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BMF (Boleh Malaysia Finance) Part One

BMF (Boleh Malaysia Finance) Part One

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Published by openid_OtVX6n9h
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! - Part One
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! - Part One

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10/18/2012

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Boleh Malaysia Finance(BMF) Part One
Posted by adminSaturday, 22 August 2009 11:34By Hakim Joehen a bank has too manydeposits (excessive funds),what does the bank do? Why,they relax their loan requirements to offermore loans out in order to maximize theirprofits. What if the national loanrequirements are already “very relaxed” due to favorable economic conditions inthe country? Why, you loan the excessiveliquidity overseas!
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Bank Bumiputera Malaysia Berhad(BBMB), found itself in such an enviablesituation in 1979/1980. This was partlydue to the fact that Petronas was “instructedto remit RM50 million amonth into its BBMB banking account. Thedilemma that BBMB was facing then washow it was going to lend these excessivecash out when other Malaysian bankswere already in the picture. BBMB could of course lower their interest rates but thepotential profits could not be maximizedand the fact that the other competingbanks could also do likewise was not loston them. Allowing the money to be left inthe bank’s coffers is not productive eitheras BBMB would have to pay interest on it.So, in order to maximize their profits, thetop hierarchy within BBMB decided tochannel these funds out of the countryand Bumiputera Malaysia Finance (BMF)based in Hong Kong, was selected as thevehicle targeting the foreign exchangeand money market operations. GeorgeTan Soon Gin of Carrian was more thanwilling to be the recipient.After the financial debacle, it was reportedthat BMF had lost RM2.5 billion andGeorge Tan was charged and convicted.Not one cent was ever realized from theseloans but the matter of fact was that BMFgave out loans in amounts that exceededits capital. This can only happen if strictinstructions from BBMB were given toofficials in BMF.An Inquiry (with limited powers andrestricted terms of reference) wasinitiated instead of a Royal Commission(just like the MACC case these days). TheInquiry Committee comprising of Tan SriAhmad Nordin, Chooi Mun Shou and RamliIbrahim produced a 6,000 page (13volumes) report after two years ointensive investigations. On paragraph74.2(2) of the BMF Final Report, thecommittee reported that “apart from fewmembers of the staff, the Committee didnot receive the full co-operation andassistance from the Board andManagement of Bank Bumiputera MalaysiaBerhad (BBMB), which was the AppointingAuthority.” The BMF Final Report started off bystating that “There might not have beenCarrian without BMF.The BMF InquiryCommittee also identified a “ConcertedPlanby various BMF top officials andGeorge Tan “to make use of BBMB fundsto make money in Hong Kong” during theproperty boom of 1979. This plan wasdivided into three phases where PhaseOne involve the takeover of a Hong Kongpublic-listed company (Mai Hon, whichwas later renamed Carrian InvestmentLimited), the purchase of Gammon Houseat US$200 million (to be resold later toMalaysian Government at US$250 million)and the setting up of Plessey InvestmentLimited (PIL) as the recipient vehicle forthe BMF loans.Phase Two involve the purchase of GrandMarine Holdings Limited (GMH) at HK$800million to be resold later to the MalaysianGovernment at HK$1 billion, and thenecessary cash flow for the CarrianGroup.
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Phase Three was never implemented asby now the Carrian Group was facingmassive liquidity problems. The murder of BMF Assistant General Manager, JalilIbrahim, hastened the end of a sordidchapter involving fraud, CBT, criminalconspiracy and murder. Klangbusinessman Man Fook Than waseventually convicted of the murder andsentenced to life in prison, a crime hevehemently denies.In the later Bank Negara Malaysia forexdebacle of 1992/1993, we had creativeaccounting practices to offset the massivelosses. Here and now in 1984, no suchactions were undertaken as none weredeemed necessary. BBMB was going totake the “hit" and the subsequent bailoutby the Federal Government means thebank “did not suffer any losses”. In fact allBBMB Chairman Tan Sri Kamarul Ariffingot was a rap on the wrist by TDM forreceiving HK$3.3 million in consultancyfees. He was never held accountable forthe 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 makea clean and quick US$50 million profit.According to the BMF Final Report, thenBBMB Chairman Dr Nawawi Mat Awin metBNM Governor Tan Sri Abdul Aziz Taha (on12 November 1982) and Dr Nawawiindicated to the BNM Governor that hewas merely acting on instructions by theMinister of Finance (Tengku Razaleigh) to “purchase Gammon House as a centre tohouse the operations of various Malaysianagencies in Hong Kong”.This was confirmed by Dr Rais Saniman(alternate BMF Director) on 7 August1984 when he reported to the InquiryCommittee that he was informed by DatukMohamed Hashim Shamsuddin (BBMBExecutive Director) that Tengku Razaleighhas decided to acquire Gammon Housewith