RM1b Selangor scandal?

JULY 6 — The Talam controversy has again surfaced. It couldn’t have come at a worse time than now. It is meant to inflict the greatest damage on its primary targets — Selangor and its mentri besar — ahead of a looming election.

The last time it appeared on national stage, the immediate casualty was none other than the secretary-general of PKR, who went after Tan Sri Khalid Ibrahim.

A controversial and enigmatic figure, Datuk Salehuddin Hashim had to be urged to back down when it became untenable and his antics surpassed the tolerance of party leaders and supporters.

This time, however, the issue is being brought up by a political adversary: The MP for Labis and Deputy Minister Datuk Chua Tee Yong.

Although recognisable through his political lineage, the fact that his MCA party is leading the charge is baffling, to say of the least.

“Why MCA and not Umno?” is a question from all discerning Malaysians that begs an immediate response.

With his lack of finesse or mastery of the matter exposing his failure to grasp the subject, Chua has placed himself in the guillotine. Is this an internal attempt to finish him off?

His allegation of a RM1 billion scandal involving the Selangor government, a public-listed company and abuse of public funds is a “stunner” of sorts, as the ailing Barisan Nasional wants to paint Pakatan Rakyat as equally corrupt and corruptible.

His insistence that the Pakatan Rakyat government of Selangor had also earlier given a RM392 million grant to Talam revealed that he is clueless about the mechanics of “round-tripping”.

His claim that the state acquisition of the RM676 million worth of assets and the usage of the RM392 million grant resulted in the RM1 billion deal, is even more atrocious.

Lest you think I will take more pot shots at him in this saga, you are wrong.

Instead, I will be more merciful and explain the matter.

In a financial manoeuvre known as “round-tripping”, the state government takes over the debt from the state subsidiaries to squeeze Talam directly to fulfil its debt obligation.

The procedures could be summarizes so:

1. Confirmation of debts — An amount of RM392million was agreed upon and an agreement signed by Talam and the various state subsidiaries, namely KHSB, PIYSB and PNSB, to confirm the debts owed by Talam.

2. Assignment of debts agreement — Talam and the state subsidiaries later undertook an agreement to assign the debt to the state government. The state government now takes full ownership and the responsibility of recovering the Talam’s debt.

3. Receivable purchase agreement — The state government initiated the move by firstly getting the Selangor Industrial Corporation (SIC) to purchase the debt owed by Talam, from the state government, by paying RM392 million to the latter firm. In order to execute the purchase, the SIC had earlier borrowed from a bank (CIMB) the equivalent amount of RM392 million. That is the first receivable purchase agreement in place.

4. Receivable purchase agreement — Acting merely as a “conduit” or a special purpose vehicle for the whole exercise, the SIC now sells this debt to Mentri Besar’s Incorporated (MBI), an investment arm of the state government. MBI will receive a grant from the state government for RM392million to use as payment to SIC.

Since Selangor did not have that allocation in the state’s Budget for 2009, the meeting of the Selangor state executive council on November 2 witnessed the tabling, debate and decision to approve to MBI the grant of RM392 million from the state government.

A supplementary supply (budget) enactment was later tabled and endorsed by the State Legislative Assembly on the November 9 for the grant of RM392 million to be allocated to MBI, in the light of the execution and realisation of the debt-restructuring exercise.

Subsequently, MBI then bought over the debt from SIC by signing the second receivable purchase agreement and paying RM392 million in cash on November 10.

With the cash payment received from MBI, SIC pays off the loan it took to initiate the whole cascade of the debt-recovery exercise.

The “round-tripping” ends with SIC paying off its borrowing and the entire cost sustained by the state government only pertains to the legal and financial cost of borrowing undertaken by SIC.

As for the amount of RM140,000 (or RM70,000 a day) bandied about, I was unable to ascertain this actual cost. Legal and financial consultations were taken care of, as it was handled in-house through the use of expertise within the state’s administrative staff, including that of the good office of the mentri besar.

If you also think that I’m an apologist for the MB, you got me wrong again.

I thought the white paper now mooted by the MB should have been presented ages ago, and all claims of assets purchases and their valuations ought to have been disclosed by a government committed to a openness, transparency and accountability.

Writing in this limited space, I am unable to fully debate or discuss at length the options and alternative views regarding each alternative.

Three years down the road, the white paper, once available, will surely explain the matter to all, albeit belatedly.

The gross fiscal mismanagement of the Barisan Nasional government will now be widely exposed.

In hindsight, I think the MB has a game plan for the long delay.

Barring anything unforeseen, it may or may not clear the air.

Whatever it is, the onus is now on the mentri besar.

* The views expressed here are the personal opinion of the columnist.