I always take great pleasure in responding to the many postings and discussions of public interest issues presented on Che Det, the Tun’s blog. The most recent of his contributions is no exception. It is made more interesting for me as the subject matter is right up my alley and consists of subject matter of great personal interest to me.

Commercial borrowings incurred by governments from any sector should be subject to the highest levels of scrutiny before any approval is given or even considered by parliament to commit.

Preceding any approval for government to incur large financial debt obligations on behalf of the state, is the requirement for scrutiny of the transaction, open debate on every aspect of it with full disclosures to parliament being made. There are of course exceptions to this rule but they are far and few. Full oversight and compliance is always necessary where money matters are concerned.

Where there is a significant financial commitment by government using state (public) funds, there are few exceptions to the rule and requirements covering oversight, compliance and disclosure. It is applicable to  everyone especially the state save maybe in mater involving state security and defence.

In fact state financial transactions is by law required to be scrutinized independently, forensically with great degree of diligence and care.

Failure to manage compliance and good governance in this regard must necessarily result in prosecution with the relevant sanctions applied where liability and culpability in any wrong doing or negligence against any party to the process is proved.

Strict observance of the process is necessary to counter the abuse of the privilege of immunity from prosecution parliamentarians ordinarily enjoy in the discharge of their duties. That same immunity extends to government ministers and civil servants as a general principle of law and under the constitution.

Oversight is vital in to prevent abuse of those privileges, protections and powers bestowed on government and its officers in the  discharge of their duties. Power without responsibility and oversight is is an invitation to absolute power. And it has been said that parliament is where this despotic power resides.


In 2012 and 2013, the Selangor state parliament, it was disclosed, gave state monies to Ambiga Sreenivasan and her Bersih movement in pursuit of what was in fact an attempt at the overthrow of the state. (Malaysia Kini interview admission by Ambiga Sreenivasan on outside funding for Bersih published by You Tube).

Berish’s actions was an act of criminality and high treason. That criminality extends by implication of their involvement and participation in Berish to the parties involved in that act of treason. They being Bersih and its leaders and the Selangor state government at the time. However inspite of Ambiga’s admissions to having received state funds from the Selangor government for that purpose without due process being followed by the Selangor state government, the matter has gone largely unpunished and was not investigated as it ought to have been. Neither was the matter and parties to that transaction prosecuted as they should have been.

Selangor state parliament did nothing about the matter and neither did the Federal government pursue the admission made by Ambiga. The state opposition did not raise the issue inside or outside the House which leads one to conclude that the composition of the Selangor state Assembly comprises a class of people who are as incompetent as each other  considering their attitude and lack of knowledge on such a critical issue. And that itself presents a danger to everyone.


With respect to the issue raised by the Tun in his blog about the Federal government of Malaysia borrowing from commercial banks, the claim alleges that the government allowed  a bank (or banks) to make loans to them at above market interest rates usually charged to a sovereign client, the issues needs further investigation.

A government is sovereign. A sovereign debt never dies which makes it very a attractive  proposition to any lender to loan to a government over any other entity. Interest rates payable by governments (sovereign borrowers) on their borrowings normally attracts the lowest rate of interest (often only a couple of basis points) above the prevailing reserve bank published inter bank rate on the strike date.

This is because  government securities, (bonds and other instruments) are considered gilt edged, carrying with it the privileges that go with their status in financial markets. This is true especially for a state like Malaysia with its excellent credit ratings. Of course there are exceptions to this generalization too. Some states like Sudan and Nigeria would not fall into the same category as Malaysia for their political risk. However Malaysia does not fall into that category as Nigeria or Sudan nor does it come anywhere close to the two on a ratings list.

The decision to award management of Malaysia’ Sovereign Wealth Fund to Wall Street Behemoth Goldman Sachs given its recent history and its nexus to the US government and its various agencies further investigation is also necessary.

Lack of transparency and perhaps even a possible breach of protocol and law is often fertile ground for suspicion, rumour and conspiracy theories. Outstanding suspicion and justifiably so in the minds of those who need answers is the question of the possibility of secret commissions, kickbacks and unlawful inducements having tainted the process. Goldman Sachs has a history of “aggressive, unlawful” conduct in respect of bagging business in this regard.

If there were kickbacks, secret commissions, undisclosed commissions or inducements to anyone in the process, it will come out in the wash. It need not require government or Goldman Sachs to initiate the inquiry, all it requires is a complaint by an individual or entity to the relevant authority and that may already have occurred in New York.

On this issue of state money business being suspected of being “funny money business” one cannot help but be reminded of the Whitlam government’s Khemlani loans affair of 40 odd years ago.

Gough Whitlam the then prime minister of Australia at the centre of that  financial scandal which brought down a labour government died in Australia in the second week of October 2014. The scandal and its history has been revived for public debate because of his death.

The current government of Najib Razak appears to be engaging in similar conduct to that of Whitlam in his government’s management of the Sovereign Wealth Fund according to members of Malaysia’s opposition and their media.