George Tan acting as the agent forthe Malaysian Government. Amongstthose present at this meeting were LorrainEsme Osman (BMF Non-ExecutiveChairman), Ibrahim Jaffar (BMF GM),George Tan (Carrain Chairman) and a fewCarrian “chaps”.When Dr Rais questioned this unorthodoxtransaction, since the MalaysianGovernment could have purchased thisproperty outright, he obtained no answerfrom Datuk Hashim. BTW, the GammonHouse deal fell through and George Tanbecame the beneficiary of Gammon Houseas the S&P was already signed. In factBBMB approved a loan of US$292 million(146% financing) to Plessey InvestmentLimited for the purchase of GammonHouse after it was made known to BMFand BBMB that the Malaysian Governmentwas not interested in Gammon House.BBMBs single US$292 million loan toPlessey Investment Limited, a HK$2 shellcompany, represented the largest everloan ever given out by BBMB at that time.(They eclipsed it with another US$580million loan later on.) Ever wondered whyBBMB approved the loan? When PIL wasasked by BNF loan officers just who theirmajor shareholder was, the answer wasBBMB. Carrian Investment Limited has bynow grown from a nonentity in 1981 tobecome Hong Kong's sixth largestcompany by market capitalisation aftermerely one year in business.Tengku Razaleigh denied theseaccusations and said that the GammonHouse was never even considered. TheMalaysian Government later bought theLap Heng Building instead. However thisdoes not detract from the fact that GeorgeTan telexed Datuk Hashim on 3 January1980 that he has been offered US$250million for the property and neededprompt advice. If the Carrian Group wasmerely in it for the profits, they couldhave easily sold Gammon House andpocketed the US$50 million as would havebeen the case if the property was sold tothe Malaysian Government. Why it didn’tdo so can only point the finger at “morepowerful” people behind the scene with a
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different agenda.The implications that Tengku Razaleighwas involved was tabulated inside SpecialBrief One of the BMF Final Report (2volumes). However, these two volumeswere never distributed to Parliament.What the MPs got were 5 volumes of Special Brief Two and 3 volumes of SpecialBrief Three. Moreover, the InquiryCommittee strongly recommended thatBBMB make a police report as the loan istantamount to theft. BBMB never didlodge any police report.As with the Gammon House, Grand MarineHoldings Limited (GMH) was bought withthe sole intention of being resold to theMalaysian Government at a profit. Onceagain BMF became the “sole provider” tothe tune of US$580 million in six tranchesof US$138 million, US$100 million, US$97million, US$143.5 million, HK$643.7million and SD$20 million.This is beside the fact that BMF was overconcentrating its loan portfolio on theCarrian Group as up to 65% of its totallending were made to them.Once again George Tan was left standingalone on the line when the MalaysianGovernment declined the offer topurchase GMH. How in the world didGeorge get the impression that theMalaysian Government had intentions of purchasing GMH, if not under instructionsfrom the BMF management, specifically DrRais?When Ibrahim Jaffar was questioned bythe Inquiry Committee, Datuk MusaHitam’s name came up as the party withinthe Malaysian Government that wasinterested in the GMH deal. When Dr Raiswas questioned, he denied knowing aboutthe GMH deal. He however admitted muchlater that George offered to sell thecontrolling interest in GMH to theMalaysian Government and that he hadasked him to act on his behalf to speak tothe Malaysian Government, which he(Rais) spoke to the DPM.Datuk Musa confirmed this but said that, “Ada satu kali di mana Dr Rais menyebutserta cuba menghuraikan hal-halperusahaan/perniagaan personalnya diHong Kong. Tetapi saya telah menahannyaoleh sebab ini tidak ada kaitan langsungdengan tugas-tugas resmi kita. Saya tidaktahu menahu atas apa-apa yang lebihdaripada itu.” The Inquiry Committee is of the view thatthere is insufficient evidence to come to aconclusion that the Malaysian Governmentis involved in the GMH affair. What isevident is that BMF provided the entirefinancing for the purchase of GMH,releasing its funds to 7 borrowercompanies for the purpose o “investment”. That BMF was unable showdocumented evidence that the bank hasdone an evaluation into these companiesbefore disbursing the first tranche of theloan of US$138 million is not the matterhere. What was terribly wrong then wasthat all of these 7 borrower companieswere HK$2 companies and that 4 of thesecompanies were only incorporated afterthe 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 fromthese 7 companies was another “mystery” of its own. 7 writs were filed againstGeorge Tan but no attempts were evermade to serve these writs on George.When this issue was brought up to BBMB’sattention (after BMF finally served the 7writs on Georges lawyers), the BBMBhierarchy “over-ruled” this action andinstructed BMF to “recover” these writsimmediately.On 26 October 1982, Carrian announcedthat the company was not in a position tomeet current payments and was facingtemporary liquidity problems. What isbeguiling is that BMF continued todisburse funds to the Carrian Group aftersuch an announcement.
Boleh Malaysia Finance (Part One)
 
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