KUGAN WHAT REALLY HAPPENED

WHAT REALLY HAPPENED TO KUGAN

Having conveniently been sidelined as a priority in their agenda for justice, the fate of Kugan, a man brutally murdered in police custody, appears now to be another statistic not simply to government but critically to that very vocal opposition that conveniently seeks to muster Indian votes at election time.

At the very heart of this group of policy neutral opportunists is one Lim Kit Siang and his larger than life shadow, Anwar Ibrahim.

To Kit Siang, a man who through his blog (like the Nutgraph) will excise all those who do not agree blindly with his anti Mahathir, anti UMNO (read anti Malay) rhetoric and propaganda, it appears that the plight of Kugan does not rate very highly for action or justice. Kugan and all like him in their view have no real rights.

These people like Kugan are but useful props to them to stage in their wider opposition game plan for government.

THE ETYMOLOGY OF INSURANCE SCAMS IN MALAYSIA- A PONZI SCHEME CALLED MERCANTILE SDN BHD UNDER ANWAR

In the very early 1990’s when Anwar Ibrahim was minister for finance, Malaysia’s non banking financial sector, particularly its insurance sector came to an unglorious end crashing to its knees. It was the result of years of neglect, fraud and the absence of prudential regulatory supervision in that sector.

Amongst these giants of insurance was that general insurance behemoth, Mercantile Insurance SDN Bhd, South East Asia Insurance and MAIKA’s own insurance arm which finally crashed weighed down by billions of ringgit in debts and unfunded liabilities.

At the top of these failed insurers and in an irredeemable position at the time was Mercantile SDN Bhd. Theirs was a scam run then by a group of well organized Chinese businessmen in places like the Kelang Valley, Johore Bahru, Penang and surrounding areasThere they indulged in writing temporary cover notes to the mainly Chinese taxi and truck transport industry as well as other areas of general cover. It was a scam of biblical proportions that lay at the root of their operations.

Mercantile like the others were cash cows for their operators but not their shareholders who only held speculative paper worth nothing. This was the classic smoke for the mirrors placed in their annual reports to inflate share prices of these companies in to create the general stampede and bubble worth little or nothing at all.

Mercantile in particular booked these unrealized earnings (Earned But Not Received EBNR) in its balance sheet and inflated its annual accounts with the assistance of its auditors and accountants some of the biggest names in the business.

ANOTHER OF ARTHUR ANDERSON’S FOLLIES (FRAUDULENT AUDITS)

Arthur Anderson the accounting giant did at the time for these companies what it also did for Enron Inc in the USA which finally brought both it and Enron down in the 1990’s. In doing so Mercantile and Arthur Anderson allowed the mountain of unrecoverable, unrealizable, unfunded liabilities and debt to mushroom as the asset base of its balance sheet.

These “audited” reports then served to con the company’s shareholders and the market that they were profitable, solvent, and well managed in the process. Directors and major shareholders of the company drew huge salaries, fees and perks whilst also in the process quietly disposing of their inflated shares in the company to an unsuspecting secondary market. Here small investor buyers queued up and paid for worthless shares.  Ignorant of their true worth, they bought these worthless shares from the directors of Mercantile and others like them for very large premium. The directors collected and remained gainfully employed by the Insurers.

At the helm of this scam were some of Malaysia’s and the MCA’s most respectable and high profile businessmen. At least two of these were politicians.

None of our investigations reveal a link to Dr. Mahathir or any of his so called cronies (meaning his family and his relatives). Unless of course one identifies MIC and the MCA and its officers and associates as being Mahathir cronies.

If we did name some of the MP’s and their families engaged in this affair who benefited out of this fraud which is what it was, the immediate charge would be “but yes they are Barisan people”. Or worse still the charge would be that we are anti Chinese.

THE SCAM – A PONZI SCHEME

The scam itself was not novel. It was a Ponzi scheme. The government should have acted earlier but it did not. Anwar must be asked why. In the end the government of Mahathir had to act and it did. Admittedly his government’s reaction was unconventional and knee jerk. But in fairness Anwar was at the helm at the ministry of finance at the time and ultimate responsibility lay with him as minister.

