websites linked him to the disgraced former Irish Prime Minister Bertie Ahern who was forced to resign over a land scandal. And when he spoke, there was no venom against such self-appointed guardians of morality and justice, but disappointment that his name has been unnecessarily been brought into a mud-slinging exercise. "I don’t even know the man and somehow, I got linked to him. Many years ago even before he became PM, a few friends and I had wanted to acquire a parcel of land which was classified as heritage. Ahern was not even the PM and our offer was not proceeded with and we dropped out of the picture many years ago. We did not pursue it further," Lorrain stressed during the two-hour interview. When Ahern resigned, the skeletons of BMF were dug up from the grave and Lorrain was erroneously linked to the deal. He laughs about the link, but perhaps understands that two and two do not always make four. Lorrain fought a long, costly and arduous battle to remain in Britain against the Independent Commission Against Corruption (ICAC) in Hongkong which wanted his head on a platter. It fought tooth and nail to have him extradited and in support of the request, the Hongkong government submitted more than 30,000 pages of evidence. Five-and-a-half years of legal battles in the High Court, the Court of Appeal and the House of Lords, it was the same conclusion: Lorrain Osman alone is responsible for the position he finds himself in, and that anytime he wants, all he has to do is give up his fight for freedom and allow himself to be extradited to Hongkong. He refused and the fight continued until he exhausted all avenues for justice and fair play. After the long-drawn battle, Lorrain was put on a plane, escorted by Scotland Yard officers and flown to Hongkong. Lorrain laughs and says: "They knew the verdict before it was read out in the House of Lords. They had already booked the plane tickets earlier and I was whizzed off." The ICAC had 43 charges against him, or that’s what was said at all the court hearings. But the ICAC’s joy had little to go on. And losing the war after all the costly battles does not exactly appear good in law journals. "I was prepared to do battle all the way ... they gave me a strong deal. But I did not jump at it. Having come so far, why should I make any deal?" he asked. The ICAC officer, Lorrain said, had asked him a soul-searching question: "You have been fighting all this while for the benefit of others. Isn’t it time to do something for your own benefit?" He didn’t want to give them an immediate answer and wanted the offer to be repeated. "I wanted them to come around a second time. I wanted some time. At the end of the day, even the decision to plead guilty was made after a lot of soul searching as it affected me in the sense I had fought for seven years ... Then I thought my reputation is already muddied, so one little bit more is not going to make any difference, and if I get a decent deal, I’d take it!" But why cave in after all the effort? "Even if people are sympathetic towards me, I knew I did not have a great future, I was already over 60. (He was 53 when he was arrested) So, what’s the point?" he reasoned. So, when they came back again to make a deal, Lorrain told them: "I will plead guilty to one single charge and it will not be a corruption charge." They agreed and the deal was done – financial negligence. A year’s penance so to speak in jail but he had already spent almost seven. After two months in Hongkong’s Stanley Prison, he flew to London a free man. The BBMB story IN 1980, Bank Bumiputera Malaysia Bhd (BBMB) was receiving RM50 million a month from Petronas as part of an agreement to increase the coffers of the bank which was set up specifically for the benefit of bumiputras. Bumiputera Malaysia Finance (BMF) was set up in Hongkong as a vehicle to channel parts of this money. A series of loans totalling about RM2.5 billion were given to Carrian Group’s investment into the territory’s booming property market. However in 1983, Carrian went bust after the property bubble burst and the loans could not be recovered. BBMB assistant general manager Jalil Ibrahim was sent to the then British colony to conduct an audit. According to court transcripts, on July 17, 1983, he told his staff that he was leaving to meet a "Datuk". The next day, his body was found in a banana plantation outside Hongkong. The connection between Jalil’s death and BMF, and the unseen hands behind the collapse were never established. Klang businessman Mak Fook Than was convicted of the murder and sentenced to life. At his trial, Mak had claimed that he merely disposed of Jalil’s body – the murder committed by a Korean working for a man named "George". Mak had also retracted an earlier statement that he was working for the Finance Ministry and was sent to Hongkong to collect money for a high-ranking public official. Lorrain, however, feels there were no links between Jalil’s murder and his investigations into BMF’s finances, believing that Jalil was a victim of a blackmail that went wrong. "From what we had gathered then, Jalil had late night visitors at his hotel room where he was staying. On the day of his murder, Jalil had taken HK$20,000 purportedly for ‘Ibrahim’, but he was not in Hongkong then. That money was to pay off someone. Something went wrong and excessive force was used. "We the directors of BMF welcomed Jalil’s audit for it showed that we were on the right path to recover the loans. There were no secret accounts or that Jalil was going to expose more wrongdoings. Jalil’s report in fact, helped the board by showing that we had done them (the loan transactions) properly. Jalil was doing us a favour." Investigations revealed that irregular and even fraudulent lending practices led to the loss of billions – losses which were eventually absorbed by BBMB. Lorrain who was BMF chairman then,alternate director Dr Rais Saniman, Carrian Group chairman George Tan and BBMB executive director Datuk Mohamed Hashim Shamsuddin were implicated in the collapse and given jail sentences