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TIIn 1992 and 1993, former Malaysian Prime Minister Mahathir Mohamad became convinced he could take advantage of a British recession, rising unemployment and a decision by the British government to float the pound sterling free of the European Exchange Rate Mechanism to make billions of ringgit.

Mahathir ordered Bank Negara to by vast amounts of pounds sterling on the theory that the British currency would appreciate at the same time George Soros shorted the pound, believing it would fall.

Soros turned out to be right. On Sept. 16, 1992, when Britain left the ERM, the government officially devalued the currency in an attempt to reduce the cost of its exports against other countries and to reduce newly expensive imports.

The result, as has been reported, was a loss for Bank Negara of at least RMK15 billion and the forced resignation of the central bank governor, Jaffar Hussein and Nor Mohamed Yakoop.

Now, 20 years later, it appears that the Malaysian government is finally paying the price for Mahathir’s disastrous venture into forex trading. It came in the form of an out-of-court settlement between several government-led companies and Tajudin Ramli in which the government quietly cancelled Tajudin’s debt of RM840 million. It is believed to be the biggest such sum awarded in Malaysian history.

Behind the settlement is a convoluted story, according to voluminous court records of years of suits and countersuits between Tajudin and the government.

According to the records, Tajudin, then a rising bumiputera entrepreneur, reportedly was ordered to purchase the government-owned Malaysian Airline System (MAS) at a vastly inflated price in order to cover up Mahathir’s forex losses.

In the RM13.46 billion Statement of Claim that former MAS Executive Chairman Tan Sri Tajudin Ramli brought against Danaharta, he declared that the then Prime Minister Tun Dr Mahathir Mohamad had instructed him to acquire a 32% stake in MAS to bail out Bank Negara, which had experienced massive losses in foreign exchange.

In other words, Tajudin was just doing ‘national service’ on the instructions of Dr Mahathir. And the whole objective of this exercise, said Tajudin, was to cover Malaysia’s massive forex losses. Hence, you can’t look at this MAS multi-billion disaster in isolation. You need to look at it in the context of the earlier scandal, the forex disaster, which the MAS exercise is supposed to cover.

The Chinese call this digging a hole to get the earth to cover another hole. Only that each new hole you dig gets bigger than the earlier hole you are trying to cover. (Don’t you just love Chinese sayings?)

Nevertheless, the MAS exercise itself was a disaster. Hence, the MAS exercise was not a solution to a problem but a problem as well. So now we had two problems, both running into billions of losses of hard-earned taxpayers’ money.

But that was merely the civil matter, which has now been settled out of court and is money down the drain. There is still the criminal matter, which the powers-that-be has filed under NFA (no further action). It appears like the criminal case too has been ‘settled out of court’.

According to the police investigation, there is certainly something criminal that went on in MAS resulting in, according to the police, a RM8 billion loss for the airline company. This means there were TWO losses involved here. First was the loss on the government buy-back of the MAS shares at DOUBLE the market price and second was the operational loss suffered by MAS itself.

Now, what many may not be clear about is that the civil suit was on the shares while the criminal investigation was on the shenanigans in MAS that resulted in the RM8 billion fiasco. So they are actually two separate issues but both involving massive losses to the Malaysian government -- meaning, of course, the Malaysian taxpayers.

What is even more interesting and which is the main issue here, the police investigation also revealed that there was collusion between the Police and the Attorney General’s Chambers (AGC) to not prosecute Tajudin and to NFA the case.

Now, this is the Director of the Commercial Crime Investigation Department (CCID) who is alleging that the Police and the AGC are colluding to cover up a crime -- a crime, according to Tajudin in his Affidavit to the court, done on the instructions of Dr Mahathir.

Was this why they had to NFA the criminal case in 2007 and seek an out-of-court settlement on the civil case two weeks ago? Was it to ensure that the real purpose of the MAS exercise would not become public knowledge? Was it so that Malaysians would never find out that the RM8 billion MAS hole was to cover an even bigger RM30 billion forex hole that was created back in 1992 and 1993?

The Minority Shareholders Watchdog Goup (MSWG) is puzzled by last month’s out-of-court settlement between several government-linked companies (GLCs) and former Malaysia Airlines chairperson, saying the unpaid debt would now have ballooned to RM840 million.

Its chief executive officer Rita Benoy Bushon says in the MSWG Newsletter that Pengurusan Danaharta Nasional Bhd, had in 2009 obtained a judgment for RM589 million against Tajudin from the Kuala Lumpur High Court.

“This is probably the largest sum awarded in Malaysian legal history. The judgment allows Danaharta to charge an interest of two per cent over the base lending rate on the outstanding sum from Jan 1, 2006.”

“A rough calculation shows that this amount would have ballooned to RM840 million. What could have prompted Danaharta not to exercise its legal right to collect the outstanding amount? We are somewhat perplexed by the out-of-court settlement,” Bushon said.

She also said it was unclear why the government resorted to an out-of-court settlement despite winning the case in court.

Established in 2000, MSWG is part of a broader capital market framework to protect the interests of minority shareholders through shareholder activism.

It is one avenue of market discipline to encourage good governance among public listed companies, with the objective of raising shareholder value over time.

The Court of Appeal on Feb 22 recorded Tajudin’s withdrawal of his appeal against the 2009 judgment and his RM13 billion counter-claim in an out-of-court settlement. The terms of the settlement are being kept secret.

Much criticism on the settlement

This move has received a lot of criticisms, with Petaling Jaya Utara MP Tony Pua also claiming that Tajudin’s Danaharta debt was written off as part of the settlement.

Among the litigants involved in the lawsuit are Telekom Malaysia Bhd, Naluri Corporation, Celcom (M) Bhd, Atlan Holding Bhd and CIMB Group, besides Danaharta.

Suspicions over the settlement arose after Minister in the Prime Minister’s Department Nazri Abdul Aziz in a letter dated Aug 8 last year directing all the GLCs involved in the matter to settle their suits with Tajudin out of court.

Tajudin, a former MAS chairperson, had in his affidavit dated Feb 10, 2012, filed with the Court of Appeal, described Nazri’s letter as a directive for a settlement.

Asked about his letter, Nazri said it was merely an advice and not a directive to the GLCs.

The Kuala Lumpur High Court will on Monday decide on the government’s application to strike out Tajudin’s RM500 million counter-claim, and Tajudin’s move to strike out the MAS suit against him over an arbitration case in Germany, in which the national carrier had to pay RM174 million.