Will ACA moderate the Maika scandal debate?

Kula challenges Samy to debate on Maika shares..... Kulasegaran said in his website that Maika Holdings was touted as an economic vehicle and a miracle to lift the Indian poor from the shackles of poverty and Maika was launched with much hype and hope, causing many plantation workers to invest in the company. "The new dawn of a golden opportunity that was promised to the Indian poor never arrived. http://kula.blogsome.com/

Malaysia's greatest financial scandal to plague the Malaysian Indian community , the Maika-Telecoms share controversy, which defrauded 66,000 shareholders will rear its ugly head again. In a debate.... if DAP's M.Kulasegran has his way.

In order to enlighten us all as to the gist of what the proposed debate would unravel, it is therefore necessary to locate the history and facts behind this scandal which full credit must be given to the pioneering work of Edmund Terence Gomez of the Aliran fame for investigating this scandal in 1992.

Formed along the similar lines of the MCA's Multi-Purpose Holdings and the government's Amanah Saham Nasional, Maika Holdings Berhad (Maika) commenced business in 1983 under the patronage of the Malaysian Indian Congress (MIC). Although the original plan by the MIC was to ensure that at least RM30 million worth of Maika shares were subscribed to, a fantastic RM106 million was raised from almost 66,400 shareholders many of those being working class Indians employed in the plantation sector. The MIC president Datuk Seri Samy Vellu's objective was to establish Maika as a major conglomerate. Despite Maika's large capital base, the investments were in a myriad of business activities with little directional purpose or acumen which resulted in none becoming major business enterprises. Although a number of major acquisitions were made into some major companies such as United Asian Bank, TV3. United Oriental Assurance, the equity acquired was not enough to give Maika effective control over these companies.

Despite being touted as a catalyst for the economic upliftment of the Indian community, Maika's performance had been abysmal. It registered profits from 1984 to 1986-the total amount of profits for three years amounted to only RM16.5 million. Maika registered losses from 1987 to 1990 and declared dividends only three times during this period which the amount was a mere 11 sen per share. Throughout its corporate history, Maika had to constantly deflect allegations that it was a convenient ground for political patronage and corruption.

The Malaysian Government, implemented its privatization policy in 1984 which among other things enabled shares of certain public enterprises be sold to the public and in accordance with National Economic Policy (NEP), by special allotment of shares to entities such as Maika. The shares of these privatized entities where bought at par value would undoubtedly fetch a huge premium when sold. From the period of 1985 , Maika had applied allocation of shares (usual amount requested was 1 million shares) in MAS, MISC amongst others. For this purpose, the Managing Director with the prior approval of the Chairman and Board of Maika Holdings, would approach the President of MIC to use his good offices to secure the special allocation of shares for Maika.

In September 1990, Telekoms Malaysia then known as STMB made an announcement of its proposed public issue. In view of its financial position at that relevant time, Maika approached the principal underwriters for the Telekoms share issue, to seek facilities to finance any allotment of Telekom shares to Maika. In October 1990 Maika was informed by the Ministry of Finance that 10 million shares had been allocated and Maika then proceeded to successfully raise a loan of RM50million to finance the share allocation in full.

According to the then Managing Director of Maika, Tan Sri Rama Iyer. the President of MIC was informed of the successful allotment of 10million Telekom shares to Maika and the possibility of obtaining full loan financing. The president had replied that the offer to Maika would be for only 1 million shares and not 10 million and that he would contact the Ministry of Finance for clarification.

Subsequently, Maika would then receive a fresh letter of offer from the Ministry of Finance withdrawing the first allotment of 10 million shares and instead allotted 1 million shares.

The MIC President offered explanations through the Tamil language paper Tamil Nesan and at MIC meetings insisting that Maika could not afford to take up 10 million shares as it was in a cash flow problems. When queried in parliament, the Finance Minister in 1992, disclosed in view of Maika stating it could only take up 1 million shares, the remaining 9 million shares were allocated to three companies(which represented the interest of the Indian community) proposed by Maika . Maika Board later denied knowledge that these three companies existed and that it was not their recommendation that 9 million shares be diverted to these three companies.

The three obscure companies in question, first two were actually RM2 shell companies.

Hounded by allegations of impropriety, the MIC president revealed that out the 9 million shares in question, 8.92 million were sold for a profit of RM7.168million. The proceeds from the sale were channeled to MIC's education investment arm, Maju Institute which was to use the funds to set up the RM25 million MIC sponsored TAFE College. The President made it quite clear he personally decided to allocate only 1 million shares to Maika as it would be financially crippling for Maika to fork out RM375,000 monthly to service the RM50 million loan facility for the full 10million shares.

As quoted in NST dated 16/5/92, the MIC president said" I could have have given all the shares to Maika Holdings if not for their past business record. They have to learn to do business on their own not depend on shares and hope to make money out of it"

Subsequently, what followed was a 17 month long investigation by the Anti Corruption Agency into the Maika-Telekoms shares scandal which ended with the ACA clearing the MIC president of any wrong doing. What this whole exercise failed to do was to clear the doubts in the minds of all Malaysians.

Fast forward 2008, will this proposed debate bring forth answers to the following questions?

1) Why was there a need to reduce the number of Telekoms shares allocated to Maika since Maika had obtained a financing approval for 10 million shares?

2) Could it possible that the shareholders of Maika, (some of whom have pawned their jewellery
or borrowed from Ah Longs at exorbitant interest rates to participate in Maika) derive some benefit if these 10 million shares were acquired by Maika?

3)What was the selection criteria for these three companies to receive 9 million shares on behalf of the Indian community?

4) What is the proof that these companies have passed over the profits of the Telekom share sale to MIC's education investment arm?

5) Who were the individuals behind these three companies?

6)How could a shell company be allotted 3 million shares by the Ministry of Finance?

No doubt when the public has the answers, other lessons will be become apparent. But unless there is full accountability, it will be business as usual. This scandal was a great tragedy for the Indian community and the only thing that we can learn from it is that without full public disclosure, there can be only limited public accountability and thus increased scope for impropriety.
Bring forth the debate!