The Royal Commission of Inquiries will resume tomorrow September 18th and continue till the September 20th. Tun Dr Mahathir is expected to testify. Will he conveniently forget?
Thus far, the reports on the RCI proceeding gave the impression that the power of Bank Negara Malaysia (BNM) superceded the Minister of Finance (MOF) or the Prime Minister (PM). In turn, the dealing room, where the foreign exchange trading was done under the Banking Department, is more powerful than the Bank’s management.
No one seemed to admit regularly briefing and reporting to the MOF and PM of the large foreign exchange trading position taken. And, no one seemed to have kept them abreast with the accumulating losses till it became a dead elephant hidden under a baby blanket.
Either the monetary system and line of authority then had a very serious systemic flaw or there was a major cover-up.
It is hard for anyone to believe that the then PM, Tun Dr Mahathir Mohamed, who is known to his fanatic loyalist as someone meticulously in the know of all happenings in the country, could have missed this humongous loss.
If he could be in the know of alleged wrongdoings in the foreign transactions linked to (but not of) 1Malaysia Development Berhad (1MDB) from outside the government, political opponents to Mahathir is asking why the silence on BNM true forex losses.
In the dark?
From the testimonies at the RCI, the MOF and PM began to officially know of the true amount of losses when former Adviser Dato Abdul Murad Khalid alerted Finance Minister, Dato Seri Anwar Ibrahim.
It was told to the RCI of Anwar confiding to Murad that himself and Mahathir may be forced to quit should the true losses were made known to the public. Anwar said he assigned the task to inform Mahathir to former Treasury Secretary General, Tan Sri Clifford Herbert.
In his testimony to RCI, Clifford said when told, Mahathir was indifferent. In a non-chalant manner, he said, “Sometimes, we make profits, sometimes we makes losses”. It gives the impression he already knew.
Before RCI started, Mahathir admitted to “know quite a lot” of the BNM forex losses. It may be a stern caution to witnesses to remain factual. He was there on the first day and the day Anwar gave his testimony. Those present in court saw him putting on a long and serious face.
In his testimony to the RCI, Anwar U-turned to effectively cover-up Mahathir. He said Tan Sri Nor Mohamed failed to provide an accurate report on the losses to him and Mahathir. Why so and not his superior?
Furthermore, Anwar said he would have sacked Nor Mohamed if he not resigned. But, Nor Mohamed later joined Anwar-linked corporate boys in Mun Loong, Abrar and elsewhere.
In his testimony to RCI, Nor Mohamed admitted responsibility for the losses but passed it off as purely losses without any criminal intent. It tallies with the testimony of former Manager for Internal Audit, Wong Yew Sen.
Apart from testimonies by former BNM Fund Manager, Essah Yusuf, and dealer, Fizaman Noor Mohammed on Nor Mohamed responsibility and authority for prior approval on trades, Wong told RCI that he seemed to be sole decision maker for the Foreign Reserve Committee.
Nor Mohamed told the RCI that he never discussed forex trading with PM or then MOF, Tun Daim Zainuddin. The immediate impression to those blaming Mahathir is that Nor Mohamed is a willing sacrificial lamb to cover him.
The blame to them both is not without any basis. In 2012, Anwar blamed Mahathir and Daim. On many occasion before the RCI, Mahathir put the blame on Nor Mohamed, the late BNM Governor, Tan Sri Jaffar Hussein and Anwar Ibrahim.
Daim resigned in 1991 and was replaced by Anwar. Former BNM staff, Abdul Aziz Abdul Manaf told RCI that the more than RM30 billion losses occurred between 1991 and 1994. And, RCI has yet to call on Daim.
Despite making the decision to move US$1 billion a day, Nor Mohamed did not discuss with MOF or PM. In his testimony to RCI, there was no mention of him sending report to update MOF or PM. And, he sure did not brief Jaffar Hussein the truth.
