Tuesday 27 February 2007

UPDATED !! : ECM-Libra Scandal: PAC's Response ? - Much Ado About Nothing

UPDATE (Feb 27th ) : From "The Straight Times" -Ibnu Hakeem
Excerpts: Read here for more

Nor Mohamed Yakcop will go down in Malaysian history as the FIRST Cabinet Minister to have been called to testify in front of the Public Accounts Committee - which is a Parliamentary Committeee ....... to clarify matters and throw some light on the controversies surrounding the ECM Libra-Avenue Capital merger.

..... the whole session was successfully diverted and a smokescreen created to camouflage the whole issue by raising general remarks over the conduct and monitoring of the GLCs.

As was expected, this was just a whitewash meeting of the PAC, a Red Herring.

Dato Shahrir Samad needs to search his own conscience and ask himself if it was really worth doing what he had done. Many people used to respect Dato Shahrir as being an independent individual and an intellectual of sound integrity. This may NOT be the case anymore.

It looks like Shahrir is just one more Umno slime-ball and scumbag after all.

Everyone knows that the Securities Commission approved the ECM Libra-Avenue Capital merger. We do NOT need the PAC to convene a special meeting or summon the Second Minister of Finance just to tell us that.

For the benefit of the public as well as future PACs that may want to revisit the issue, we repeat some of the unanswered and nagging questions about the ECM Libra-Avenue Capital merger:
1) How does the Securities Commission justify accepting the disputed and highly suspicious share valuation of ECM Libra and Avenue Capital in this merger?

2) What was the justification in accepting the ‘goodwill’ amount of RM360 million as part of the share value?

3) Why did the Bursa Malaysia ignore reports of widespread insider trading in ECM shares?

4) What is the justification for the Ministry of Finance and the EPU in allowing this merger?

5) Why was the justification for the waiver of a mandatory General Offer (by the Securities Commission or the Minister)?
Yes, we all know that the Securities Commission approved the merger.

But WE ALSO WANT TO KNOW who was the ‘position holder’ in the Government (i.e., either Prime Minister, Minister, Second Minister, Cabinet of Malaysia, KSU, Chief Clerk, Office Boy, Driver, Gardener, etc.) who initially approved the sale of Avenue Capital to ECM Libra?

This has NOT been made known at all.

Who actually approved the sale of this prized Government asset?

This is the main crux of the matter. And this still remains unanswered.

--- End of Update --


"....Like all good UMNO members, PAC (Public Accounts Committee) 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?..."

- Ibnu Hakeem


Feb. 26th: Bernama reported:

".....PAC chairman Datuk Shahrir Abdul Samad said on the merger between ECM Libra and Avenue Capital, the Finance Minister ( Nor Yakcop) had explained that there was nothing unusual about the deal since it had obtained clearance from the Securities Commission (SC).

"To say we are satisfied (with the explanation given) is not right since the PAC consists of representatives of various political parties. We all have a different degree of satisfaction. The government feels that since the SC had no objection and the majority of shareholders of the two companies wanted to merge, then the merger should take place without any interference," Shahrir added.

He said the PAC could not monitor GLCs because it had an advisory role and not a decision-making one.


I. From 3540 Jalan Sudin

" Disappointed?

And what were YOU(sic) expecting?"

MUST READ !! II. From Another Brick in the Wall:
here article -"Kerana Mu Malaysia II: ECM Libra Debacle Revisited "

(Feb 26th ) at 9:30 a.m., the Parlimentary PAC will reconvene to continue with the issue of the Merger between ECM-Libra and Avenue Capital. This issue has caused quite a bit of uproar in both the corporate circle and political.

Background of ECM Libra

ECM Libra started out as ECM, an Investment Advisory Company by David Chua and Lim Kian Onn, two former Hong Leong top guns.

Then came Dato Kalimullah into the picture with the idea of a takeover of Bumiputera Securities. Bumiputera Securities was a former subsidiary of Bank Bumiputera but left out of the package in the takeover by CIMB Group.

ECM, that became ECM Libra, subsequently undertook a backdoor listing via Tan Sri Azman Hashim's PLC to become ECM Libra Berhad. The Company started to transform itself into a Boutique Investment Banking Company.

The Company was employing the infamous SIL, Khairy Jamaluddin, as Director of Investment Banking. That's quite a jump for someone without Investment and Finance experience, even for a claimed genius.

It was then that ECM Libra was allegedly to be an instrument for Khairy to do a "clearance sale" of Government assets to an Island Nation.

Through a vendor financing scheme, i.e. the sellers provide layaway plan, Dato Kalimullah, David Chua and Lim Kian Onn sold some of their shares to Khairy.

Conveniently, a few months later, a proposal was put to the Minister of Finance for a Merger between ECM Libra and Avenue Capital Resource Berhad.

Was It Merger Or Takeover?

The Merger, what seemed like a Merger, is actually an attempt to camouflage the true intention of a Takeover. The "Takeover" was to substantially expand the operations of ECM Libra and buffer the seasonal income of ECM Libra with stockbroking income from Avenue.

That helps to undertake "other" operations. One, as a source amongst journalist, was to provide salary for some personality within Kalimullah's team.