The insurance and banking sectors were suffering from an image problem and confidence crisis. The government had no choice but to take into consideration public and foreign investor perceptions of the non banking finance sectors condition in Malaysia and pumped into it billions of dollars of tax payers money to fuel recovery and to bring liquidity back into the sector. Anwar Ibrahim was finance minister then.

A Singapore think tank recently commissioned one of its own, the former Asian Wall Street Journal writer Barry Wain, to write a fanciful book about Dr. Mahathir and his faults in office which conveniently overlooked this unmitigated disaster and others like it  presided over by Singapore’s’ celebrated bum boy in the region, Anwar Ibrahim. To add insult to injury Lim Kit Siang called for a Royal commission into Wain’s scurrilous claims against Mahathir, whilst conveniently remaining wilfully ignorant and silent about his political ally’s and constituents possible complicity in a the insurance and banking Ponzi scheme of the 1990’s.

INSURANCE SCAMS AND AUTO THEFT

Insurance theft and fraud on a scale as large as the frauds and thefts Kugan was suspected of being involved in do not run on the whims or actions of a single person.

These are not isolated acts of impulse but an organized and well funded well planned industry. It requires a great deal of skill and cooperation from both the underworld and the boards of respectable companies to execute to the level it operates in Malaysia.

Mobsters and organized crime czars like Carlo Gambino, Joe Colombo, the Gallo Brothers, Jimmy Gravano and Meyer Lansky all knew of the immense financial pickings available to them in these scams if were run well. They had all in their time made hundreds of millions out of such scams in their own turfs in their time. The practice continues to run well in Europe, Australia and the major Asian Tiger economies today and provides rich pickings for the brave. (Yes indeed Fortune favours the Brave).

THE MALAYSIAN OPERATION

In Malaysia and other south east Asian countries, Interpol claims the Chinese as always create and fund the structures, the organizations necessary for these scams to thrive and control the industry.

In Malaysia for at least of the last 2 decades, the Chinese have been fortunate enough to find a large enough pool of desperate young Indians willing to do their dirty work for them in this field.

CREATING A POOL OF INDIAN TALENT

Mainly Chinese run property syndicates have been purchasing rubber estates when prices were depressed to convert these lands for real estate development. They obtain government permits with ease bribing officials, ejecting the Indian labourer population without notice (much like Lim Eng Guan did in Penang recently)then turn these former plantations into large scale housing estates.

The Indians move to the urban sprawl with little to do having the rubber mat pulled from under them by the Chinese and a reckless government. Forcing these former plantation workers into exile in the cities into a life style they are not accustomed to unprotected and ill equipped to survive in a highly urbanized environment has always been a recipe for disaster. Not to the Chinese run gangs though.

Forced evictions like these have helped create a desperate environment, a breeding ground for toughies them like Kugan who would do anything to survive. Many are without education or training, the result of years of neglect by government and their own community leaders.

Kugan was, according to material we have seen, one such candidate. A suspected bit player in a ring who was both trusted and skillful in his work. He knew the players the hierarchy and the system very well. That meant he knew the identities of everyone in the ring thus becoming a danger to those at the top if he were ever caught. And caught he was in the end.

AUTO THEFT

Cars stolen by professional auto theft gangs are quickly and professionally disassembled within Kuala Lumpur and its precincts in professionally equipped auto workshops for the purpose.

This is a multi billion dollar industry efficiently run by its operators at every level. Timing and discretion are critical to its success. Parts and components of luxury cars which in sum total fetch more than the completely assembled vehicle on the open and black markets is the prize. Not the assembled vehicle as popular legend would have one believe.

Luxury cars such as the Mercedez, BMW, Lexus and other well known brands are expensive for their replacement parts. “Accidents” are often according to our source staged by “cowboys” who drive uninsured second hand vehicles crash them into these luxury vehicles which creates an immediate demand for a replacement part such as a guards, side panel, grille or fully assembled door.

