The rule of law from Tan Koon Swan’s MPHB to 1MDB

by Rama Ramanathan

OUTSPOKEN: Tan Koon Swan, a Puchong hawker’s son, rose to become president of the Malaysian Chinese Association (MCA) after a stint as General Manager of Genting Highlands Berhad. He owned and led many companies.

In 1986, in Singapore, Koon Swan pleaded guilty to a charge of abetting in Criminal Breach of Trust (CBT) of funds belonging to Pan Electric Holdings. When convicted, he resigned as MCA president. He paid a fine of SG$500,000 and spent 18 months in jail.

Koon Swan, who indirectly owned a 30% stake in Pan El, was accused of abetting in illegal fund transfers into Pan El, including from Multi Purpose Holdings Bhd. (MPHB), a commercial venture of MCA.

Pan El collapsed in 1985, with debts totalling SG$480 million. Overnight, its 5,500 shareholders found their shares worthless. The stock markets of Singapore and Kuala Lumpur had to close for three days.

When released from Singapore, Koon Swan was prosecuted in Malaysia. He was found guilty of CBT of RM23.2 million belonging to MPHB in 1995. (I am using “RM” although Malaysian currency was not at that time designated Ringgit Malaysia.)

Before the Malaysian trials in 1988 (first in a Sessions Court, then on appeal in a High Court), Koon Swan had repaid MPHB RM18 million in cash and the rest of the RM23.2 million through shares in listed companies. He was sentenced to 18 months in jail.

Koon Swan was president of the MCA, a member of Barisan Nasional, the ruling coalition. After he was convicted, he did the honourable thing. He resigned; he made restitution; he paid a fine and did jail time in two countries.

Sadly, Koon Swan was not judged wrong by the public. In the 1986 general election, the voters of Gopeng sent him to Parliament with a majority of 6,135 votes.

There is debate over whether he was wrongfully prosecuted in Singapore. The fact is, Koon Swan pleaded guilty. Though he was declared a bankrupt, he and his children are now very rich. The 5,500 shareholders believe he spirited away some of their money.

I am not bringing up Koon Swan to discuss the merits of the case against him or the adequacy of his actions and punishment.

My point is this: finding Koon Swan guilty and punishing him was inevitable in Malaysia after Singapore took action against him. Singapore made the evidence and the process of accumulating evidence and prosecuting the perpetrator available for all to see.

It was also politically expedient for Prime Minister Dr Mahathir Mohamad to act against Koon Swan even though he had helped BN clinch an overwhelming majority in the 1986 general election.

Koon Swan’s trials came in the wake of the Bumiputra Malaysia Finance (BMF) and the London Metal Exchange scandals. The public clamoured for a demonstration of justice.

In the 1980s, there was no Internet, no mobile phones. There was no alternative media. Yet Koon Swan was investigated, prosecuted and found guilty.

Now, the public clamours for prosecutions around the allegations of illegal fund transfers surrounding 1MDB and SRC International. (Now we have the Anti-Money Laundering Act which didn’t exist during the Koon Swan era.)

Other jurisdictions, including Singapore, are investigating or have taken action. Yet Malaysia, home of the allegations, has done nothing other than persecute those who urge action. What explains the inaction in Malaysia?

The answer lies in who the perpetrators, beneficiaries and consequences are.

The perpetrators are the entire cabinet – they are culpable even if only because they stood by as the 1MDB investigation was crushed by executive fiat. The beneficiaries are a legion of Barisan Nasional ministers, senators and their friends. The consequences are a collapse of the whole rotting structure of (mis-)governance.

Koon Swan wasn’t the only one to be punished in Singapore over the Pan El debacle. It appears only Koon Swan was prosecuted in Malaysia.

The justice meted out in Malaysia over the MPHB scandal seems meagre. However, there is some; at the very least, the person at the top paid the price.

In the 1MDB case, the Public Accounts Committee of Parliament has put the blame on Shahrol Azral, the administrative CEO of 1MDB, and seemingly exonerated Prime Minister Najib Razak who approved the decisions which led to the debacle.

In relation to 1MDB, the police have not recommended charges against anyone. The Attorney General, who is legal advisor to the Prime Minister and the only one who can proffer criminal charges against anyone, has already exonerated the prime minister.

Comparing the fate of Koon Swan and Najib/Shahrol, how can we not conclude that even the semblance of rule of law has plunged in Malaysia?

An engineer by training, Rama Ramanathan was Quality Leader (Asia Pacific) in two US-based multinationals over the last two decades. Tired of travel, he now mostly stays put in KL and focuses on being a thoughtful neighbour and citizen.

-The Ant Daily

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