BMF scandal: A piece of history that will never truly go away

 |Jan 24, 2017
Former BMF chairman Lorrain Esme Osman went to prison in Hong Kong for financial negligence.
Former BMF chairman Lorrain Esme Osman went to prison in Hong Kong for financial negligence.

It was a scandal that rocked not only Malaysia, but also Hong Kong, then still under British rule.

The BMF scandal which took place in the early 80s is, for the most part, history, so to speak.

However, the scandal has popped up occasionally; spoken by some, written about by others and researched by enthusiasts, probably hoping to uncover snippets of information that would finally solve its mysterious nature.

Most recently, the BMF scandal is back in the news following declassified documents of the United States’ Central Intelligence Agency (CIA).

In a 9-page document titled ‘The Bank Bumiputera Scandal: More Trouble Ahead for Malaysia’s Mahathir?’, it was revealed that the intelligence agency cited circumstantial evidence that suggests the scandal extended into then Prime Minister Mahathir Mohamad’s administration.

It deserves to be noted however that this has never been proven.

Then Bumiputera Malaysia Finance Ltd (BMF) chairman Lorrain Esme Osman who lived in exile in London until his death in 2011, told The Sun Daily in an exclusive interview in 2008 that he had no evidence of Mahathir’s involvement, with regards to the BMF scandal.

While he did not reveal much, Lorrain said he knew that the executive directors of the bank who were overseeing the running of BMF were doing things he knew nothing about.

“I didn’t know what they were doing, but I believe they were up to something. Only after my release did I realise this,” he had told The Sun Daily referring to his release from Stanley Prison in Hong Kong for financial negligence.

The CIA said Bank Bumiputera (Bank Bumi), which was at the centre of the scandal alongside its Hong Kong subsidiary BMF, was a government-owned bank closely monitored by both the Finance Ministry and Bank Negara Malaysia (BNM).

“It is unlikely that the government was unaware of Bank Bumi’s increase on lending limits for its overseas branches to allow more funds to be channeled to Hong Kong,” the CIA said.

The BMF scandal saw Bank Bumi suffering a loss of USD1 billion.

This, after the bank and its Hong Kong subsidiary was said to have granted bad loans to several Hong Kong property speculators, one of it being the Carrian Group.

The scandal also included the murder of Bank Bumi auditor Jalil Ibrahim who was found strangled to death in a banana plantation in Hong Kong in July 1983. He was sent there to investigate the financial scandal. While a Klang man was convicted of the murder, Mak Foon Than maintained his innocence, saying that he only disposed off the body.

The CIA document, issued two months after an investigative committee’s report on the scandal, opined that the report ‘fueled speculation of high-level government complicity and a coverup.’

The question is whether the CIA’s suspicion of government involvement, in this case Mahathir’s administration, in the BMF scandal is to be believed, or merely based on speculation.

Tunku Abdul Aziz Tunku Ibrahim, in a comment piece for the New Straits Times in May 2015, remarked that ‘Mahathir’s studied indifference served to reinforce suspicions of high-level complicity’.

The social activist was referring to the fact that no criminal proceedings were instituted against those who were involved in the BMF scandal in Malaysia despite such proceedings having been recommended by then Auditor-General Ahmad Noordin.

Ahmad Noordin who headed a committee of inquiry into the scandal, according to Tunku Abdul Aziz, was the ‘fearless auditor-general whose report stopped just short of naming senior members of government who had profited from the loan disbursements’.

“Noordin recommended that criminal proceedings be instituted against those involved. No such action took place in Malaysia. In Hong Kong, criminal action was taken under the law against the crooks as soon as the scandal broke. Scapegoats, or to use the modern expression, fall guys were quickly identified and ‘persuaded’ to fall on their swords,” Tunku Abdul Aziz had written, adding that Lorrain was one of the ‘fall guys’.

Also in his comment piece, Tunku Abdul Aziz said he had met Lorrain in London, and asked the latter who was behind the Carrian affair.

“He asked me whether I thought that he alone could have made the decision to move billions of US dollars without instructions from ‘high above’,” Tunku Abdul Aziz wrote.

However, whatever Lorrain did or did not know of the scandal, he took to the grave as he died in 2011 without having revealed much about the scandal.

In his interview with The Sun Daily, Lorrain was asked if he would write a memoir, to which he answered: “If I do write a book, it would not be factual, as I would not be able to say the things I want to say. So I will write a fictional piece then I can say everything!”

Tunku Abdul Aziz, in his 2015 comment piece, spoke of the BMF scandal in light of Mahathir’s relentless criticism of 1Malaysia Development Berhad (1MDB).

He noted that in comparison to the ‘lost ethical years’ when Mahathir was prime minister, the current climate exhibits more openness and this will make getting to the bottom of 1MDB’s shortcomings a lot faster.

“We will, in our current climate of openness, get a lot faster to the bottom of 1MDB’s shortcomings, if indeed there are problems, than we got out of the investigations into financial and other excesses during the lost ethical years when Dr Mahathir was prime minister,” Tunku Abdul Aziz said.

In responding to Tunku Abdul Aziz’s comment at the time, Mahathir rebutted claims that 1MDB was similar to the BMF scandal.

Mahathir told reporters, “I don’t steal money. The money was missing and it is the bank’s money. I was not the manager of the bank, neither was I its advisor.”

**Tunku Abdul Aziz’s comment piece for NST which was published on May 4, 2015 can be viewed here.

Farah Harith has been in the media industry since 2008. Her field of work has been predominantly centred on politics and human interest. She joined the industry to have a better grasp on the issues plaguing the masses.