Declassified CIA docs: Mahathir downplayed Bank Bumi’s culpability in BMF scandal

 |Jan 24, 2017
File pic credit Global Peace Foundation.
File pic credit Global Peace Foundation.

The United States’ Central Intelligence Agency (CIA) was of the opinion that former Premier Mahathir Mohamad had downplayed Bank Bumiputra’s (Bank Bumi) culpability with regards to the BMF scandal in the 80s.

Asian Correspondent, a news portal, today highlighted a document titled ‘The Bank Bumiputra Scandal: More Trouble Ahead for Malaysia’s Mahathir?’, which was part of files recently declassified by the CIA and is now available on the intelligence agency’s website.

The 9-page document issued on March 5, 1985 provided a summary of the major financial scandal which saw Bank Bumi suffering a loss of USD1 billion.

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It was known as the BMF Scandal, due to the bank and its Hong Kong subsidiary Bumiputera Malaysia Finance Ltd (BMF) having granted bad loans to several Hong Kong property speculators.

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

“Circumstantial evidence suggests that the scandal extends into the Mahathir administration. As a government-owned bank, Bank Bumi is closely monitored by both the Finance Ministry and Central Bank and no important decisions are made without their agreement or knowledge,” the CIA said.

“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,” it added.

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The Carrian Group under its chief executive George Tan was said to have been among those who received bad loans from BMF between 1979 and 1983.

Tan was charged in Hong Kong in 1984 with conspiracy to defraud in connection with the collapse of his financial empire in 1983, according to a Reuters report.

The investigative panel set up by Bank Bumi to look into the matter accused six BMF executives of corruption.

The CIA noted in their document that Mahathir had admitted BMF’s lending practices were imprudent and pledged action if management malpractices were uncovered.

The intelligence agency however opined that the government’s response to the BMF loss was ‘surprisingly restrained’.

With Mahathir being a strong critic of 1Malaysia Development Berhad (1MDB), he rebutted claims that it was similar to the BMF scandal which took place during his administration.

Malaysian Anti-Corruption Commission (MACC) advisory board chairman Tunku Abdul Aziz Tunku Ibrahim had in 2015 slammed the former premier saying that probes into financial scandals were more transparent presently than before.

Asked to comment on that at the time, 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.”