The Asian Correspondent said the documents were among 13 million released last week by the Central Intelligence Agency (CIA), which among others questioned the Mahathir administration’s response in dealing with the BMF scandal resulting in losses of some US$1 billion.
“Under political pressure, Mahathir compromises and established a three-member Committee of Inquiry. This closed-door commission, however, has no legal power to summon witnesses, subpoena documentary evidence from outside Bank Bumi, or require testimony under oath,” the CIA report said.
The report added that the government justified the secrecy surrounding its investigation using the Banking Secrecy Laws, adding that “a year’s delay after the problems surfaced in effecting any management changes at BMF have made the government suspect”.
It said the Malaysian government could not claim ignorance of the scandal as it involved Bank Bumiputera which had strong ties with the ruling Umno of that time and which was closely monitored by the Finance Ministry.
“No important decisions are made without their agreement or knowledge,” the portal quoted the CIA papers dated March 1985 and titled “The Bank Bumiputra Scandal: More Trouble Ahead for Malaysia’s Mahathir?”.
“It is unlikely that the government was unaware of Bank Bumi’s increase on lending limits for its overseas branches to allow more funds to be channeled to Hong Kong.”
The release of the documents comes at a time when Dr Mahathir has been leading criticism of Prime Minister Najib Razak’s handling of the 1MDB saga.
Dr Mahathir had in May 2015 said the BMF scandal could not be compared to 1MDB.
The BMF scandal made the headlines in the early eighties, after it was revealed that the bank’s Hong Kong-based subsidiary had provided “bad” loans to several shady companies, including units of Carrian Holdings Ltd, a conglomerate led by George Tan.
Hundreds of millions of dollars were lost overnight when the Carrian group collapsed in 1983, in Hong Kong’s largest bankruptcy. A Bank Bumiputra auditor checking on the scandal was murdered, and the government pumped in billions of ringgit to support Bank Bumiputra.
Those responsible were charged in courts both in Malaysia and Hong Kong. BMF chairman Lorrain Esme Osman lived in exile until his death in London in 2011.
The Asian Correspondent further quoted the CIA documents as saying: “It is unlikely that the government was unaware of Bank Bumi’s increase on lending limits for its overseas branches to allow more funds to be channeled to Hong Kong.
“This action was taken after word of Tan’s difficulties had dried up funds from other sources,” it added.
The documents said both Dr Mahathir and Tengku Razaleigh Hamzah, who was trade and industry minister at that time, had close ties with those involved, including Nawawi Mat Awin, the bank’s chairman.
“The most potential damaging aspect of the affair is the connection of Tan to officials of the United Malays National Organisation (Umno), headed by Mahathir and the dominant party on the government coalition,” said the CIA report.
“The secrecy of the government’s investigation — defended as necessary under Malaysia’s Banking Secrecy Laws — and a year’s delay after the problems surfaced in effecting any management changes at BMF have made the government suspect.
“Many businessmen and bankers believe that the government is using the six accused BMF officials as scapegoats in an effort to avoid implicating senior government officials,” it added.