The "Takeover" caused quiet an uproar. Websites and blogs were scrutinising the deal closely. Off course, the Opposition had their piece of the action.

Kalimullah got himself a Court Injunction on Husam and Harakah to stop "talking" of ECM Libra. And, there is a suit and countersuit still pending between him and Mathias Chang, which the latter called him corrupt.

The public uproar slipped into the less-happy Company's EGM, namely Avenue Capital's. Some an hour and a half of drilling was levelled on the Directors, whose response were cliche, leading shareholders to believe that a "gun was put to their heads to sign on the dotted line".

The two resolutions to approve the merger with ECM Libra and waive the Mandatory general Offer to ECM Libra Shareholders were passed. It was reported as near unanimous but shareholder sources said it was only between 60-70% majority (including the managing shareholder, who strangely also voted).

The equity held by Minority Shareholders seemed close to the votes opposing the Resolutions.

PAC in the Pix

The uproar has not ceased despite "their" victory. Amongst those within UMNO circles, noises were loudly heard. In several Majlis Penerangan UMNO, the issue of ECM Libra kept cropping up.

Finally, Dato Shahrir Samad, as Chairman of the Parlimentary Public Account Committee, called for an enquiry into the ECM Libra affair.

Almost about the same time and during the rounds of opening UMNO Youth Division Meeting, Khairy announced his sale of ECM Libra shares, claiming loses in the process. The Ministry of Finance and Securities Commission officials have been called. After six months, they are reconvening again.

This time, Minister of Finance II, Tan Sri Nor Mohammed Yakcop, will attend. Thus far, the PAC enquiries dwelled on the issue of procedural and overview of Government investment decision.

Unanswered Issues

It has yet to openly tell the public the answer to the ethical and moral issue of the Takeover.

1) Why was the Avenue shares undervalued and ECM Libra overvalued by goodwill?

2) Why was there a "rigging" of ECM Libra shares in the market prior to announcement?

3) Why was the rather unfair purchase terms on Avenue to buy ECM subsidiaries?

4) Why was the EGM proceeding at Avenue filled with improper procedures?

5) Why was a "biased" valuation recomendation by Adviser K&N Kenanga accepted by SC?

6) Why was it that it seemed from the eye of many shareholders a "collusion" by various authorities has occurred?

There is also the issue of incongruence with the BNM and SC plans for the Securities and Banking Industry.

After the "Takeover" is completed, the merged entity ECM Libra-Avenue suffered RM15 million losses for Third Quarter ending October 31st, 2006. Some 23% of staff were laid off.

1) Whose side did the loses came from, ECM Libra or Avenue Capital?

2) How much has ECM Libra's Boutique Investment Banking enhanced the Government's asset?

3) What happened to the much-hyped Investment Banking license?

4) Why the need to lay off staff?

5) Whose staff was affected, ECM Libra or Avenue Capital?
Will the Government admit that the Merger with ECM Libra is a bad decision? Now, who decided? Will they admit its Baba deciding for SIL's request? Perhaps not. There is also the matter of inconsistency with the Government policy for the Banking and Securities Industry.

During the uproar that lead to the PAC enquiry, one of the major shareholders, David Chua, sold his entire shares. Industry sources said David Chua was against the manner of the takeover from the beginning. And, Kalimullah? He sold his shares below the 5% level to avoid disclosure of his activities.

III. From "The Straight Times" -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.

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.”

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.

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.


Read HERE on Screenshots-Jeff Ooi -"Why David Chua exits ECM-Libra he co-founded?"

Excerpts: Read HERE for more and HERE and HERE

"....The analysts also said that David Chua had fallen out with Lim Kean Onn, ECM's driving force, over the group's strategic direction.

... Filings on Bursa Malaysia re ECM-Libra Avenue et al
Some interesting filings with Bursa Malaysia on August 11,2006:
1 ) Kalimullah Masheerul Hassan (ECM Libra Avenue Berhad -- Reference No EL-060811-55211:

August 08, 2006: Acquired 56,259,500 shares (6.77%) arising from distribution of ECM Libra Avenue Berhad shares by ECM Libra Berhad to its shareholders on the basis of 1:1.

August 11, 2006: Disposed 16,259,500 shares at RM0.65 each

Total no of securities after August 11 change: Direct interest of 40,000,000 shares (4.81%)

2 ) Kalimullah Masheerul Hassan (ECM Libra Berhad) -- Reference No EL-060811-53640:

August 08, 2006: Disposed 43,394,641 shares (Direct Interest) arising from the Capital Reconstruction Exercise by ECM Libra Berhad.

Total no of securities after August 11 notice: Direct interest of 12,864,859 shares (12.99%)

3 ) Lim Kian Onn (ECM Libra Avenue Berhad) -- Reference No EL-060811-59550:

August 08, 2006: Acquired 76,456,000 shares (9.2%)

August 08, 2006: Disposed 433,000,000 shares

Both acquisition (Direct Interest) and disposal (Deemed Interest) were arising from distribution of ECM Libra Avenue Berhad shares by ECM Libra Berhad to its shareholders on the basis of 1:1.

Total no of securities after August 11 change:
Direct interest of 76,456,000 shares (9.2%);

Indirect/Demed Interest 9,000,000 shares (1.08%)"

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