In terms of dollars the replacement costs and cost of labour make it prohibitive. The offenders cannot pay. A good stolen second hand part suddenly becomes a valuable commodity.

Not all owners of luxury vehicles go to a recommended service centre or agent for a replacement part, for spares or for service. Owing to this practice in Asia, the second hand parts market has become a multi billion dollar industry fully finance by the poorly regulated insurance sector. Entry barriers to the insurance auto scam industry are low.

The chances of getting caught and prosecuted in a high end operation is, even lower where police protection is involved. The returns are significantly higher than that of most other legitimate businesses such as taxi driving, the assembly line, the petrol pump, fruit vegetable or other groceries operations and general labour. In fact the penalties are relatively insignificant although the returns and risks higher when compared to that of drug peddling.

INSURANCE COMPANY PARTICIPATION AND COMPLICITY IN CRIME

A number of large Malaysian general insurance companies with foreign underwriter agreements have been actively participating in these scams either willingly, through neglect or ignorance of the deception and fraud being perpetrated by their executives. At least that’s their story when discovered and caught out.

We are not at liberty to name the three main players in the auto theft scam market in Malaysia as supplied to us by our source. However it is fair to say that the cooking of books in Malaysia’s insurance and banking sector is legend that it has become a conduit for black money, a convenient hole for Australian and European financial institutions to channel funds through in a number of schemes designed to fill in deficits temporarily when their compliance audits fall due (for a fee of course).

HERE IS HOW IT WORKS.

A car goes missing, it gets sold on the open market within hours or days through a network of workshops to customers. The pay offs are settled by the larger operators to the low level hacks like Kugan immediately in cash when a stolen car is delivered to a recommended workshop for dis-assembly successfully.

The insurance company receives its claim from the “victim” and processes it relatively quickly (depending on who the insurance agent is who makes the application).

A code is sent with the claim to the insurers claims department which an operative within the insurance company must recognize as an “approved” job for the claim to be processed favourably. It is then processed without too much fuss. Any loose ends are quickly dealt within a “team”.

At the end of the month, the head of the “team” within the insurance company has his commissions settled into accounts such as their credit cards or mortgages by the scam operators. In many instances cash is still used.

In the alternative a child’s education fees abroad is paid for from a separate account controlled by the syndicate. Typically this is done from a charitable foundation registered in the Cayman Islands, Labuan or somewhere else in Asia like Hong Kong. So far so good.

The level of sophistication is much higher than space here would permit for fuller description. Nothing seems terribly complicated. It occurs every day. People torch their vehicles for insurance money.

Insurance executives are pressured (and some willingly) to reduce claims paid on legitimate policies by up to half of the entitlement to a policy holder, especially during times of emotional distress such as when a person dies or has had an accident and is on life support in hospital. It is a daily practice in places like Malaysia.

The policy holder in such circumstances are pressured to accept a smaller amount in entitlement and to cover the rest themselves out of their own personal resources.

Heart, kidney, liver and other critical organ defective patients quite often find themselves staring down the barrel of an insurance company fraud in their moment of despair, having to argue with insurance company lawyers about the fine print in their policies whilst on their death beds. This is no time to argue with the insurance companies who are acutely aware of the vulnerability of their policy holders. And they cash in on it.

It is here in this market (health or casualty insurance) they make up for those other amounts lost through paying out on theft of motor vehicles and other fraudulent general insurance claims. Get the picture so far?

THE INVESTIGATION-BACK TO THE KUGAN MATTER

An audit was ordered on one of the participating (fraud) insurance companies in Malaysia by their Australian underwriting partner. Amongst the audit team a forensic accountant from one of Australia’s  top 5 accounting firms.

