Maika Holdings’ lost windfall: The government owes an explanation

from Malaysiakini

On June 1 2008, Datuk Zaid Ibrahim, the de facto law minister taunted journalists who attended the dialogue with him at the National Press Club with this question, “….do you take up an unpopular issue with your news-owner?”

Picture courtesy of Malaysiakini

Benar hopes the mainstream news editors will rise to Zaid’s challenge and also not ignore other issues that people want answers to. While this may take time given the lackadaisical attitude of the editors (exemplified by Zaid when he noted that only one senior editor had bothered to attend the gathering at the NPC) and the uncertainty how far and fast the envelope may be pushed, Benar, which is not subject to such conditions, would certainly raise issues as it see fits on behalf of ordinary Malaysians.

When Dato’ Seri Abdullah Ahmad Badawi became the 5th Prime Minister of Malaysia in 2003, he had promised quite a lot. Perhaps no other promise had endeared more to the Malaysian public than the promotion of a culture of zero-tolerance on corruption and the fight against this menace without fear or favour. On March 8, 2008 the public delivered a stinging rebuke to the Barisan Nasional government for its failure in this and many other things. Without transparency in government, the fight against corruption was always going to fail.

The Maika Scandal

The controversy surrounding the issue of Telekom Malaysia shares to Maika Holdings way back in 1990 refuses to dissipate.

On 23rd May, 2008 readers at the popular web site Malaysia-Today were able to access a copy of the police report filed by Klang resident Thiagarasan A/L Palaniaya (the website identifies Thiagarasan as the Klang MIC chairman) demanding that the police conduct an investigation on the alleged losses, misuse of power, mismanagement and criminal breach of trust which had occurred over the allocation of Telekom shares to MIC in 1990.

Thiagarasan states in the police report that back in September 1990, the Finance Ministry had made a special offer or allocation of 10 million Telekom Malaysia (TM) shares to Maika Holdings. At that time, TM shares were generally traded at price levels in excess of RM10 per share. In 1992, the Indian community found out that the MIC wound up with only one million shares.

What had happened?

On May 16, 1992 Tan Sri G. K. Rama Iyer, the then Managing Director of Maika Holdings revealed that Samy Vellu was informed at 6.10 am on October 5th 1990, that Maika had been offered 10 million TM shares and of the probability of obtaining full loan financing and that Maika intended to take up the entire allocation of 10 million shares. Rama Iyer further disclosed that Samy Vellu replied that there must have been a mistake. The offer to Maika should be for one million and not 10 million. According to Samy Vellu, the remaining 9 million shares were meant to be allocated to “other MIC bodies”.

Thus after Samy Vellu had contacted the Finance Ministry, the letter of offer was retracted and Maika’s allocation was reduced to 1 million shares.

Samy Vellu’s response to this disclosure was that Maika Holdings did not have the capacity (funds) to purchase the TM shares but this was denied by Rama Iyer (NST, Dec 10 2003). Indeed, in 1992, Rama Iyer had disclosed that a letter from Arab-Malaysian Merchant Bankers Bhd offering RM50 million to finance the purchase of the 10 million shares was received on October 6th 1990.

In a statement before Parliament after the scandal broke, then Finance Minister Datuk Seri Anwar Ibrahim disclosed that since Maika had stated that it could take up only one million shares, the other nine million shares were allocated to three companies proposed by Maika because to his “ministry’s knowledge, the three companies represented the interests of the Indian community” (The Star, April 30, 1992). According to one Pasamanikam, a Maika director at that time, Maika did not reject the Finance Ministry’s offer and did not propose that the nine million shares be allocated to other companies. He further revealed that Maika had indeed raised a RM50 million loan to facilitate the acquisition of the entire 10 million shares even before the Finance Ministry had withdrawn its offer.

The 3 companies that received the 9 million shares were named by Thiagarasan in the police report as:

Company Paid up Capital Directors
Clearways Sdn Bhd* RM2 Robert Tan, Baharudin
SB Management Services Sdn Bhd* RM3 Balasubramaniam, Sothinathan
Advance Personal Computers Sdn Bhd** RM250,000 Balasubramaniam, Sothinathan, Selvendra

* A name search at the Companies Commission of Malaysia (SSM) website does not return these names. These 2 companies may have been wound up or the names may have been changed.

