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This article first appeared in The Edge Malaysia Weekly on October 8, 2018 - October 14, 2018

THE former president and CEO of Bank Pembangunan Malaysia Bhd (BPMB), Shaharuddin Zainuddin, is understood to have sought legal redress from the development financial institution (DFI).

While the details of the lawsuit are unclear, a source familiar with the matter says the BPMB board had frowned upon a corporate social responsibility (CSR) initiative undertaken by Shaharuddin — a back-to-school programme that involved the distribution of funds to underprivileged children — as supporting the Barisan Nasional government that lost in GE14. The donation was termed a misconduct and Shaharuddin was removed at end-July this year.

It is not known if there were other reasons for his removal but clearly, Shaharuddin is the only one in BPMB to have taken the fall for the CSR initiative. It is noteworthy that his replacement at the DFI will be the third in a span of three years.

The Edge understands that in his lawsuit, Shaharuddin is seeking to be reinstated in his old position at BPMB.

The bank did not reply to questions from The Edge while Shaharuddin did not want to comment on the matter.

Nevertheless, the source says, “From what we know, the CSR initiative cost him his job. I don’t know if there is any other reason for his removal.”

Another banking source says no internal enquiry was conducted but this cannot be verified as BPMB did not respond to The Edge’s questions.

“If the bank’s financials are a yardstick, he [Shaharuddin] did very well,” the banking source adds.

In its financial year ended Dec 31, 2017, BPMB’s after-tax profit strengthened almost 282% year on year to RM199.4 million while its net impaired loans, advances and financing ratio improved to 4.99% from 6.33% in FY2016.

Nonetheless, some quarters say it might not be fair to attribute the stellar results to Shaharuddin as he had been with the bank for less than a year.

One common point of contention, however, is the large number of board meetings held at BPMB.

The DFI pays the chairman RM15,000 per month while the directors are remunerated RM5,000 a month. The chairmen of the credit, group nomination and remuneration, audit and examination, and risk management committees get RM5,000 per meeting while the members get RM3,000.

In FY2017, the BPMB board met 27 times, the risk management committee 29 times, the credit committee 28 times, the nomination and remuneration committee 24 times, and the audit and examination committee 16 times, which works out to a total of 124 meetings during the year.

The total remuneration of BPMB’s directors in FY2017 was RM4.42 million, up almost 30% from RM3.41 million in FY2016.

In contrast, another DFI — Small Medium Enterprise Development Bank Malaysia Bhd (SME Bank) — held 42 board and committee meetings in all and paid a total remuneration RM2.65 million in FY2017.

Another issue at BPMB could be that it has only five directors, according to its website, and according to its annual report, it had four board committees, which would mean that the same people sit on all the committees. One of the directors of BPMB is with the small debt resolution committee of Bank Negara Malaysia, which is a regulator of the DFI.

BPMB is wholly owned by the Minister of Finance Inc and provides medium and long-term financing to strategic sectors of the economy, such as infrastructure, maritime, technology, and oil and gas.

A few of the DFI’s loans have also come under the spotlight.

For instance, Asian Broadcasting Network (M) Sdn Bhd (ABN), a company linked to well-connected businessman Tan Sri K K Eswaran, has a RM450 million facility with BPMB that is “unsatisfied”, according to RAM Credit Information Sdn Bhd.

News reports last year had it that ABN had debts of RM400 million and that half of that was owed to BPMB.

In its financial year ended Dec 31, 2015, ABN suffered a net loss of RM60.58 million on revenue of RM4.88 million. News reports in May last year said ABN was being wound up. It remains to be seen how BPMB will recover its money from ABN.

The DFI is also understood to have extended financing to Integrated Nautical Resort Sdn Bhd and Garuda Suci Sdn Bhd, two companies that were at one time linked to Indonesian businessman Tan Sri Peter Sondakh. They were set up to build and operate the St Regis hotel in Langkawi and build and operate the Langkawi International Convention Centre.

According to RAM Credit Information, Integrated Nautical Resort has a RM246.54 million facility with BPMB, which is unsatisfied, while Garuda Suci has a RM57.75 million facility that is still due.

Checks on RAM Credit Information indicate that Integrated Nautical Resort and Garuda Suci are 40%-controlled by Sondakh via Eagle Rock Capital (L) Bhd, 30% by Lembaga Pembangunan Langkawi and 30% by Aset Tanah Nasional Bhd, which is a unit of the Ministry of Finance.

Integrated Nautical Resort and Garuda Suci have been suffering losses since 2013, which raises the question as to how BPMB will recoup its money. Furthermore, being a DFI, it has a duty to closely monitor the companies and businesses it has lent money to. This is crucial because DFI loans are given out without collateral.

Another misstep by BPMB is Syarikat Borcos Shipping Sdn Bhd, which is now wholly owned by Global Maritime Ventures Bhd (GMV), a 90% unit of BPMB.

It is a mystery how GMV ended up wholly owning Borcos because liquidator KPMG was appointed to the latter at end-December 2016 after it went belly up. Borcos had a RM62.7 million facility, unsatisfied, with the DFI.

As BPMB has been around for more than four decades, the abovementioned loans could be just the tip of the iceberg should one comb through the bank’s loan book.

 

 

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