in Hongkong. In 1986, a Commission of Inquiry headed by former auditor-general Tan Sri Noordin Ahmad established that what was going on in BMF was just "the tip of the iceberg", implying that bigger hands were at play. The commission report was not tabled in Parliament and had limited public release – 2,000 copies at RM250 each. Noordin was ostracised by the Mahathir administration for his findings, where he was even accused of colluding with the Opposition. The cause celebre WHILE Lorrain was fighting his legal battles from prison, human rights campaigners were taking their fight everywhere. Petitions, public meetings and numerous appeals were sent. They claimed that the telephones of his wife and legal team were tapped. His house was raided by armed policemen while he was behind bars. Campaigners claimed it was an act of blatant intimidation. Scotland Yard claimed it had received a tip-off that one of his wife’s bodyguards was armed. Interestingly enough, the original complaint went missing! They also charged that Lorrain had been the scapegoat and the victim of dirty politics in three countries – Hongkong, Malaysia and the United Kingdom, and that the governments of Hongkong and the UK were suppressing some 150 documents which could clear his name. In leaflets, the group said: "The only thing that is relevant is that Lorrain Osman has now served the equivalent of a 10-year sentence with remission and a 15-year sentence with parole, and he is still, in law, not guilty." ‘I should have left Bank Bumi’ DESPITE his trials and tribulations, Lorrain Esme Osman remains philosophical. "If I allow myself to feel bitter, then I’ll never have peace of mind because regret is fodder for a completely distorted life. Lorrain who is recovering from minor surgery indulges Fernandez and Nadeswaran. "But one thing I kick myself for is for not taking immediate control of Bank Buruh. I was on the verge of acquiring the bank and I had not done the transfer yet as it was pending, but I kick myself for not leaving Bank Bumiputera (in the impending period)." Just before news of the bank’s exposure in Hongkong became public, Lorrain was already in the final stages of taking over Bank Buruh. "I should have left and then run my own bank then I won’t be involved in this bull****," he says. Emphasising that he was not being too big-headed among the four directors; Lorrain says he was the most knowledgeable and the most strong-headed because he used to insist on a lot of things. After all, Bank Bumiputera, he had then held, was set up to help bumiputras, not to make money for the government. "So three years into its setting up, during the AGM, a director mentioned something about ‘it’s time for our dividends’. I stepped in very strongly and said the purpose is not to give the government any profits but for the profits to go back to the people, the bumiputras, many of whom did not have the same access to banking facilities at that time. That made me very unpopular, but the question was never raised again." So if that was the conservative approach and thinking, then why go off-shore to Hongkong and set up BMF? "By that time, notwithstanding the principal purpose was to help bumiputras, the fact remained that Bank Bumi was a commercial undertaking and if we wanted to be successful, we needed to provide a full range of services. "The rationale was for BMF to be part of the international scene. We first opened in a middle-eastern country and subsequently in London, New York, Tokyo, Hongkong, so that we have branches circling the globe. "Also we were awash with money from Petronas. Now if you have that money on deposit, you pay interest, and if it ended up in Hongkong at the time of the property boom, it would be used to generate income." But the loans that were given to George Tan and Carrian Group went awry after the property market collapsed with then British Prime Minister Margaret Thatcher announcing the date of the official hand-over of the colony to the Chinese government. Lorrain opined and still maintains that Thatcher forced Beijing to retake Hongkong. "If she had said nothing, I’m sure the Chinese government would have been happy to leave Hongkong alone." His reasoning is that Hongkong is a potential nuisance as it has rights other parts of China do not. "Any dissident will try to escape to Hongkong and when you talk about the western imperialists, all they need to do is point at Hongkong. But Thatcher said a treaty is a treaty! If she had just shut up, the British will still be there." Was he the fall guy? "One has to accept the fact that if you are put there as chairman, you have to accept responsibility. At the end of the day, the fact that there was prosecution, I myself believe it was a means to attack the Malaysian government by certain British civil servants who were very anti-Malaysia and anti-Mahathir. I have no evidence to support this but there was no other purpose in it." From what initially appeared to be a domestic problem, Malaysia played into the hands of the British, and he faults the late Tan Sri Bashir Ahmad, who by then had become chairman of Bank Bumiputera. "Bashir fell into the trap and lodged a report in Hongkong by claiming that the (Malaysian) Attorney-General had said that Malaysia has no jurisdiction for offences in Hongkong, which is not true. If they wanted to prosecute me in Malaysia, they could have. The Anti-Corruption Act provides for that," he says. "That is why I say, if I had left (Bank Bumi) once gaining control of Bank Buruh, I’d still be in Malaysia making money," he half-joked. Was he used as a pawn in the protracted political battle between then prime minister Tun Dr Mahathir Mohamad and Tengku Razaleigh Hamzah in the Eighties? "I have no evidence of Mahathir’s involvement. "I know for a fact that the executive directors of the bank who were overseeing the running of BMF were doing things that I knew nothing about. I didn’t know what they were doing, but I believe they were up to something. Only after my release did I realise this," said Lorrain, without elaborating.