** Positive search result at SSM; company number is 177706-U

The media did not question the basis upon which these 3 companies, with so little capital, were deemed to be companies representing Indian interests. And how could a company with RM250,000 capital, let alone the RM2 or RM3 ones, afford to buy RM45 million worth of TM shares?

The Anti Corruption Agency investigated this case and no further action was deemed necessary. To the public at large this should mean everything was above board and Samy Vellu was unfairly tarnished. Yet the saga refuses to die down, perhaps because people believe there had been a cover up.

On behalf of the people and in the spirit of the transparency in government promised to the people, BENAR would ask the Ministry of Finance and the Anti Corruption Agency to clarify some lingering doubts so that people who are suspected of wrongdoing are either cleared or brought to account for their actions.

  1. At whose behest were the 9 million TM shares, originally earmarked for Maika, re-allotted to the 3 companies listed above?
  2. How did the Ministry of Finance satisfy itself that the companies nominated for the 9 million shares represented the interests of the Indian community? If all that it did was to rely on the statement or representation of someone, who was that person?
  3. How did the 3 companies finance the purchase of 9 million shares? As TM is a large entity in an important industry, there should have no shortage of willing buyers, both foreign and local, for a large block of TM shares at perhaps a discount to the market as a sweetener. With the eventual selling price more than double the offer price for the TM shares, and thus a low lending risk, it would not have been difficult to obtain short term loans from most banks or even their brokerage houses to fund the purchase of the said shares. Thus the rationale that Maika did not have the financial resources to execute the deal is rather feeble. After all, none of the other 3 companies could be said to be financially capable to purchase millions of Ringgit worth of shares with their paid up capital.
  4. What were the ultimate profits made by the 3 companies? The sales would most likely have been done on a block basis. Even if the shares were sold off in smaller chunks, it should not have been difficult for the ACA to trace the cash movements through the bank account(s) of these companies to determine the ultimate gain on the disposal of these shares. According to Maika Holdings, it earned a profit of RM5.6 million from the sale of their million shares. Nine times this would amount to some RM50 million if the 9 million shares were sold at around the same time.
  5. How were the profits made by the 3 companies distributed? Did the ACA test the claim that the 3 companies represented the interests of the Indian community?In Thiagarasan’s police report, he claimed that Clearways Sdn Bhd had paid RM2.318 million and APC and SBN had paid RM4.85 million to Tafe College. The total of these amounts is less than one-fifth of the possible profits. BENAR believes the authorities should reveal the actual amounts paid by these 3 companies towards causes that benefit the Indian community to demonstrate the veracity or otherwise of the claim that these companies had the interests of the Indian community in their hearts.
  6. Were other transactions investigated? In the police report Thiagarasan lists a series of multi-million ringgit movements in what appears to be Samy Vellu’s personal bank account between April 4, 1992 and May 1992. The documentation for these transactions was apparently disclosed by one V. Subramaniam in 1993. Did the ACA determine whether the cash involved was derived from the gains arising from the sale of the 9 million TM shares?

Let us hope there are meaningful answers to these questions so we can respect the decision that was made by the government in this saga.

4 Responses to Maika Holdings’ lost windfall: The government owes an explanation

  1. Natteng says:

    Great info…keep it comming

  2. […] What happenned to this scandal? Remember the MAIKA HOLDINGS scandal? BENAR, a blog community advocating media freedom, is challenging the media and government to explain what has happenned to the scandal.  Says BENAR in its website: […]

  3. bungkak says:

    Thiagarasan lists a series of multi-million ringgit movements in what appears to be SamVellu’s personal bank account between April 4, 1992 and May 1992.

    Let Samy Vellu be thoroughly investigated. If samy opens his mouth, at least 20 top politicians will be in prison for curruption charges. So guys, make a decision – let BN govt rule and sweep everything under the carpet or EXPOSE THESE B******S via Pakatan Rakyat govt.

    Let the rakyat decide.

  4. Devan says:

    Why no action by the police to investigate the report?????The Polis Raja di Malaysia chooses its cases at its own wish.
    The ACA just is a toothless tiger with 2 polished balls dancing to the tunes of the Super – Murder Charger..Patail!!!Just see how many corruption cases has been exposed !!!!!
    Samy Velu has been swindling, sucking and cheating the Indian Community for years….
    till the 5 Muskeeters came and destroyed his empire !!!!!
    Yet this Hair-Planting Specialist escapes the law…how and what he does nobody knows!

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