As told by former Deputy Governor, Tan Sri Dr Lin See Yan, and Special Adviser to BNM Governor, Lee Siew Kuan to the RCI, Jaffar Hussein was shocked at the extend of the losses upon being told of the true figure.
Jaffar Hussein had requested Lee to recheck the loss figures again with BNM’s Account Departments.
Judging from the statement of Dr Lin and Wong on whether Nor Mohamed had briefed the Governor or not, they believed he should but were not sure.
It smack of the same political finger pointing done by politicians to cover-up their wrongdoings but on the indefensible deceased. One can only conclude from Jaffar Hussein’s surprise reaction that Nor Mohamed did not brief him the actual situation.
In turn, Jaffar Hussein could have wrongly briefed his superior on the true losses. It was Jaffar Hussein that directed Murad to inform Anwar of the losses in 1994.
It is not conclusive to point the blame of Nor Mohammed’s indiscretion to Jaffar Hussein. One has to take account of a strong statement once made by Jaffar Hussein’s son-in-law and Deputy Home Minister, Dato Nurjazlan. He said his late father-in-law was made scapegoat.
Dr Lin may have done the same finger pointing on the late Jaffar Hussein twice. When he enquired Jaffar Hussein of the rumours of forex trading losses, he told the RCI that Jaffar Hussein said, “I got the Bank into this mess.”
One can’t help but pre-conclude the testimonies of the majority of BNM’s top officials were scripted to cover up the financial scandal. At the beginning of the RCI, BNM lawyer tried to use the Official Secret Act (OSA) to slow down the proceeding.
Despite talk of BNM’s aggressive trading within the international foreign exchange market, former Governor, Tan Sri Zeti Akhtar Aziz claimed ignorance. Though she corrected the earlier loss figure of RM31.5 billion to RM32.07 billion, she excused herself by saying she was then Manager at BNM’s London branch.
However, the London branch has a dealing room to monitor carried over positions from head office and to execute buy or sell orders. Though she may not be in the know of head office actual losses then, she cannot be unaware of the happenings.
The former Director of Foreign Exchange Management Department, Azman Mat Ali, who was not in London at the time, told the RCI that Mahathir did not enter the dealing room during his visit.
But in his memoir, Mahathir wrote in black and white of his visit to the London dealing room and consented for profit generating operation of the trading room to continue.
A former bank employee Ishak Ismail insisted to the RCI that BNM did not adjust its accounts to cover up its forex losses. He said, “As far as I am concerned, there was no cover-up and everything was done in accordance with the accounting policies and procedures existing at that time."
Ishak Ismail statement seemed to be in conflict with the statement by former BNM Audtitor, Datuk Ahmad Hizzad Baharuddin that there was a manipulation of figure to hide the true losses. He also mentioned there was no “check and balance” in BNM system.
Nevertheless, Ishak Ismail could be telling the truth as far as the procedures concerned. It indicated the figure told to the Governor could have been the intentionally manipulated to cover up the true losses.
High level cover-up
He had enquired former Attorney General, Tan Sri Ainum Mohd Saaid, who was then Head of Consultancy at the Office of Attorney General, on the legality of BNM foreign exchange trading activities and was told over the phone, "The higher-ups said stop meddling."
Ainum did not made known to Kanesan the names of “the higher-ups” and told the RCI she had forgotten. However, the legal breach of BNM foreign exchange trading was made known at the early stage in 1990, before the major losses from 1992 onward.
In her written statement, Ainum told RCI that disagreed with BNM’s legal interpretation of foreign exchange trading by the Bank as per a letter dated February 1990 signed by Nor Mohamed. In a meeting attended by BNM and Audit Department, she told them it did not comply with the Central Bank Ordinance 1958 and other law related to BNM.
The question remained as whether Nor Mohamed’s indiscretion was done on his own or with the concurrence of someone “higher up”.
In the letter entitled “A report on Bank Negara” dated August 8th 1994 to Anwar Ibrahim, former Governor Tan Sri Ahmad Don mentioned the forex loss is the “... error of judgement of a few officers”.
