A case of noble intentions gone awry
by P Ramakrishnan
Aliran Monthly 2003:11
http://www.aliran.com/oldsite/monthly/2003a/11j.html
Maika tottering on brink of bankruptcy?
Maika's accounts raise more questions:
1. Why does it take one whole year for the AGM to be held? (The AGM for the financial year ended 31 December 2002 will only be held on 30 December 2003. Normally, the AGM should be held within 6 months of the end of the financial year).
2. From RM125 million paid up share capital, the accummulated losses have come up to RM71.7 million. (The loss after tax and minority interests for the year ended 31 December 2002 was RM4.5 million).
3. The overall profit before tax for the year ended 31 Dec 2002 amounted to RM8.9 million. The only significant profitable activity is insurance, which made a profit before tax of RM26.9 million. Investment trading made a loss of RM12.2 million, property incurred a loss of RM1.4 million and manufacturing made a loss of RM3.5 million. How were these losses incurred?
4. The current liabilities is four times the current assets. The general rule of thumb for healthy companies is that current liabilities should only be half the value of current assets. This is why Maika is tottering on the brink of bankruptcy.
5. Provision for doubtful debts for the year ended 31 Dec 2002 amounted to RM8.3 million. Who were the borrowers or debtors? They should be named.
6. Directors' other emoluments(remuneration) totalled RM202,000 for the year. Do they deserve this? Why is there no figure disclosed for directors’ salaries?
7. Staff costs of RM15.7 million works out to RM40,000 per annum per employee at the group level. At the company level, staff costs (for 11 employees) averaged almost RM70,000 per annum per person! How much was Vell Paari a/l Samy Vellu paid? |
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| Maika didn't reject the shares |
In its twenty years of tortured history, Maika investors have known nothing but pain and sorrow. The new dawn of a golden opportunity that was held out to the Indian poor never arrived. Instead, each passing year only witnessed dashed hopes and broken promises that littered the chequered history of Maika.
Touted as an economic vehicle and a miracle to lift the Indian poor from the shackles of poverty, Maika was launched with much hype and hope. The poor Indians – traditional MIC supporters, the lower middle-class and the working class Indians as well as a vast majority of plantation workers – were mesmerised into responding enthusiastically. Respond they did, some scraping the barrel, others mortgaging their property and pawning their jewellery while the vast majority took loans at exorbitant rates to invest in a venture that promised dreams of hopes and tantalising prospects.
It’s not only the poor Indians who responded to this call to rally behind the MIC's efforts to secure seven per cent of the corporate ownership for the Indian community – which at that time had been stagnating at under one per cent since 1960. Even the middle-class Indians who were wary of the caste and communal politics practised by MIC came forward to participate.
Incorporated on 13 September 1982, Maika commenced business on 31 January 1983.
A Phenomenal Response
According to Terence Gomez, “Although the original plan by the MIC was to ensure that at least RM30 million worth of Maika shares were subscribed to, so successful was the campaign to promote the company that by 1984 a phenomenal RM106 million was raised from almost 66,400 shareholders. The largest individual shareholder with almost 2.8 million shares was MIC president Datuk Seri S Samy Vellu. The amount invested in Maika was even larger than that obtained by the MCA’s Multi-Purpose Holdings when the company commenced business.”
What went wrong for a venture that took off in a blaze of glory? Why is it in shambles today?
It is a case of a noble intention that has gone awry through bad management, poor investment and sheer arrogance that brooked no question and refused to be accountable to the shareholders. If proper business ethics had been observed, if honest criticism had been tolerated and accommodated, if from the beginning Maika was run by professionals rather than politicians, Maika perhaps may not have nose-dived into the hopeless situation that it is in today.
In spite of a number of major acquisitions made into some important companies – like the United Asian Bank (UAB), United Oriental Assurance (UOA), Malaysian Airlines System (MAS), Malaysian International Shipping Corporation (MISC), TV3 and Edaran Otomobil Malaysia Bhd (EON) – Maika’s performance has been mediocre.
It registered a profit from 1984 to 1986 – the total amount was nothing to shout about and amounted to RM16.5 million only – which enabled Maika to declare three dividends which totalled 11 sen per share.
Telekom Shares: Hanky-Panky
There wasn’t any fanfare when Maika was allotted shares in Syarikat Telekom Malaysia Bhd (STMB). It was assumed in 1990 that Maika had been allotted all the shares it had subscribed to. No details were made known at that time.
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| Samy: "They don’t deserve 10 million shares" |
Sometime in the middle of February 1992 the shroud of secrecy surrounding the Telekom shares allocation was ripped apart. Then all hell broke loose.
A journalist from Watan disclosed that “there could have been some hanky-panky in the allocation of Telecoms shares to Maika.”
This was then followed by another report in a Tamil magazine, Thoothan, on April 1, 1992 which disclosed that there could have been some discrepancy in the distribution of the ten million Telekom shares allocated to Maika by the Finance Ministry. Malaysians learned for the first time that Maika acquired only one million and not the entire 10 million shares that were allotted to Maika.
