Past Scandals – Bank Bumiputra
Bank Bumiputra was incorporated in 1965 and was supposed to provide credit and financial facilities to the rural areas in Malaysia. As a government-owned bank it is the preferred bank for deposits of state funds and it grew rapidly and became the largest bank in SE Asia. However, usually UMNO politicians or UMNO-linked civil servants were appointed to run the bank instead of independent professional managers.
It is not surprising that it became a source of cheap funds and questionable loans for well-connected businesses. This includes a RM200 million loan to UMNO in 1983 to build its headquarters.
After a series of scandals the bank has to be bailed out by the government with the help of Petronas not once, not twice but three times resulting in a total loss estimated to be as high as RM10 billion (ref. Barry Wain’s book “Malaysian Maverick”).
“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.
Mak Foon Tan, the murderer of Jalil Ibraim, a Bank Bumi assistant manager who was sent to Hong Kong to investigate the disappearance of the money, was given a death sentence, and Malaysian businessman George Tan who had participated in looting most of the funds, was jailed after his Carrian Group collapsed in what was then Hong Kong’s biggest bankruptcy, and a handful of others were charged. No major politician was ever punished in Malaysia despite a white paper prepared by an independent commission that cited cabinet minutes of Prime Minister 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 prime minister’s brother. That scandal, which stretched over several years before its denouement in 1985, set the tone for 24 years of similar scandals related to top Malaysian officials and was the first to prove that in Malaysia, you can not only get away with murder, you can get away with looting the treasury as well.”