Malaysians' 'corruption covered up': Nervousness over Pergau dam deal revealed. Chris Blackhurst reports (CORRECTED)

CORRECTION (PUBLISHED 11 OCTOBER 1994) APPENDED TO THIS ARTICLE

THE GOVERNMENT covered up corruption, and even suspected murder, by its Malaysian counterpart, during the run-up to signing the aid-arms package that included the Pergau dam project.

Documents obtained by the Independent reveal the extent of government nervousness in dealing with Malaysia. Yesterday it emerged that two more ministers, Chris Patten and Sir Geoffrey Howe, in addition to Baroness Chalker, voiced their opposition to the package signed by Margaret Thatcher and ratified by John Major and Douglas Hurd.

The opposition stemmed from the trail of alleged Malaysian corruption uncovered during the Bank Bumiputra affair, when the Malaysian state-owned bank made unauthorised loans worth pounds 600m to a Hong Kong company called Carrian. The Hong Kong government and the Foreign Office were aware that a Malaysian minister, Tengku Razaleigh Hamzah, owned 25 million Carrian shares. Mr Razaleigh was also a director of Bank Bumiputra and treasurer for the Malaysian ruling party.

In a letter, dated 30 May 1980, George Tan, chairman of Carrian, told Mr Razaleigh he was making 25 million Carrian shares available to him.

As part of their inquiry into the collapse of Carrian, Hong Kong police examined the killing of Jalil Ibrahim, a Bank Bumiputra auditor who had queried the ownership of the 25 million shares.

British ministers became concerned in December 1985 when Lorrain Osman, an executive from Bumiputra's branch in Hong Kong, was arrested in London. The Malaysian authorities accused him of being behind the Carrian loan and demanded his extradition to Hong Kong.

Telexes between the Hong Kong government, the Foreign Office in London and the British High Commission in Kuala Lumpur, reveal high-level diplomatic activity and Britain's fear that the Malaysian authorities were wrongfully persecuting him. In one to the Foreign Office, the Hong Kong Governor, the late Sir Edward Youde, said it was not safe to assume that the Malaysians had 'only the interests of justice in mind'.

Sir David Gillmore, the then British High Commissioner in Malaysia, and present head of the diplomatic service, told the Foreign Office that Hong Kong police had been to see him and 'we have briefed them on some of the political background.'

In another telex, dated 20 December, Sir Geoffrey Howe, then Foreign Secretary, became involved, urging the Hong Kong authorities to pacify the Malaysians. In all, 150 telexes were transmitted about Osman.

The frenetic activity had been accompanied by a dramatic thawing in relations between Britain and Malaysia. Britain was in the middle of negotiating a loan of pounds 60m from the Overseas Development Administration to a pounds 200m irrigation contract won by Biwater, and Michael Heseltine, the Secretary of State for Defence, had just visited the country to begin negotiations on the sale of arms.

Mr Osman spent seven years in jail in Britain, fighting extradition on 43 charges. When that battle ended in 1992, he went to Hong Kong to face one, relatively minor, charge. He was sentenced to one year's imprisonment for conspiracy to defraud.

Sources close to Mr Osman, now back in London, said last night that the documents showed he had been made a scapegoat and that the Government was aware all along of alleged Malaysian corruption.

CORRECTION

Tengku Razaleigh Hamzah

IN AN article on 5 February entitled 'Malaysians' 'corruption covered up' ' the Independent reported on the collapse in 1983 of a Malaysian bank in Hong Kong and the ensuing corruption scandal, which coincided with the negotiation of the Pergau dam aid package with the British Government.

The bank, Bank Bumiputra, made unauthorised loans of pounds 600m to Carrian, a Hong Kong property company, which later went into liquidation.

The article stated that Tengku Razaleigh was owner of 25 million shares in Carrian as well as being a director of Bank Bumiputra and the treasurer of the ruling UMNO party. The loans were in fact made by Bumiputra Malaysia Finance Limited (BMF), a subsidiary of Bank Bumiputra. Tengku Razaleigh ceased to be a director of Bank Bumiputra and of BMF in 1976 when he was first appointed as finance minister. The first of the BMF loans to Carrian was made in 1979.

The article quoted a letter from George Tan, chairman of Carrian, in which he wrote to Tengku Razaleigh saying he was making 25 million shares available to him. The letter was denounced as a forgery by Tengku Razaleigh when it first came to light in 1990, during legal proceedings involving Lorraine Osman, Britain's longest serving remand prisoner. Its authenticity has never been established.

Tengku Razaleigh has always stated that he does not know George Tan and that he has never received any Carrian shares.

The article also stated that Hong Kong police were investigating the murder of a bank auditor who had made inquiries into the ownership of the block of shares.

A letter from the auditor to Tengku Razaleigh was made public at the same time as the Tan letter. Similarly, it has not been proved to be genuine.

Tengku Razaleigh denies that he received any inquiry from the dead man and maintains that this letter is also a forgery.

In 1984 a man was convicted of the murder and is currently serving a life sentence in Hong Kong.

Letters, page 11