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Euromoney, April 2018

The EPF has, like Bank Negara, generally been seen as one of Malaysia’s best institutions, rising above the considerable political noise of the country. But in febrile, post-1MDB Malaysia, the whiff of scandal is never far away.

In February, the EPF was accused of involvement in a scandal that recalled 1MDB – although the circumstances are very different and the EPF claims the whole thing is a long-known fraud.

That month the Sarawak Report released a trove of apparently incriminating documents that appeared to have the EPF consorting with a grim cast of characters.

The documents suggested that Ja’afar bin Rihan, a senior executive at the EPF, had participated in a transaction allowing two companies, Ladylaw Securites and Limage Holdings, to use RM10.64 billion ($2.72 billion) of bonds owned by the EPF as collateral to raise money, supposedly for a hospital investment.

The Sarawak Report alleges the whole purpose of the exercise was to create an election slush fund for prime minister Najib Razak. An election must be held by August 24.

Both Ladylaw Securities and Limage Holdings have been run by convicted criminals. Limage is owned by a US-based Hungarian called Gyorgy Matrai, who was sentenced to two years’ imprisonment for fraud; Ladylaw’s founder George Miller served time in the Philippines.

The EPF claims all the documents are forgeries. Its case is very much strengthened by the fact that it says it reported the documents to the police well before Sarawak Report ever got hold of them.

It says that a fake letter of indemnity alleging an agreement between the EPF and Limage was brought to its attention in October 2015 and was passed on to the police within days. It says that other letters were passed to the police with the suspicion of fraud in both 2016 and 2017.

“I think it is a bit disappointing because we’ve quite clearly said many times that the documents that they are relying on are fake,” says Datuk Shahril Ridza Ridzuan, chief executive of the Employees Provident Fund. “They have never come from the EPF.

“More importantly, the transactions they allege to have done are actually impossible to do. Bonds in Malaysia are scripless and can’t simply be managed and transferred in the way they seem to be alleging.”

Two banks alleged to have been connected, RHB and HSBC, have both denied any involvement with any of the named companies at any time.

It must be said that if it is a fraud, it is an extremely elaborate one. One of the documents using Ja’afar bin Rihan’s name appears to have been notarized by notary public Wong Kien Cheong, apparently on sight of bin Rihan’s ID card.

The EPF has not been helped by denying having had any interaction with Ladylaw, when Ladylaw’s owner, Nic Manikis, has told Australian newspapers that he met bin Rihan personally (although it appears very likely this was about a different deal entirely, which never went forward. It is also possible that he may have met only someone claiming to be bin Rihan).

Shahril points out that the documents use a number of email addresses for bin Rihan, several of them apparently invented googlemail addresses. There is one functioning EPF email address in the documents, but Shahril tells Euromoney: “The only email address which purports to be his address in the EPF is actually the email address of an office boy in Sarawak, who happens to share the same name.”

He also pours scorn on the sophistication of the scam.

“In this day and age, my 10-year-old daughter could fake it,” he says of the key document. “[One could] go to the EPF web site, do a GIF of the logo and the address and create your own letterhead.”

Among Malaysia’s institutions, the opinion seems to be that the timing of the revelations is politically motivated and that Sarawak Report is backing one side.

Shahril says: “Quite clearly they have their own interests of viewpoint they want to pursue,” and “they seem to be like a dog that’s got a bone it can’t let go of.”

But it would be doing the Sarawak Report a disservice to suggest it were a fake news organization. Without it, we might never have heard of the 1MDB scandal. The vast majority of the key documents that led to that scandal’s exposure and ultimately to the US Department of Justice investigation, first appeared on the Sarawak Report site, which, despite its name, is based in London and run by investigative journalist Clare Rewcastle Brown.

Nevertheless, the fact that EPF can prove it reported the documents to the police years before the public saw them supports its position and suggests we are not looking at another 1MDB.

Instead the bigger question is what did the police do about the EPF’s complaints? There was an attempt to use RM10 billion of public money without the permission of the fund’s investment board. Surely there must have been an investigation?

“We’re not sure. We left it with the police for them to investigate,” says Shahril. “The problem basically is that in the absence of any real leads, you don’t know who’s doing it. I can only imagine the difficulty the police would face in trying to work out who’s responsible for the fake documents.”

Questioning the notary public who apparently authorized bin Rahim’s signature on documents would seem a logical place to start.

Euromoney contacted the Royal Malaysia Police to ask about the progress of its investigation but received no reply.

Full article:

Chris Wright
Chris Wright
Chris is a journalist specialising in business and financial journalism across Asia, Australia and the Middle East. He is Asia editor for Euromoney magazine and has written for publications including the Financial Times, Institutional Investor, Forbes, Asiamoney, the Australian Financial Review, Discovery Channel Magazine, Qantas: The Australian Way and BRW. He is the author of No More Worlds to Conquer, published by HarperCollins.

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