“Established strictly for the takeover, the weeks old Hati Budi quickly soaked up a controlling stake in UEM by promising Yap a ‘paperless’ role in the planned North-South Expressway project and thereafter control of the company. Two years later, UEM was contracted to complete the remaining 494km of the 870km expressway despite never having built a major road or bridge since its inception. At the time of award, the company was already facing insolvency after having registered losses for the sixth year in a row”
THE THIRD FORCE
In June 1981, the then Attorney-General of Malaysia, the late Tan Sri Hamzah Abu Samah, quietly facilitated the establishment of an RM2 concern with intent “to purchase tin futures contracts and stockpile on the commodity.” The company came to be known as Maminco Sdn Bhd and was the vehicle through which almost a billion ringgit flowed into several offshore accounts based in Bahrain and London. Unbeknown to many, these accounts belonged to both Hamzah and a then up and coming Malay tycoon, Daim Zainuddin.
Then, in December 1981, Tengku Rzaleigh Hamzah got Bank Bumiputra Malaysia Berhad (BBMB) to channel into the company borrowings worth over RM1 billion from two of the bank’s offshore subsidiaries – one in Bahrin, and another, in London. Weeks thereafter, Razaleigh went on to secure another loan worth over RM200 million from the Hong Kong based Bumiputra Malaysia Finance (BMF) with the help of the bank’s General Manager, Ibrahim Jaafar.
Jaafar was quite instrumental in ensuring that the extra millions involving Maminco was never reflected in banking books. While there may have been evidence of that money being deposited here and there, much of it was never credited directly to Maminco despite the company’s name making countless appearances in BMF receipts and invoices. All in all, a total of RM400 million is said to have been spirited through cross-continental loopholes owing to differences in banking policies that existed between BBMB’s local and offshore subsidiaries.
In the months that followed, a total of RM900 million or so went into Maminco’s purchase of 60,000 tons of physical tin and 30,000 tons in futures contracts. Mahathir planned to deprive global speculators of access to tin its physical form, so that when the time came, they wouldn’t have the stock to honour their contracts with both the United States (US) and companies linked to the Government of Malaysia (GoM). But by mid 1981, it dawned upon the CIA that the Malaysian premier was putting the fix on the Americans by “buoying tin prices through the manipulation of the futures market.”
Weeks prior to the establishment of Maminco, the London Metals Exchange (LME) had already informed the US administration that the volume of tin entering the market, then at a reasonable high, was expected to increase magnitudes of a fold. But towards May 1981, the then Head of the US Central Intelligence, William J. Casey, was given a heads up by someone from the LME who declared that “something was amiss on that Malaysian fellow’s (Mahathir’s) end.”
Upon hearing this, Casey undertook to warn the then US president, Ronald Reagan, that the so-called increase of world tin prices was due in part to large quantities of the metal being released “in gushes” by smugglers through the Asian market. According to him, the amount was “sufficient to exert pressure to the floor of the ITC’s (International Tin Council’s) target band.” Casey had reason to believe that Mahathir was redirecting the smuggled tin to release those ‘gushes’ in the Southeast Asian region.
And he was right.
Weeks prior, the Prime Minister had gotten Hamzah to intensify the smuggling of tin through the regional market with the help of an Egyptian conman named David Zaidner. In the months leading to December, both Mahathir and Hamzah raked some RM500 million or so through a BBMB insider who went on to purchase shares in a USD2 billion Hong Kong transportation firm. While all of this happened, UMNO had begun the construction of its 42-story headquarters together with a convention an exhibition center at a cost of more than RM300 million.
According to the late Barry Wain, UMNO had planned to part-finance the construction of the convention centre (which came to be known as the Putra World Trade Centre) with borrowings worth RM200 million from some local banks. In his book The Malaysian Maverick: Mahathir Mohamad in Turbulent Times, he spoke of the 17 or so years that UMNO needed to clear all obligations associated with the debt. While that may have been true, there is a lot that escaped Wain’s scrutiny, probably because the journalist was deliberately being fed damning information regarding the RM200 million loan to prevent him from discovering the bigger elephant in the room.
That elephant had to do with plans that were afoot to release a portion of Maminco’s tin stockpile by March or April 1982. Both Hamzah and Mahathir had anticipated that the price of the metal would have skyrocketed by then, enough for UMNO to seize control of United Engineers (Malaysia) Berhad (UEM), an ailing construction firm that had some serious losses on its books. Then, when president Ronald Regan suddenly undertook to foil Mahathir’s plans by deliberately crashing the tin market, Daim was quickly ushered in to figure out ways to regain some of Manminco’s losses.
Now, the first thing the soon to be Minister of Finance did was discuss with real property bigwig Yap Kim Kee on ways to restructure Renong into a crony-capitalist concern. Having been promised RM100 million in advance, Yap quickly undertook to deregister the company in London as Daim worked behind the scenes with Razaleigh to have its shares listed on the Kuala Lumpur Stock Exchange (KLSE). By February 1984, a decision was reached – Daim was to be made Minister of Finance to facilitate the takeover of UEM by one of his own companies, Hati Budi Sdn Bhd.
Established strictly for the takeover, the weeks old Hati Budi quickly soaked up a controlling stake in UEM by promising Yap a ‘paperless’ role in the planned North-South Expressway project and thereafter control of the company. Two years later, UEM was contracted to complete the remaining 494km of the 870km expressway despite never having built a major road or bridge since its inception. At the time of award, the company was already facing insolvency after having registered losses for the sixth year in a row.
To help recover those loses, Mahathir undertook to grant the company a 30-year concession on a 7.5 sen per kilometer toll term, the condition being that Daim would channel 30 percent of the estimated RM34 billion UEM stood to gain to various nominee companies parked under his name and those of his cronies.
To be continued…
PAST ARTICLES IN THIS SERIES
Part 1: The dirtiest scandals in Malaysian history. Part 1 – The Maminco tin scandal as never before told