Only Nor Mohamed owned up but not the other officers.
On Thursday, the last session of last week’s Royal Commission of Inquiry on Bank Negara Malaysia (BNM) foreign exchange trading losses, then Governor, Tan Sri Ahmad bin Don laughed off an attempt by Tan Sri Nor Mohamed Yakcop to cast a positive light of the financial scandal.
Nor Mohamed claimed the country gained the know-how to formulate unorthodox measures to withstand the financial challenges of the 1998 Asian financial crisis.
For few years, he has been trying clean-up his heavily tarnished image. He commissioned former The Star reporter, Wong Sulong to write a book entitled “A note to the Prime Minister” with his and then Prime Minister Tun Dr Mahathir Mohamed’s faces at the front cover.
In his usual guffaw and sometimes cynical laugh, Ahmad Don replied, “I don't know if it was worthwhile, but I do know that we had to do a lot of tightening up (of policies and bank procedures) following that.”
The loss amount of RM32 billion in 1994 could build 18 KLCCs or undertake 21 Proton bail-outs or 5,000 Bugatti Vernon for some tycoons or built toll-free road and highways for Sabah and Sarawak or simply, BR1M for all Malaysians.
Despite being thwarted off by Ahmad Don, there are those still insistent that Nor Mohamed has taken responsibility by resigning and has since, redeemed himself through his contributions. Instead of being reprimanded, he was rewarded.
He was the adviser to Mahathir for the Selective Capital Control. And he was Special Adviser to the Prime Minister in engineering the remaking of Malaysia Incorporated and subsequently the transformation of GLCs.
However, Nor Mohamed resignation from BNM was not truly transparent. It lacked the accountability since the true figure remained hidden under the cloak of the Official Secret Act (OSA).
It is still not known who is responsible, or in more simple word, who gave Nor Mohamed the authority that he need not report to the Governor.
By the denial of knowledge and lack of information divulged by various testimonies at the RCI, the impression given is there was no line of reporting established to the Minister of Finance and Prime Minister for BNM’s massive foreign exchange trading operation.
The fact to the matter is Nor Mohamed contribution was merely cleaning the mess from his wrongdoings. The economic loss from the attack on ringgit was blamed at George Soros but its root cause traced to BNM forex loss.
The economic loss and diminution in value of wealth had far more devastating impact than his re-engineering and transformation repair work. The loss of wealth, opportunity cost and collateral damage are still at large.
His appointment as Minister of Finance 2 and Minister in charge of the Economic Planning Unit were no compliment since it was tarnished by two cases of alleged corruption and money laundering against his political secretaries.
Essentially, Nor Mohamed did not resign but was transferred for higher position. He was rewarded to carry out the devious assignment to destroy political and economic rivals in order to save the fortune of “family members” and inner circle of Mahathir.
With his name smeared and reputation tarnished, there should be no more reason to retain Nor Mohamed at Khazanah Nasional. The continued presence of his diehard loyalists in GLCs could be liabilities to the operations of government and opens the PM to political sabotage.
Nor Mohamed remained in-denial and blamed the Paris Accord for the losses. The Paris Accord did not make any trading decision for BNM. It happened in 1985 but the absolute mess occurred from 1991 onward.
After resigning from BNM, disgraced former Governor Tan Sri Jaffar Hussein was without any government appointment for a long time.
It was left to Ahmad Don to clean-up his mess at BNM. He stopped all speculative trading activities in the foreign exchange market at BNM. Reserve management would only be for “purely investment basis to preserve the value of reserve and optimise returns on investment.”
Ahmad Don assumed the Governorship from the late Jaffar Hussein on May 1994 but his tenure was short as he resigned in August 1998. The reason speculated was his close association to his MCKK alumni, Dato Seri Anwar Ibrahim but it should be beyond politics.