Samy Vellu, through the Tamil Nesan and at MIC meetings, tried to explain by insisting that the cash flow problem faced by Maika did not allow Maika to take up all ten million shares. But, one of the directors, a one-time ally of Samy Vellu, Vijandran, issued a statement insinuating that the truth may not have been told.
When this matter was raised in parliament, Finance Minister Datuk Seri Anwar Ibrahim disclosed that since Maika had stated that it could take up only one million shares, the remaining nine million shares were allocated to three companies proposed by Maika because to his “ministry”s knowledge, the three companies represented the interests of the Indian community” (The Star, April 30, 1992).Incidentally, at the time of share allocation in 1990, the Finance Minister was Tun Daim Zainuddin.
Maika Didn’t Reject The Shares
The mystery deepended and bewildered the shareholders when another Maika director, Pasamanikam, contradicted the statements made by Anwar and Samy Vellu. According to Pasamanikam, Maika did not reject the Finance Ministry’s offer and did not propose that the nine million shares be allocated to any other company. He further revealed that Maika had indeed raised a RM50 million loan to facilitate the acquisition of the entire 10 million shares even before the Finance Ministry had withdrawn its offer.
Why did the Finance Ministry cancel the initial offer of the 10 million shares and subsequently allot only one million shares to Maika? Who was responsible for the retraction of the original offer? Who lied to the Finance Ministry? Who informed them that Maika had recommended that the nine million shares be given to the three companies? Who supplied the names of these three companies? Who coerced the Finance Ministry to change their mind?
There was no earthly reason for the Finance Ministry to change its mind on its own after having allocated 10 million shares. Who aborted this offer?
According to Tan Sri G K Rama Iyer, the Managing Director of Maika Holdings Bhd – as revealed in his press release dated May 16, 1992 – Samy Vellu was informed at 6.10 am on october 5, 1990 that Maika had been offered 10 million STMB shares and of the probability of obtaining full loan financing and that Maika intended to take up the entire allocation of 10 million shares.(Indeed, a letter dated October 5, 1990 from Arab-Malaysian Merchant Bankers Bhd – AMMBB – offering RM50 million to finance the purchase of the 10 million shares was received on October 6, 1990).
There Must Have Been A Mistake
He further clarified that Samy Vellu replied that “there must have been a mistake. The offer to Maika should be for one million and not 10 million.
“According to Dato Seri Samy Vellu, the remaining 9 million shares were for allocation to “other MIC bodies”.
“Further, Dato Seri Samy Vellu stated that he would contact the Ministry to clarify the position.”
It was then, after Samy Vellu had contacted the Finance Ministry, that the letter of offer was retracted and Maika’s allocation reduced to one million shares.
Why did Samy Vellu prevent Maika from acquiring the 10 million shares? Wasn’t Maika his brain-child to raise the corporate wealth of the Indian community so that their economic welfare would be secured? Wasn’t he the leader of MIC which launched Maika as a business venture to enrich the community which had long been associated with deprivation and poverty?
This was God-sent wealth. Why did he prevent this wealth from reaching Maika? Imagine how much Maika would have made from these shares for which it only paid RM5 per share. When Telekom shares were “first traded it fetched a price of RM6.15 per share and that too during a bearish market. By mid-1992 the Telecoms share price was hovering around RM11-RM13,” observed Terence Gomez.
According to Ram, in an article in the Aliran Monthly – 1993:13(10) – by giving away the bulk of the shares, Samy Vellu had taken away from Maika RM120 million in profit (which it would have attained had it just held on to the extra shares until then).
They Don’t Deserve 10 Million Shares
Samy Vellu made it abundantly clear that he personally decided to allocate only one million shares to Maika. According to Samy Vellu, “I could have given all the shares to Maika Holdings if not for their past business record. They don’t deserve 10 million shares because of the dismal performance of the Maika management. They have to learn to do business on their own and not depend on shares and make money out of it” (
New Strait Times, 16 May 1992).
His autocratic style and arrogance comes through so forcefully: “I could have given all the shares to Maika Holdings…,” he boasts. “They don’t deserve 10 million shares…,” he berates. Mind you, he decides – not the Ministry of Finance!
It is very apparent that he keeps a very tight hold on Maika. That being the case, how could Maika undertake any business venture without his knowledge and blessing? Shouldn’t he be part of the debacle that is haunting Maika today? Shouldn’t he also shoulder the blame for “the dismal performance of the Maika management”?
And why should he give nine million shares to three obscure companies, two of which were in fact shell companies with paid-up capital of RM2 each? He did it on his own, without authority or directive from the Central Working Committee. And what was the rational for doing so?
And who lied to the Finance Ministry that these “three companies represented the interests of the Indian community”? What was the motive for diverting nine million shares to three private companies?