He was accompanied by a former Australian Federal Police officer very well versed in these operations. Needless to say an audit uncovered a number of suspect transactions and irregularities that should have alarmed the company’s own internal auditor and its financial controllers. It did not. And they provided no answers nor explanations that could have even by the widest stretch of the imagination been considered reasonable let alone professional to their Australian counterparts investigating.

Suspicion began to fall on a group of executives, three in one company alone who took leave of absence without notice when the alarm was raised. At least one who was being investigated took medical leave and could not be contacted for a considerable period of time.

The standards applied to the accounts of the particular insurers were, to say the least according to our sources, certainly not in compliance with the accepted accounting standards or practices of any reputable accounting body. In that group one would have to include the Malaysian peak professional accounting bodies.

What concerned the auditor from Australia most was the way in which generous and prompt payments were made to car theft claimants (luxury cars mainly) whilst legitimate claims in the health and casualty divisions and other general insurance areas of business were in some cases halved inspite of the underwriters obligations to paying these out in full.

The monies saved or retained in these businesses of the insurance companies were being diverted to the other accounts (auto theft) to make up for the deficits there. Again the general fire and theft of auto and other valuable property rated very highly.

Smelling a scam of the highest order in a country where consumer rights are trampled on easily, the auditor wired Melbourne for assistance. Careful not to become a casualty like a colleague in a similar investigation of corruption in Bangkok the late 1990’s, (an Australian auditor who was assassinated by Chinese Thai gangs for uncovering a similar racket in the building industry there), the auditor sought protection and was kept under constant surveillance whilst the investigative audits progressed slowly in KL.

The Australians together with the aid of some local assistance captured Kugan after he was fingered by a colleague and then filmed doing a car job. Kugan then began to cooperate but not fully yet. It was here that elements of the Royal Malaysian Police Force who were themselves complicit in protection scams collecting from insurance fraud gangs went into action.

Kugan was picked up and tortured (interrogated) unbeknownst to the Australian team, to reveal to the police acting for the syndicates how much he Kugan actually knew and how much he Kugan had told the Australian investigators during their more ‘civilized’ interrogation of the man.

There was at least one civilian present at the time of Kugan’s interrogation at the police cells. He was neither a policeman, nor official of the insurance companies but an operative of the insurance scam syndicates. The largest of them.

The Indian police constable accused of administering the beating to Kugan was on the payroll of the individual from the gang present at the time of Kugan’s interrogation. And that Indian police operative was not alone in assaulting and eventually killing Kugan.

KUGAN MUST GO

Disposing of Kugan was a decision taken at the top once it was discovered the Australians had information about the extent and structure of the car theft operation in Malaysia and the complicity of 3 insurance companies in the scam.

For their part the Australians themselves appear to have been negligent in not providing Kugan and another accomplice fuller protection against personal danger in the circumstances. That failure led directly to Kugan’s death. He was vulnerable and marked since they the Australian investigators had him pulled in for interrogation.

Kugan was exposed by a naieve investigative team who now discovered the extent of the rorts their client’s in Australia were paying for in terms of their reputations and their investment in a country like Malaysia.

CONCLUSION

As we conclude this article for the moment, we are aware that a part of the investigation was voluntarily stopped by the Australians.

Although a second area of investigation into money laundering continues with the Australian Federal Police investigating the use of insurance companies in Malaysia for fraudulent transaction (internal) to launder the proceeds of crime from Australia and Asia.

THE VALUE OF A HUMAN LIFE IN THE EYES OF MALAYSIA’S OPPOSITION

What’s more tragic in all of this is how the mainly Chinese opposition in Malaysia carry the memory of Teoh Beng Hock (which Teoh deserves) but forgets the rest of those who have in almost identical circumstances met their deaths whilst in police custody.

It is tragic because the parochialism which enters the equation in finding justice for these victims make it harder to achieve those aims when the principles that drive the opposition are so divisive along racial lines.

To Lim Kit Siang and Anwar Ibrahim a Chinese death in custody is worth more than a Tamil’s or a Malay. Nothing can be achieved that is just, through unjust means and selfishness.

Shelly Bain