How the gov't 'looted' up to US$100 bil, and Mahathir squandered RM100 bil

The multi-billion ringgit Port Klang Free Zone scandal may be big, but it is only the latest in a long line of scandals going back to the early 1980s.

In July of 1983, what was then the biggest banking scandal in world history erupted in Hong Kong, when it was discovered that Bumiputra Malaysia Finance (BMF), a unit of Bank Bumiputra Malaysia Bhd, had lost as much as US$1 billion which had been siphoned off by prominent public figures into private bank accounts.

The story involved murder, suicide and the involvement of officials at the very top of the Malaysian government. Ultimately it involved a bailout by the Malaysian government amounting to hundreds of millions of dollars.

No major politician was ever punished in Malaysia despite a white paper prepared by an independent commission that cited cabinet minutes of Prime Minister Dr Mahathir Mohamad giving an okay to a request to throw more money into the scandal in an effort to contain it.

That was just the first Bank Bumi scandal. The government-owned bank had to be rescued twice more with additional losses of nearly US$600 million in today's dollars.

Ultimately government officials gave up and the bank was absorbed into CIMB Group, currently headed by Nazir Razak, the sitting prime minister's brother.

Perwaja Steel, for instance, lost US$800 million and its boss, Eric Chia, a crony of Mahathir's, was charged with looting the company. He stood trial, but was acquitted without having to put on a defense.

In the mid-1980s, the Co-operative Central Bank, a bank set up to aid the Indian smallholder community, had to be rescued by Bank Negara, the country's central bank, after hundreds of millions of ringgit in loans granted to a flock of Umno and MIC politicians became non-performing....read more here.

Meanwhile, Malaysia has squandered an estimated RM100 billion on financial scandals under the 22-year rule of Dr Mahathir Mohamad, according to a new book about the former prime minister.

According to Barry Wain, author of the soon-to-be launched 'Malaysian Maverick: Mahathir Mohamad in Turbulent Times', direct financial losses amounted to about RM50 billion.

Wain writes that the Mahathir administration, which took office in 1981 with the slogan, “clean, efficient, trustworthy”, was almost immediately embroiled in financial scandals that “exploded with startling regularity”.

By the early 1990s, he says, cynics remarked that it had been “a good decade for bad behaviour, or a bad decade for good behaviour”.

The book also reveals that:

* Mahathir, despite his nationalistic rants, signed a secret security agreement with the United States in 1984 that gave the Americans access to a jungle warfare training school in Johor and allowed them to set up a small-ship repair facility at Lumut and a plant in Kuala Lumpur to repair C-130 Hercules transport aircraft.

* Mahathir used a secret fund of his ruling Umno to turn the party into a vast conglomerate with investments that spanned almost the entire economy.

* Mahathir's Umno financed its new Putra World Trade Centre headquarters in Kuala Lumpur partly with taxpayers money, by forcing state-owned banks to write off at least RM140 million in interest on Umno loans.