Corruption and the NEP: Hand in glove

MALAYSIA TODAY SPECIAL REPORT ON THE NEP

Raja Petra Kamarudin

We will come back to our report on Umno Sabah and the Umno Sabah building in the next episode of this series on Malaysia’s New Economic Policy (NEP). Yes, we certainly have more to expose. Government projects and contracts are being awarded to those already super-rich tycoons, mostly non-Malays may I add. And we are going to name names. We are going to expose and strip naked those people who are beneficiaries to giant projects and government contracts. We are going to show you where your hard-earned money which the government has ‘robbed’ from you in the form of taxes has gone to. We are going to reveal how government leaders and politicians, under the so-called development plan called ‘The Malaysia Plan’ (Rancangan Malaysia), and under the so-called NEP (Dasar Ekonomi Baru), have exploited and abused the system to line their pockets.

Politicians who publicly declare their assets to the tune of hundreds of millions on taking office leave office with billions in their pocket. Forget about asking them how they made billions in just a few years in office. Ask instead how, in the first place, they are worth hundreds of millions before taking office when their job function allows them a meagre salary of a couple of thousand a month.

Hard working Malays struggle to get by with less than RM2,000 to RM3,000 a month with which to support a wife and kids in the city, siblings in college or university, and aged parents at home in the kampung too old to work and surviving on RM125 welfare payments a month (but even then if they can produce an Umno membership card and get a testimonial from the JKKK head that they are not opposition supporters).

Hard working Chinese struggle to pay their own way through life without any government support and curse Malays who they perceive as benefiting and leading a cushy life because of the NEP while they, not being Malay, get no government assistance.

Yes, Malays blame Chinese for hijacking the NEP. Chinese blame Malays for having an NEP. In the end, no one actually benefits from the NEP save the political elite who ‘freed’ this country from the British colonial masters just so that they can become the new colonial masters over their own race. Have you read Animal Farm and how the animals ousted the humans just so that the pigs can become the new masters? Well, that is Malaysia for you.

Anyway, let us look at another aspect of the NEP, how corruption is perpetuated under the camouflage and umbrella of the NEP and how you can get away with corruption as long as the money is for the Umno fund or is done under the auspices of the NEP. Corruption and the NEP go hand in glove, or, as the Malays would say: bagai pinang dibelah dua.

This is what Sabah’s Daily Express reported on Sunday:

About 20 Sabah State Forestry Department staff have been sacked for collaborating with illegal loggers over the past 10 years. Disclosing this to Daily Express, its Director Sam Mannan said these cases involved mostly general labourers found guilty by the court.

And this is what Selvaraja Somiah wrote in the same newspaper on 15 December 2003 under the heading ACA not seen to be serious:

Sometime in November 1997, I gave the Anti Corruption Agency (ACA) in Kota Kinabalu a set of documents pertaining to a land deal. This land in Kota Kinabalu submerged under water was registered under a private limited company and was wholly owned by a semi-government body and managed by a high ranking senior civil servant.

This land was sold to a group of investors from West Malaysia for RM3.5 million. The investors paid RM200,000 on the signing of the Sales and Purchase Agreement, and had not yet even paid fully the initial 10% payment as per the SP Agreement but somehow had managed to use the land as collateral, and borrowed close to RM150 million, with a very fancy development plan, from a public listed financial institution.

Yes, one hundred and fifty million ringgit and this is no joke. At the time when I visited the ACA in Kota Kinabalu the land was still submerged under water and the RM150 million in solid cash was already released to the investors.So you see, with a sleight of hand, even land ownership from Sabah Quasi-government bodies shifts to others outside Sabah so easily! Perhaps, this is just the tip of the iceberg.

There must be many more cases of prime land owned by Sabah government bodies changing hands to others, not highlighted, and where trustees were bought-over by investors from outside the state. There are more. But why are the authorities not able to see?

Again, last week, while surfing the Internet, I came across a website and one of the topics discussed there quite naturally caught my attention for they discussed on pesticides, a topic on which I spent half my life.

The topic: "10 Drums of Water Sold As Pesticides For RM850,000 To A Semi-government Body In Tawau" naturally excited me.

Again, it could have happened and I'm not at all surprised if it did. My time in the agriculture sector in Sabah has made me aware that adulteration and dilution of chemicals and ferilizers is a common practice.

This is compounded when some corrupted officials on the ground who, in spite of knowing a particular product is not working and not giving the desired results, would do nothing about it. The suppliers will get paid anyway, and continue to supply. This has been going on in Sabah since USNO days. Nothing has changed.

Some of the failed government agricultue agencies like the Padi Board, Koperasi Pembangungan Desa (KPD), Sabah Land Development Board (SLDB), and many others, were in fact cash cows for many private companies and its directors.