Those who sought to find the answers were threatened or beaten up. One brave soul who went on a crusade to expose this scandal was stabbed in Penang. Whenever questions regarding Maika were raised at MIC meetings presided by Samy Vellu, it was alleged that thugs would suddenly appear beside the person asking the question and that would be the end of the affair to seek answers.
Datuk Seri Abdullah Ahmad Badawi, our new Prime Minister who seems to be on a crusade to wipe out corruption, should order the ACA to reopen this case.
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Some years ago, it was claimed that at one paricular MIC meeting at the Dewan Sri in Penang, chaired by Samy Vellu, a Maika shareholder wanted to know the position of Maika. It was alleged that Samy Vellu told this shareholder that he would provide the answer after the adjournment for refreshment. In the meantime two thugs confronted this shareholder and told him that if he wanted to return home in one piece it was the right time to go home. When the meeting resumed, Samy Vellu reportedly called for the shareholder to repeat his query. But since he wasn’t there, Samy Vellu continued with his meeting without touching on the subject of Maika.
Highly Questionable
It was alleged that Samy Vellu’s son and brother-in-law were directors of of the RM2 companies, SB Management Services Sdn Bhd and Advance Personal Computers Sdn Bhd. which received three million shares each. The third company that received the remaining three million shares was Clearway Sdn Bhd.
How these companies disposed of these shares and the manner the profits were channelled to Maju Institute of Education and Development (MIED) were highly questionable. Millions of ringgit were given to MIED in cash. In this day and age one has every right to suspect such transactions. Do you carry millions of ringgit in your person to pay to an educational institution? For God's sake, there is such a thing as bank transfers!
Let’s for a moment try to be logical. How did these companies come to possess this amount of money before it was handed over to MIED? They must have been paid in cheques when they sold the Telekom shares. Does it mean that they went to the bank, cashed the cheques and carried the millions of ringgit, presumably in a bag, as one crazy Malaysian guy did in Australia? This seems far fetched!
What is puzzling is the fact that in spite of so much overwhelming evidence, the Anti Corruption Agency (ACA) after 17 months of investigation cleared Samy Vellu of any wrong-doing but unfortunately without clearing the doubts in the minds of the Malaysians, as was observed by Aliran Monthly. (See accompanying story on page 9 for a fuller account)
Who Benefits From Share Allocations?
But the larger question as to how and why political parties are allocated shares that are monoploised by the connected few have not been addressed. These allocations are never revealed and it is not possible to know which crony benefits and by how much. This system has led to abuses and effectively blocks the wealth from reaching a wider circle of deserving citizens.
Even the former Prime Minister Mahathir Mohamad, when queried on the issue, confirmed the lack of accountability being practised by government leaders. Mahathir’s twisted logic for not interfering with Samy Vellu’s decision in connection with the allocation of shares for the Indians was: “I cannot interfere in this matter because I also don’t want non-bumiputras to question how we distribute the shares among our commu-nity.” (The Star, 14 May 1992)
He wasn’t bothered whether the benefits reached the right people. He wasn’t concerned if there was a corrupt practice in place. The policy seemed to be one of non-interference when wealth resources were allocated, particularly under questionable circumstances.
Maika Scandal Refuses To Be Buried
In spite of 10 years of history, the Maika scandal refuses to be buried. It keeps on surfacing, haunting and hounding the perpetrators of a crime that robbed the poor of their fair share of their due. Ten years ago the Aliran Monthly had rightly observed, “The controversy surrounding the Maika-Telekom shares scandal appears to be far from over.”
Maika will be holding its Annual General Meeting on December 19, 2003 in Kuala Lumpur. As far as we know, no shareholder seems to have received any Notice of Meeting. Neither have they received the Annual Report nor the Statement of Accounts. And today is December 17, 2003. (This AGM has now been postponed to December 30, 2003)
How many shareholders are aware of this meeting? And what can they discuss without the benefit of the annual report and the statement of accounts? Will the shareholders be free from intimidation to raise relevant questions? Will they receive honest answers?
But answers may not be found at this AGM. What could this AMG reveal that the previous AGMs failed to disclose?
It is, therefore, a matter of urgent concern that the Maika scandal be re-investigated seriously. Datuk Seri Abdullah Ahmad Badawi, our new Prime Minister who seems to be on a crusade to wipe out corruption, should order the ACA to reopen this case. The poor Indians have turned to him as a last resort for help. Many of them had lost almost everything in investing in the Maika shares. All they want is the return of their investment. Justice must be done to them. Will he respond?
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"I think that even with the parameters shifting at this particular juncture, it is extremely difficult for the opposition to break the barrier of the two thirds. Period," said Bridget Welsh, a Southeast Asian expert at John Hopkins University. 
But Welsh predicted Abdullah's Umno, BN's lynchpin, could lose up to 15 parliamentary seats in upcoming polls and its senior coalition partner MCA could drop about six seats. 
The ethnic Indians are also discontented. At least 30,000 of them defied police warnings and held rare protests in Kuala Lumpur earlier this week against what they see as racial discrimination. 
