A Court Clears a Mahathir Crony

Eric Chia, the hard-charging Chinese tycoon brought in by former Prime Minister Mahathir Mohamad to rescue the ill-fated national steelmaker Perwaja Steel and who ended up being indicted for embezzling 76.4 million ringgit from the vastly unprofitable project, escaped conviction in a Malaysian courtroom Tuesday, putting Prime Minister Abdullah Ahmad Badawi’s drive to clean up corruption into limbo.

Chia, who made a fortune in the 1970s and 1980s by selling logging equipment, became deeply involved in attempts to revitalize the government’s Proton national car project when he was managing director of EON, the firm's marketing arm. Mahathir turned to him in 1988 to take charge of Perwaja, one of a long series of mostly disastrous mega projects initiated by the former prime minister in his headlong rush to make Malaysia into an industrial state.

However, the steelmaker ended up with debts of US$2.6 billion and losses of nearly US$800 million and was declared insolvent in 1995, a year after Chia stepped down as managing director. Chia was accused of putting the 76.4 million ringgit into his own pockets through a Hong Kong company called Frilsham Enterprises in 1994. After an eight-year investigation, prosecutors alleged that Chia had channeled the money into a Frilsham account with American Express Bank for "technical assistance" provided by NKK Corp. of Japan for a “Beam and Section Mill Plant Project” in Gurun in Mahathir’s home northern state of Kedah.

Frilsham, the prosecutors alleged, was a bogus company that then transferred the money into bank accounts in the Virgin Islands and Switzerland. Ex-company officials testified that no payment had been required by NKK and that Chia had sought to hide evidence of the crime.

The acquittal is a setback for Badawi, who had made the prosecution a major issue in his campaign to clean out cronyism. But after a 43-day trial that included 29 prosecution witnesses against the ailing 74-year-old Chia, who was confined to a wheelchair during the proceedings, Sessions Court Judge Akhtar Tahir ruled that " I would say ... in this case the court was deprived of making this maximum evaluation as the material witnesses were not even called.”

Chia told reporters after the verdict that “the truth has finally prevailed. It is like mixing water with oil. After a while, the water will float and the oil will sink.” He said he was gong to Tibet to offer thanks for his acquittal.

Then-Deputy Prime Minister Anwar Ibrahim revealed the staggering losses and debts in the Malaysian Rakyat, or parliament, 11 years ago. Chia had by then left the company. It was also revealed that at that time that Perwaja was locked into high interest payments on loans calculated in Japanese yen, which caused stratospheric losses because they weren’t hedged against currency fluctuations.

Critics charge that the fact that the Malaysian Anti-Corruption Agency took eight years to investigate and that the money was long ago transferred into Swiss accounts weakened the prosecution’s case.

Lim Kit Siang, the head of the opposition Democratic Action Party, questioned whether Badawi’s corruption campaign has now run its course. Chia was the only major figure charged with corruption after Badawi succeeded Mahathir. The arrest had been had been hailed as a tough move against corruption, with many Malaysians hoping the huge losses would finally be accounted for and the perpetrators brought to justice. Lim also hit out at the prosecution for its lack of ‘professionalism’ and ‘seriousness’ in the case.

Public sentiment over the case is not good as national elections draw near and the issue of corruption dominates daily news reports. A Kuala Lumpur based senior lawyer however told Asia Sentinel that ‘the prosecution is within its rights and may appeal the judgment' but noted that there weren’t any material witnesses during the trial.

The drastically reduced Perwaja Steel Sdn. Bhd. is now owned by another local conglomerate known as Maju Holdings Sdn. Bhd and is still in the business of producing iron and steel and related products.

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