Much of the government funds invested just could not be accounted for. It is a shame no action was taken against many of these people who were involved in milking these outfits dry.

Some of the officers holding key positions in these organisations are living beyond their means and this is proof enough of corruption, but no action was taken.I know of one CEO, my colleague from a quasi-government body in Sabah dealing with land development, who took millions and just disappeared to Australia when investigations were about to begin.

In this same outfit, another CEO, also my colleague, Datuk Wasli Said and the Chairman Tan Seri Kasitah Gaddam, are being investigated and the figure mentioned is close to RM100 million.

Corruption has seeped into Malaysian society so thoroughly that unless the government is prepared to shoot itself in the foot nothing would change.The government, on the other hand, wants proof before it would act. But who would likely leave a paper trail and go to jail? No, they are much smarter than that. They say the higher you go the more sophisticated is the bribe-giving and bribe-taking.

Just a few days ago, I met a Minister who he told me that the ACA had gone to his office and his residence in Likas a few months ago and had taken certain files and documents pertaining to some investigation.

He claimed he had confirmation from the ACA in Kuala Lumpur that there was no wrongdoing on his part and hence ACA had cleared him.

It is now a badge of honour for this Minister to tell the world that since ACA does not act after investigating him, it is proof that he has the seal of approval and that he is not corrupt.

In today's skewed political climate, this is deemed to be proof of innocence.That was what Selvaraja Somiah wrote in Sabah’s Daily Express on 15 December 2003. In fact, Selvaraja’s story of the undersea land in Kota Kinabalu was also featured in Malaysia Today on 4 January 2005 in an article called Atlantis: Sabah’s proposed new city below the sea. In that article Selvaraja said:

I remember vividly December 15, 2003, when my article ACA NOT SEEN TO BE SERIOUS appeared in the Daily Express Sabah.

At that time I did feel some anxiety, though not outright fear, when I received those few threatening phone calls regarding the article from certain individuals who did not want me to reveal too much. I wasn't afraid of being bullied into silence. In fact, it was mixed feelings as, on the one hand, I had people whom I knew who did not want me to spill the beans and, on the other hand, I had readers who wrote to me, who called up, and who approached me whenever they saw me storming in and out of Kota Kinabalu Airport, just to say they wanted more exposes.

It was heartening and uplifting. It is these positive comments -- the feedback and appreciation -- that inspired me to further investigate a piece of land of approximately 0.971 hectares held under Kota Kinabalu Town Lease No 017538788. The land is actually submerged underwater but was sold by Permodalan Sabah Berhad [PSB] for a price of RM3.5 million and charged to MBF Finance Bhd for RM131 million based on a fancy development plan that can never materialise unless one wants to build an underwater city like Atlantis.

It was in 1992 that Elite Consortium Sdn Bhd, a company incorporated under the Companies Act 1965, entered into a Sales & Purchase Agreement with Permodalan Sabah Berhad to purchase the 0.971 hectare land submerged underwater [unreclaimed] -- located along the seafront of Jalan Haji Saman between the Police Marina and the Old Kota Kinabalu Harbour -- for a consideration of RM3.5 million. By the terms and conditions of the agreement, a deposit of RM200,000 was to be paid on signing the agreement while the balance of RM1.8 million was to be paid over six months from the date of the S&P agreement and another RM1.5 million over 12 months.

However, Elite Consortium was unable to pay the first instalment of RM1.8 million as required under the S&P agreement. An extension of three months till the 23rd of July 1993 was then given and, in July, a further extension till the 23rd of October 1993.

On the 12th of April 1993, Elite Consortium submitted a plan to the Kota Kinabalu Municipal Council [MPKK] through its architect, Messrs Arkitek Billings, Leong & Tan, to develop the land into a 280-room, 24-storey, four-star hotel, with 21 floors of condominium apartments and a 128 unit six-storey shop and office block.On the 30th of July 1993, MPKK informed Elite through its architect that the proposal was still under consideration and some amendments and certain revisions were required before it could be approved. The amendments and revisions were immediately accepted and agreed upon. In November 1993, MPKK approved the proposal to develop the land into an amended 21-storey four-star hotel with a 17-storey office block and eight units of six storey shophouses.Armed with MPKK’s approval, Elite had to move fast, as time was running out in its payment commitment to Permodalan as per the S&P agreement. A revaluation on the land was crucial and a valuation report was most needed. A Kuala Lumpur based real estate valuer was engaged to value the land. The land was valued for RM27 million, inflating the value ten fold.With the enhanced value now at RM27 million, Elite had to strike while the iron was hot and it started exploring the possibility of selling the land. It was decided the most feasible game plan was to sell the 0.971 hectare land with its approved development plan to a public listed company for not less than RM18 million.

