Sunday, February 25, 2007

Remember the ECM Libra-Avenue Capital debacle?

Remember the ECM Libra-Avenue Capital debacle?
by Ibnu Hakeem

Government sources who are fed up with the Government cover-ups say that the Public Accounts Committee (PAC) will be revisiting the controversial ECM Libra Bhd-Avenue Capital merger which came to the fore in August last year. The PAC will be reconvening at 9:30 am on Monday, 26th February 2007 at Parliament House.

This time around, Second Finance Minister Nor Mohamed Yakcop will be called to give testimony over this controversial merger. Sources expect a choreographed performance. Nor Mohamed Yakcop is expected to speak in general terms about the Government’s investment and divestment policies over its own assets, hence diluting attention from the more pressing questions regarding the controversial merger which have not yet satisfied public opinion.

The PAC last spoke on the matter in August 2006 but without any satisfactory conclusion. The controversy over this merger arose after it became known that the relatively unknown - up to that time - ECM Libra had swallowed up the gargantuan taxpayer-owned company, Avenue Capital, which had a cash hoard of RM3 billion in its reserves.

The shareholders of ECM Libra include Kalimullah Maseerul Hassan, who hails from the riverbank at Maslampatti, Azamgard in Uttar Pradesh, India, who is the Prime Minister’s chief ‘cheerleader’ and also Khairy Jamaluddin - the Prime Minister cum Finance Minister’s son-in-law. It is widely believed that the merger was brought to a super quick conclusion without approval from the Cabinet or even from any Minister.

Speaking on the controversy in August last year, PAC Chairman Shahrir Samad was quoted in the media as saying the merger between ECM Libra and Avenue raised troubling questions. Shahrir had said, “In principle, there is a conflict of interest if the minister’s family member is involved. But here, maybe there was no minister’s consent because the matter was not brought to the cabinet - it was decided between the ministry’s officials and the party which made the offer.”

Even more perplexing were the media reports that ECM Libra took over Avenue Capital without any cash outlay. To sweeten the merger further there was also a valuation of ‘goodwill’ to the amount of RM360 million. The danger in valuing ‘goodwill’ is that it is an intangible asset which can be hyped up to be worth more than its inherent value.

To date, the PAC has refrained from making any public statement about this RM360 million goodwill. The result of this transaction is that the minnow, ECM Libra, has ended up swallowing a whale, Avenue Capital. The greatest mystery is who exactly approved this sale of a prized taxpayer-owned asset to a company that is owned by the Prime Minister’s chief ‘cheerleader’ as well as his son-in-law? Till today, this question remains strangely unanswered - even by the PAC.

Civil Servants do not and cannot make decisions to sell companies with RM3 billion in cash assets all by themselves. Even a KSU (Ketua Setiausaha) will not make a decision to sell Avenue Capital to a private company unless he has received specific approvals from the Minister of Finance. Since the Minister of Finance is Abdullah Badawi, there is a clear cut conflict of interest if he approved the sale. The approvals should also not come from the Second Finance Minister because he has little or no authority to approve such transactions either.

Therefore the PAC should make public just who exactly approved for the sale of a government prized asset with RM3 billion in cash reserves to a private company owned at that time by Kalimullah and Khairy? Just how did it happen? If the Cabinet, the Minister of Finance, the Second Finance Minister, or the KSU, did not approve the sale then was it approved by a Chief Clerk? The public wants to know and the Public Accounts Committee is obligated to tell.

At that time, Khairy Jamaludin, who is also Umno Youth deputy chief, clarified that he borrowed money to buy a substantial stake in the ‘fledging’ (at that time only) financial advisory company ECM-Libra. This was before the merger with Avenue Capital. According to Bernama, Khairy had said, “I borrowed the money ... everything is loaned, not my own money. Luckily, there are people who want to give loans (to me). I took a loan from them (ECM-Libra) who sold their shares to me.”

Exchange filings showed that Khairy bought 13 million shares in ECM Libra at 71 cents per share in three separate transactions from acquaintance and ECM-Libra’s chairman, Kalimullah Masheerul Hassan, chief executive officer, Lim Kian Onn, and chief operating officer, Chua Ming Huat. Khairy was made a director of ECM-Libra in July 2004, not long after his father-in-law, Abdullah Ahmad Badawi, became Prime Minister. Later, after the controversy broke, Khairy sold some of his shares in ECM Libra.

ECM Libra is also a Financial Institution (a so-called investment bank), which means it is also under the purview of the BAFIA (Banking and Financial Institutions Act). Since Khairy Jamaluddin has publicly admitted to taking a loan from ECM Libra to buy its own shares, the PAC should assure the public about this aspect of the transaction too.

Like all good UMNO members, PAC Chairman Datuk Shahrir Samad is a staunch supporter of Abdullah Badawi. Said Shahrir’s brother, Khalid, there is no other man Shahrir hates more than Mahathir and he would do anything to oppose Mahathir, even supporting those Mahathir do not like just out of spite. No wonder then that Abdullah Badawi would get the PAC’s backing on this matter if it serves to upset Mahathir. Kalimullah Maseerul Hassan, on the other hand, owns a house in London and has already sent his children to school in Britain. Abdullah Badawi has been told by the security chief that Kalimullah is bad news and has failed the security agency’s security clearance but the Prime Minister just brushed it off and said, “He is my friend.”

How, in light of all this, will Shahrir and the PAC come in with an untainted verdict?

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