Source: Asian Correspondent
Recently declassified documents by America’s Central Intelligence Agency (CIA) said the Malaysian government under longest-ruling Prime Minister Dr Mahathir Mohamad had a hand in the largest financial scandal the country had seen during the 1980s.
The CIA’s claim was revealed last week after its move to declassify more than 13 million documents, making them accessible online for public viewing.
During the first few years of Dr Mahathir’s tenure, Malaysia was ensnared in a massive graft debacle involving government-owned Bank Bumiputera (Bank Bumi), whose reputation was tarnished by the “questionable” operations of its wholly-owned Hong Kong subsidiary Bumiputera Malaysia Finance Ltd. (B.M.F.).
Widely known as the BMF scandal, the Malaysian bank and its offshore subsidiary dished out billions in bad loans to numerous Hong Kong property speculators, including the Carrian Investment Limited (Carrian Group) between 1979 and 1983. The scandal also saw the brutal murder of a young Malaysian Bank Bumi auditor.
The BMF scandal has been described as an embarrassing episode in Dr Mahathir’s premiership, which dogged his leadership and saw hundreds of millions of dollars disappear into thin air following the defunct Carrian group and its former chief executive George Tan’s move to declare bankruptcy.
As BMF was heavily involved in providing loans to property speculators during Hong Kong’s property boom in the late ’70s, the CIA said BMF — unlike other banks in the the British colony — continued to extend credit to real estate despite concerns of a weakening market.
As a result, the Malaysian bank, which was initially set up to uplift impoverished Malaysians from the ethnic Malay community, had lost US$1 billion and prompted a delayed and wide scale probe into the scandal.
In the document entitled “The Bank Bumiputra Scandal: More Trouble Ahead for Malaysia’s Mahathir?”, the CIA said although Dr Mahathir had admitted BMF’s “imprudent” practices, the government’s response to the losses incurred was “surprisingly restrained”. Continue reading