List of scandals in Malaysia
The following is a list of alleged scams and scandals in Malaysia since independence. These include political, financial, corporate and others. Entries are arranged in reverse chronological order by year. The year is the one in which the alleged scam was first reported or came into knowledge of public.
|Notable scandals in Malaysia|
|Scandal||Year reported||Scope Malaysian Ringgit||Summary|
|MISC||2018||RM108.57mil||It was reported that the company had come under MACC’s radar following allegations of abuse of power, corruption and false payment claims involving about RM109 million.|
|1Malaysia Development Berhad scandal||2000s||42 billion debt||The controversy over the debt-laden company transactions 1Malaysia Development Berhad (1MDB) continues unabated, but this is not the first time the federal government plagued by large financial scandals. There are many similar cases in the last three decades, beginning during the tenure of former Prime Minister Mahathir Mohamad. 1MDB has RM42 billion in debt and struggling to pay interest to both local and international banks. 1MDB established in 2009, and immediately implement the various aspects of raising bonds and joint ventures that shocked the world of international finance. Two major flagship projects, Tun Razak Exchange (TRX) and the ongoing development of Malaysia granted to 1MDB. There was talk that 1MDB sell or liquidate certain assets, but the extent of damage caused by the transaction will only be known after the audit report on the company, in late June.|
|Port Klang Free Zone scandal||2000s||12.5 billion loss||Port Klang Free Zone scandal (PKFZ) occurred 6 years ago, the government estimated a loss of about RM12.5 billion, but no one so far convicted him. Six people were charged, two were acquitted, while 4 other cases pending. Port Klang Authority (PKA) recently discussed to drop RM720 million suit against the contractor Kuala Dimension Sdn Bhd (KDSB), raises the question of whether the money will be recovered. This project was known when it was found that the cost of establishing a free zone in excess of RM3.5 billion. Kuala dimensions also make RM993 million for capital gains when it bought the land from Pulau Lumut Development Cooperative Berhad at only RM95 million before selling it to PKA at a price of RM 1.8 billion. The government also extended a soft loan of RM1 billion for the project, after PKFZ advisable to develop the entire project in a single phase, at a cost of RM1.8 billion. Former Transport Minister Ling Liong Sik was among those charged, but he was acquitted of cheating related irregularities in land valuation.|
|Malaysian Airlines financial scandal||1990s||9.4 billion debt||In 1994, businessman Tajuddin Ramli taking a loan from a government-linked company to buy a controlling stake in Malaysian Airlines share price much higher than the market price - RM8 per share. For seven years he led the MAS, this is a period of various alleged fraud occurred. The company has cash reserves of RM600 million when Tajuddin took over, but the accumulated losses of RM9.4 billion when he left the company in 2001. Despite the big loss, the government has bought back from MAS Holdings with the same price it was sold - RM8 per share - out of desperation to keep the airline afloat for allowing the construction of Kuala Lumpur International Airport (KLIA). Tajuddin was involved in several lawsuits with the government-linked companies (GLC) claiming non-payment of loans and even lost against Danaharta case and ordered to pay more than RM500 million, the company and Tajuddin out of court settlement, the so-called "bailout" by critics. MAS experiencing financial problems since then.|
|Bank Negara forex scandal||1990s||30 billion loss||In the early 1990s, the Bank Negara Malaysia (BNM) began to dabble in speculative currency trading and foreign exchange trading with large sums of money, alarming other banking institutions worldwide. Bank Negara Malaysia lost almost RM30 billion between 1991 and 1994, before technically bankrupt and had to be rescued by the Ministry of Finance. None of the top executives in the Bank Negara Malaysia accused of trading activities as the government fully absorb losses. After that, the Bank Negara Malaysia is not involved in any high-risk business to prevent it recurring.|
|Pan-Electric Industries scandal||1980s|||
|Deposit-taking co-operative scandal||1980s||552,000 Depositors and RM1.5 Billion Involved||The 1986 deposit-taking cooperatives (DTCs) was a scandal waiting to happen.
A year before the scandal erupted, Consumers Association of Penang (CAP) had already written to JPK to find out the control exercised over cooperatives and the protection given to depositors should a cooperative face financial trouble or a “run”. CAP’s investigations disclosed that malpractices in the cooperatives included directors using the cooperatives’ funds to buy land which they owned or controlled at above market price. Directors were also making the cooperatives buy the shares they owned in private companies at above market value. The cooperatives also gave big unsecured loans to directors, their relatives or their companies.
On 29 July 1986, CAP sent a memorandum on “The Need for Greater Control over Co-operatives” to Bank Negara Malaysia (BNM), the Ministry of Finance, Jabatan Pembangunan Koperasi (JPK), and the Ministry of National and Rural Development. The memorandum pointed out that unless the Co-operative Societies Act 1948 was amended and cooperatives activities strictly regulated, depositors may lose billions.
However, our early warning fell on deaf ears and the scandal exploded.
The DTCs fiasco which occurred the following month involved 24 cooperatives, 522,000 depositors and about RM1.5 billion in deposits.