Tan Sri Ainum resigned from her position as Attorney General in December 2001. On January 1, 2002, Tan Sri Gani Patail assumed the post.
When Ahmad Don announced his resignation, Mahathir passed nasty remarks. He was quoted by mainstream media to have said, “I for one am not surprised with the resignation because he should have done so from back then.
“He knows we do not agree with the policies he proposed but he chose not to resign earlier”.
If the proposed policies were from International Monetary Fund (IMF), it is known in close circle that even some of Mahathir’s confidante and associate, including Zeti and Dr Lin were agreeable.
In 1998, Mahathir was already toying with the idea to curb forex trading and insulate the financial system.
He maybe opposed to any strict measures proposed by Ahmad Don and preferred the flexibility and political narrative to prepare for the general election. He took swipes at IMF using neo-colonisation twist and that made a hero out of him.
Despite the political turmoil of the Reformasi movement due to the sacking of Anwar Ibrahim from cabinet and UMNO followed by imprisonment for abuse of power and sodomy, Mahathir managed to win for Barisan Nasional with two third majority at the 1999 General Election.
Covered up accounts
After almost 25 years, the cover-up could be successful or failed. Some responsible parties may suffer the consequences. Some of the culprits are likely to get away.
Unlike unsubstantiated allegation of leakage or loss by 1MDB, it could be recouped by investment in Bandar Malaysia and Tun Razak Exchange. The RM32.5 billion losses cannot be recovered or recoup but remained permanently lost.
Thus, there should be a follow-up with more thorough and detailed investigation including forensic investigation. There is a possibility that there were criminal offenses committed including fraud, cheating, and money laundering.
One area that this last three day session need to do is to understand the manner the negative shareholder fund of BNM was covered up. It is believed losses were hidden as deferred expenditure and other items, and never before done revaluation of government fixed assets.
Openly known is the sales of Malaysia Airlines shares "parked" under BNM acccount sold to Tan Sri Tajuddin Ramli.
The share price of MAS was hovering at around RM3 and a controlling block should be at around RM5 per shares but Tajuddin was forced in the swiftest of time to purchase at RM8 per shares.
MAS generated operational profit but thanks to Nor Mohamed forex trading, the forex translation cost wiped out all profit and more (read 2010 posting here and 2011 3-series posting here, here and here).
There was no RM8 billion loss blamed to Tajuddin as the frontpage of PAS past Harakah issue.
On his return from Washington and London, Najib revealed that Mahathir was responsible for the mess of MAS. He claimed government had to buy back MAS shares at 3 times the market value. This excerpt from a 2006 Sundaily report here revealed:
Faced with a RM589 million suit by Danaharta, one-time corporate high-flyer Tan Sri Tajudin Ramli has counter sued for RM13.46 billion and also drops the following bombshell in court documents:Mahathir has no right to comment on MAS' current turnaround plans including buying planes from Boeing announced in Washington.
* He was directed by former prime minister Tun Dr Mahathir Mohamad and former finance minister Tun Daim Zainuddin to buy shares in MAS to help Bank Negara recover from foreign exchange losses in 1994
* The transaction was a national service but was disguised as an arm's length commercial deal because the government wanted it that way
* He was at all times only a nominee/agent of the government in MAS
* He was assured repeatedly by Mahathir and Daim that he would not suffer any losses or be held liable for anything arising from his purchase of the MAS shares.
Most embarrassing, BNM was supposed to monitor Banks’ foreign exchange trading. They themselves had no comprehensive policy on foreign exchange trading and proper reporting system with the right check and balance.
One trader admitted he could abuse the weak system to make money for himself, but claimed he did not.
Mahathir claimed he knows a lot of the BNM forex loss. In one off his many statement, he insisted the loss is merely around RM10 billion and not US$10 billion.
There is a hypothesis that with limited foreign exchange reserve, BNM could not lose such amount of money. And, the BNM forex loss was a charade to cover-up money stolen from the safe. His testimony is much awaited.