Goldman Sachs recent history, its complicity and involvement in the CDO toxic debts scandal and its massive breaches of US securities laws prior to and even after the GFC ought to have provided food for thought for a government (Najib’s) under attack for its failures of compliance and good governance.

That having been said one wonders why was there no discussion as to who would end up with the privilege of managing Malaysia’s Sovereign Wealth Fund and on what terms?. And how Goldman Sach’s tender or its offer, when compared to that of its competitors, if there were in fact any, made the critical difference?

There are other excellent and more compliant and law abiding funds Managers in the world in Japan, India, Brazil, Holland and even in the US, why did they not succeed in securing the management rights to Malaysia’s Sovereign Wealth Fund? Many more Funds Managers apart from Goldman Sachs are competitive, compliant (and aggressive) though not beholden to the US government or its agencies. So why were they not approached or given the job given to Goldman Sachs?

Goldman Sachs managed the sovereign wealth fund of Libya, a nation embargoed by their own government and the UN. That in itself should tell anyone how powerful an entity Goldman Sachs is.

Till 1988 no non Jew from the upper classes of New York’s Jewish establishment moved passed the 10th floor of Goldman Sachs building into higher management. It was in 1989 that a graduate of the Indian Institute of Technology broke that barrier and the rest as they say is history. Thats how unaccountable and closed Goldman Sachs is.

Goldman is like a Sovereign State as described by the late professor Anthony Sampson. So too are many of the US Hedge Funds.

If a nation state like Malaysia needs to engage in future investment using its Sovereign Wealth Fund for any legitimate purpose, it needs internal and external control mechanisms in place, accountability and responsible people at the helm selected from a pool of skilled talent from anywhere to make execute those functions independently and under legislation to cover oversight.


The Tun’s further reference in his article about what appears to be a plunder of this fund in transactions such as the sale of the power station which appears to have been not at arms length (my words) and other dealings and ‘investments’ entered into by the Malaysian Sovereign Wealth Fund if true could be the result of there being no proper oversight of regulation or compliance standards in place. The absence of the any proper oversight of the management of the Sovereign Wealth Fund opens it to being squandered and pilfered by those with access to it.

There are no proper safeguards at all in Malaysia where government expenditure is concerned at least on the evidence available over the past decade. Such oversight and rules if they exist in Malaysia are often only recognized in their breach but not for their observance.


The role of economic groups, law firms, lobbyists & investment bankers needs to be brought more sharply and critically into focus and placed under the spotlight.

Who valued the power station the Tun mentions that was sold to government at a premium. Was it a money laundering exercise for the private sector with government connivance?

What methodology was applied t the valuation process and was there an independent audit of the process? were the seller and purchaser independent of each other and at an arms length? Was the premium paid by government in its purchase price for the power station justifiable. And if so how were the proceeds distributed amongst the sellers and agents.

Internationally binding anti money laundering legislation that also binds countries like Malaysia compels government to make disclosures and to avoid any transaction that is likely to breach money laundering provisions of its international obligations. Such a duty overrides any obligation to protect the privacy of any party involved in a transaction that breaches anti money laundering laws.

None of the large 4 accounting firms is independent in the true sense of the word and that is a huge red flag to be concerned about. Following the GFC it was revealed that all of the top accounting firms and the major credit ratings agencies were all conflicted in issue of toxic debts in collateralized debt obligations that brought the US and world financial systems to its knees.

Each of these firms had unchecked conflicts of interest which they did not care to reveal in their pursuit of the dollar. So too it was with the major money managers of Wall Street, the City of London and Singapore. Yes Singapore too.


It is from the smallest and apparently least significant inquiries that we often unravel the complex and deeper, darker mysteries of our universe and of those of our governments. The multi billion dollar mismatch of capital commitments and transactions entered into by the state under the cloak of the official (state) secrets act are as mysterious and forbidding as black holes in the Milky way.

Unravelling Watergate and the Iran Contra Affair was only possible after someone raised the alarm about a most insignificant discovery, the result of an even more insignificant inquiry, leading to and uncovering a complex web of intrigue, illegality, criminal conduct, murder,arms trafficking, drug smuggling and dark dealings involving the highest levels of government. That too in the world’s most powerful government espousing as part of its creed, the highest morals of Christianity and good ethics.

Somehow people tend to forget that no matter what devices one uses to ‘conceal’ large scale money transactions, there is a paper (now electronic) trail that can be uncovered without too much difficulty from even a simple desk top computer.


The Cayman Islands, Switzerland, Gibraltar, Singapore, none of these offshore havens cover the trails of money to an extent that it becomes untraceable or invisible. That statement is is a marketing myth created and spread by these offshore havens and their banking system to attract those with something to hide. More on that side of things later and in detail.

As regards ‘investments’ made by anyone, government’s included, there are two types of financial analysis that is often useful to employ when deciding the viability of those investments. From these we are able to ascertain the reasoning or logic behind an investment and the price paid for it.