It was triggered off by Koperasi Belia Bersatu Berhad (KOSATU) suspending payments to depositors who wanted to withdraw their savings in July 1986. The Essential (Protection of Depositors) Regulation 1986 promugulated on 20 July 1986 allowed BNM to freeze the assets of KOSATU and its key management and also to investigate into the affairs of the cooperatives . Other depositors became jittery and this led to a run on other DTCs. On 8 August 1986, the activities of 23 other cooperatives were also suspended. 17 accounting firms were then appointed to assist BNM in its investigations and to come up with a White Paper.
The White Paper on the DTCs indicated that the 24 DTCs had by November 1986, together lost approximately RM673 million through mismanagement or fraud. The White Paper revealed that a significant number of cooperatives suffered from bad management, either due to lack of expertise or professionalism or through imprudent, and in some cases, corrupt management.
This result in gross mismanagement of funds such as overinvestment in land and property, with nearly one-fifth of assets in housing development projects and fixed assets, some of which were purchased at the height of the property market.
There was also over-commitment in loss making or non-income generating subsidiaries and related companies with as much as 42% of total assets committed in loans or capital investments in such companies. The cooperatives also suffered from speculative investments in shares.
In certain cooperatives, incidents of fraudulent activities and conflict of interest led to imprudent lending of funds, including to directors and other interested parties.
Many cooperatives did not have borrowing powers or exceeded them. A number of them invested in assets or projects without approval of the JPK, or specifically against the approval of JPK.
In 1986, 5 directors of 3 DTCs were charged in court, and in 1987 a further 17 directors of another 5 DTCs were also charged.
The refund to the depositors of the 24 DTCs was made possible through 3 types of rescue schemes. These rescue schemes had provided for a full ringgit-for-ringgit refund by way of cash or a combination of cash and equity.
The rescue involved RM600 million in soft loans and commercial loans from Bank Negara Malaysia. BNM also paid RM15.6 million for professional fees incurred in the investigation and rescue exercise.
In 1988, 7 other ailing DTCs were investigated. 3 were operating in Sabah and 4 in Peninsular Malaysia. One of the 4 in the Peninsula was the Federation of Housing Cooperatives Ltd, in which the Cooperative Central Bank had a 78% interest.
|Bumiputra Malaysia Finance scandal||1980s||2.5 billion faulty loan||The first major financial scandal in Malaysia erupted in 1983 when it was found that Bumiputra Malaysia Finance (BMF), a subsidiary of Bank Bumiputra Malaysia Bhd (BBMB) providing RM2.5 billion loans to companies that have a vague track record, including Carrian Group based in Hong Kong. The scandal dragged on with the murder of an assistant manager who was sent to Hong Kong to investigate the transactions, Carrian Group bankruptcy, and ultimately the government to pump more money to save BBMB from being closed. Then prime minister, Mahathir Mohamad repeatedly distanced himself from the scandal, referring to it as the business of the bank that is not affiliated with the government. Losses incurred in the crisis, including capital injections repeatedly by the government, estimated at RM10 billion. At that time, BBMB is Southeast Asia's largest bank and the Carrian collapse is the largest bankruptcy in Hong Kong. The scandal came just two years after Mahathir leading the government, at the time he vigorously pursue on Malaysia's industrialisation. The Royal Commission is established but no one is prosecuted in Malaysia. In Hong Kong, a few of executives is prosecuted while BMF Chairman, Lorrain Esme Osman live in exile until his death on 2011.|
|Perwaja Steel scandal||1980s||10 billion loss||In 1982, Perwaja Steel started as a joint venture between the Government and Nippon Steel Corporation of Japan. It is supposed to be a mega project for promoting Mahathir's industrialisation, however turning to be incoherent because the company confronting with production problems, ultimately Nippon Steel quit from the co-operation. The interest payments was rising and the Government was forced to inject RM2 billion to save the company, together with loans from the EPF and Bank Bumiputra. Eric Chia, Mahathir's ally, was brought in to lead the Perwaja for 7 years, but he left the company with the worst situation as compared to the situation when he takeover. The company incur additional losses of RM5.7 billion and RM2.5 billion loss. Chia was charged with breach of trust in 2004 but was freed three years later, and no one is responsible for the loss of Perwaja scandal, which allegedly included interfering accounting records. Overall losses from the scandal are estimated to be RM10 billion.|
|Maminco scandal||1980s||1.6 billion debt||In 1981, a company namely Maminco Sdn Bhd was established soon after Mahathir became prime minister, seeks to control the price of tin on the London Stock Exchange. Maminco take out loans amounting to RM1.5 billion from Bank Bumiputra but in debt when tin prices fell at last. Another company called Makuwasa Sdn Bhd is established to cover losses that Maminco. The new shares supposedly created and reserved for the poor natives, was converted to the Employees Provident Fund (EPF), to sell the shares and the low market price to indemnify Maminco. Taxpayers lost about RM1.6 billion in the Maminco scandal .|
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