Apparently, one of the directors of Elite Consortium, Mr Yip Yee Foo, had dealings with REPCO Holdings Berhad, a public company listed on Malaysia’s Second Board. Mr Yip had played a crucial role in REPCO’s listing exercise in 1991 when it acquired a 100% interest in an automotive parts dealer, Repco [Malaysia]. Hence was the connection between REPCO and Elite Consortium.

Simultaneously, Mr Yip entered into negotiations with KOPEKS, the Sabah Government Workers Thrift and Loan Society, for Elite Consortium and KOPEKS to jointly acquire REPCO Holdings. A deal was struck between the KOPEKS Chairman, Mr Bungga Berut, and Mr Yip. KOPEKS then appointed Mr Yip as the consultant for the deal.

Many members of the KOPEKS board at that time were against the deal and were sceptical that the acquisition of REPCO’s shares would benefit KOPEKS. Mr Bungga, however, thought otherwise and he was extremely gung-ho about the REPCO acquisition. The KOPEKS board, for all intents and purposes, was just a rubber stamp as all decisions were bulldozed by Mr Bungga who had a vested interest in the whole deal.

Sometime in November 1993, a preliminary meeting was held in Kuala Lumpur where Mr Yip, on behalf of Elite, entered into a Memorandum of Understanding with three shareholders of REPCO for the purchase of 19.2% of the total issued and paid-up capital of REPCO Holdings Berhad totalling 2,690,000 shares.Subsequently, KOPEKS entered into a Conditional Agreement with Mr Tan Hah Sing to acquire 1,000 shares in Tan Hah Sing Holdings Sdn Bhd which owned 3,948,000 shares in REPCO Holdings Berhad representing 28.4% of the issued and paid-up capital of REPCO.

With the Memorandum of Understanding and Conditional Agreement, both KOPEKS and Elite Consortium would jointly have effective control of REPCO Holdings Berhad. KOPEKS and Elite called this alliance the REPCO Agreement.

In the meantime, while all this wheeling and dealing was going on, Permodalan Sabah Berhad had still not received its full payment for the underwater land other than the initial deposit of RM200,000.

Elite Consortium was now getting very desperate as it had defaulted on its payment to Permodalan Sabah Berhad so it suggested that Mr Bungga Berut approach Innosabah Securities Sdn Berhad to seek financial assistance on the basis of the REPCO Agreement. Understandably, Innosabah was very impressed with the whole deal.

Innosabah thus agreed to extend financing to Elite Consortium based on the following terms and conditions:

1] Innosabah would arrange a revolving loan of RM18 million from Bank Bumiputra Malaysia Berhad [BBMB].

2] Elite Consortium would arrange for Permodalan Sabah Berhad to charge the 0.971 hectare land to BBMB as security for this loan.

3] Innosabah would utilise the BBMB loan to:
[a] pay Permodalan Sabah Berhad the balance of the purchase price of the 0.971 hectare land.
[b] pay for the acquisition of the 19.2% interest in REPCO Holdings Berhad.

4] The 0.971 hectare land (now charged to BBMB) would be sold to REPCO Holdings Berhad for RM20 million.

5] The proceeds of the RM20 million from REPCO would be used to fully repay the BBMB loan.

At the end November 1993, Permodalan Sabah Berhad, by way of a third party charge, charged the 0.971 hectare land to BBMB.

In the second week of December 1993, BBMB released RM18 million to Innosabah, who then paid Permodalan Sabah Berhad RM3.3 million as full payment for the land plus RM14.7 million for the acquisition of the REPCO shares.

Elite Consortium now became the beneficial owner of a 0.971 hectare piece of land and 19.2% of the issued and paid-up capital of REPCO Holdings Berhad, financed entirely through borrowings.

In the meantime, the 0.971 hectare land with its fancy development plans approved by MPKK, now charged to BBMB for RM18 million, was again re-valued. Though there was no physical change to the land and it was still submerged underwater, the new valuation bumped up the value of the land to an exorbitant RM150 million.

Armed with this new valuation of RM150 million, Elite applied for further financing from MBF Finance Berhad. The game plan was similar to the REPCO arrangement except that this time Pengkalen Industrial Holdings Berhad, another public listed company headed by Mr Yip (which means there was conflict of interest), was used as the vehicle.

In February 1997, MBF Finance Berhad approved and dispersed a loan of RM131 million while the 0.971 hectare land changed ownership from Repco Holdings Berhad to Pengkalen Industrial Holdings Berhad.Up to today, the 0.971 hectare land is still submerged below water and no development of any kind has been started on the land. Public listed companies and banks, with the collusion of Permodalan Sabah Berhad, have been manipulated to fill the pockets of the shareholders of a private company, Elite Consortium Sdn Bhd.