Technical analysis refers to analysing data involving price movements over a period of time using charts, numerical data, algebraic equations and other forms of scientific and mathematical ‘tea leaf reading’ of financial markets.

For simplicity’s sake  “twin heads and shoulders” is used to forecast future movements in prices of assets and investments. It is one such ‘leaf’ in the ‘tea leaf reading’ science when predicting a rise or fall in the market using technical analysis.

Fundamental analysis by contrast takes into account all those other things in a corporation. like for example the composition of its board, their track record (as individuals as well), the character and performance record of the company’s management, connections between external managers, suppliers, its management and its board, again at a very simplistic level.

This is a form of risk evaluation. 90% of all failed financial institutions and government agencies over the past 3 decades conducted no fundamental analysis which if they did could have weeded out the problems that brought them down before they occurred.

What is perhaps easiest and a most efficient path to discovering anything and everything that occurs between government and private enterprise is the use of ‘market intelligence’ these days. It is available in a much more sophisticated and pervasive form than ever before. And it does not cost too much.

Many of these intelligence services are run by former spooks let go after the collapse of the Berlin Wall from both sides of the Cold War divide. They work famously well and efficiently sharing the product of their skills and their craft for the dollar (or tens of thousands of it).


Market intelligence ( or “commercial and strategic intelligence” as it is now termed) is available discreetly to any client or customer government agencies and private alike on a simple request and payment of a fee and retainer.

Intelligence gathering and its outcomes in its many forms is a widely used tool to uncover fraud and impropriety especially in the case of government and their operatives.

The Swiss company that goes by the name of ‘Reconnoiter’ sits at the top of this industry. It does not advertise its services nor is it registered in Switzerland nor does its registered name bear any resemblance to the name Reconnoiter. It is a case in point of one such quality service provider amongst the hundreds now in existence.

Think, If oil companies and oil traders have the ability to identify the origins of a shipment of oil the origins of payments and the bargains people strike between themselves in buying and trading oil which looks all the same to the rest of us mere mortals, what else can be deduced from not just documents and conversations but also from information prized from the transactions itself?

This same science is as effective when applied to government and private transactions secret or semi secret, between government and non-governmental parties especially in developing countries like Malaysia. And the intelligence and information is already out there waiting to be picked for a fee. It is a question of knowing where to look and the willingness to look for it.


The US, British, Israeli, Japanese and Singapore governments have all of the information about private deals involving governments and the private sector at their fingertips. They operate on the basis that everyone is a potential enemy and a potential competitor. They are able to detail how when and why such transactions occurred and who benefitted from it. Malaysia for all its wealth and first world aspirations appears not to have the capacity or willingness to create such intelligence gathering apparatus simply because the legal culture that requires to give rise to the need for it is non existent.

As long as that element of meritocracy required to police the system is absent from regulation, countries like Malaysia will continue to suffer the consequences of ‘Chinese banking’

‘Chinese Banking’ is the system of patronage employed by overseas Chinese communities whereby privileges like banking licenses and permits and the benefits that go with it  are reserved by them for them to be exercised in favour of a parochial group or community which is exclusively theirs.

That privileged position is reinforced and secured exclusively with  the money they receive in customer deposits to pay to their patrons (corrupt government officials). And the banking they practice is along high risk lines favouring family and community connections of bankers with depositors money underwritten in risk by government central banks in the event of illiquidity or failure. Typically this too is practiced along racial and clan lines at the expense of the rest of the public.

Losses from their risky undertakings where they fail are then absorbed by government as underwriter and lender of last resort as has been the case in Malaysia, Hong Kong, Thailand, Indonesia in particular and the Philippines in their private banking system.

The rescue is usually by means of a government infusion of public funds under one pretext or the other or an un prosecuted wind up of the failed institution as was the case of the non banking financial sector in Malaysia (Mercantile Insurance) in 1991.


Tamasek holdings, Singapore’s sovereign wealth fund manager is reputed to have lost over $65 billion in the GFC when the PM’s wife was at the helm of the manager at the time. Although a brilliant scholar and experienced banker, she failed to foresee the disaster and the consequences of Tamasek’s involvement and heavy investments in the banking sector at a time when the sector was over valued. More important she or Tamasek failed to foresee the disaster that led to the GFC knowing how over exposed US banks were in the toxic CDO scandal that was to come and regardless they continued to invest heavily in that sector.

Tamasek later brought in Chip Goodyear the Harvard educated former CEO of Australia’s mining giant  BHP. After just 3 months on the job Goodyear quit from what it is revealed he was about to discover in Tamasek. Clever move by Singapore. And a justifiable one at that. Here is why:

A nation’s sovereign wealth fund is an integral part of its overall security. The damage that can be wreaked on a nation if its funds are depleted is immeasurable and unthinkable. The economy is after all a security issue as much as it is a social issue for any government.

Anyone with control of a nation’s purse strings has their hand on its proverbials. A painful truth to contemplate.

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