Angkatan Koperasi Kebangsaan Malaysia (ANGKASA) commenced in 1977 as the umbrella cooperative of the country.
However it has become obvious that all is not well in ANGKASA. Its former President Royal Professor Ungku Aziz voiced his disappointment that SKM’s investigation into the alleged misappropriation of funds was still not completed in January 2009.
According to him the discovery of financial and administrative irregularities in the processing of loan applications and repayment deductions in ANGKASA were highlighted in the investigation report to SKM on 23 Oct and 18 Nov 2008. He laments the relative lack of enthusiastic response even though about RM20 million per day is involved (Malaysian Insider 23.12.08).
He also accused some core members of the administrative committee of collecting total allowances amounting to between RM15,000 and RM25,000 per person during the period (from 24 March to 5 May 2008) when Ungku Aziz was removed from office (Malaysian Insider 24.12. 08).
In March 2009, Thurasingham Shun, a cooperative consultant, wrote a letter to the press bringing to light the suspicious goings on in ANGKASA. He asked for ANGKASA to be investigated by SKM and that its board should be suspended. He further added that a thorough investigation of ANGKASA should be carried out and its report made available to members.
According to him, the election process at the January 2009 ANGKASA annual general meeting (AGM) was null and void because 50% of the delegates were students and teachers representing the school cooperative. As minors below the age of 18 years the students had no legal capacity to vote or to delegate any powers to the teachers to vote on their behalf. As a result the teachers votes were invalid and therefore the whole process of the AGM was null and void.
- A very senior official of ANGKASA who approved a contract with a company in which he himself was involved.
- Claims had been submitted in a haphazard manner.
- Allowances have been claimed without signature.
- “Day use” claims and payments have been made without set guidelines.
- The issue of Amanah Saham Angkasa, whose initial investments of RM500 million had dwindled to RM230 million, and of ANGKASA’s attempts to write off RM5.1 million of the investment.
2) The 24 Deposit-Taking Co-ops Scandal: 552,000 Depositors and RM1.5 Bil Involved
The 1986 deposit-taking cooperatives (DTCs) was a scandal waiting to happen.
A year before the scandal erupted, CAP had already written to JPK to find out the control exercised over cooperatives and the protection given to depositors should a cooperative face financial trouble or a “run”.
The DTCs fiasco which occurred the following month involved 24 cooperatives, 522,000 depositors and about RM1.5 billion in deposits.
It was triggered off by Koperasi Belia Bersatu Berhad (KOSATU) suspending payments to depositors who wanted to withdraw their savings in July 1986. The Essential (Protection of Depositors) Regulation 1986 promugulated on 20 July 1986 allowed BNM to freeze the assets of KOSATU and its key management and also to investigate into the affairs of the cooperatives
Other depositors became jittery and this led to a run on other DTCs. On 8 August 1986, the activities of 23 other cooperatives were also suspended. 17 accounting firms were then appointed to assist BNM in its investigations and to come up with a White Paper.
The White Paper on the DTCs indicated that the 24 DTCs had by November 1986, together lost approximately RM673 million through mismanagement or fraud.
The White Paper revealed that a significant number of cooperatives suffered from bad management, either due to lack of expertise or professionalism or through imprudent, and in some cases, corrupt management.
This result in gross mismanagement of funds such as overinvestment in land and property, with nearly one-fifth of assets in housing development projects and fixed assets, some of which were purchased at the height of the property market.
There was also over-commitment in loss making or non-income generating subsidiaries and related companies with as much as 42% of total assets committed in loans or capital investments in such companies. The cooperatives also suffered from speculative investments in shares.
In certain cooperatives, incidents of fraudulent activities and conflict of interest led to imprudent lending of funds, including to directors and other interested parties.
Many cooperatives did not have borrowing powers or exceeded them. A number of them invested in assets or projects without approval of the JPK, or specifically against the approval of JPK.
In 1986, 5 directors of 3 DTCs were charged in court, and in 1987 a further 17 directors of another 5 DTCs were also charged.
The refund to the depositors of the 24 DTCs was made possible through 3 types of rescue schemes. These rescue schemes had provided for a full ringgit-for-ringgit refund by way of cash or a combination of cash and equity.
The rescue involved RM600 million in soft loans and commercial loans from Bank Negara Malaysia. BNM also paid RM15.6 million for professional fees incurred in the investigation and rescue exercise.
In 1988, 7 other ailing DTCs were investigated. 3 were operating in Sabah and 4 in Peninsular Malaysia. One of the 4 in the Peninsula was the Federation of Housing Cooperatives Ltd, in which the Cooperative Central Bank had a 78% interest.
3) MOCCIS (The Malay Officers Cooperative Credit and Investment Society): Ex-Members Need 5 Years to Recover Money
In February 2008, the Malay Officers Cooperative Credit and Investment Society (MOCCIS) was placed under the administration of Rakyat Asset Management Sdn Bhd by SKM.
This is because MOCCIS (established in 1934) was insolvent. It could not carry out its activities and did not have enough funds to pay workers’ salaries, and loans to members had to be stopped. Neither could it refund the share/fees to its members who had requested for it.
(This is no surprise as we have received quite a number of complaints regarding MOCCIS in the early 2000s.)
Commenting on the matter, the former Minister of Entrepreneurial Development and Cooperatives, Datuk Seri Mohamed Khaled Nordin said that MOCCIS had problem debts of RM78 million and negative cash flow liquidity problems (Utusan Malaysia 3.1.08).
But things had not been going on well with MOCCIS for some time. Members had complained that they were unable to withdraw their money from MOCCIS.
One member complained that when he could not withdraw his RM10,000 savings in 2006, he was told that he would be paid 10% of it in March 2007. However when the time came he did not get his money.
In 2006, Utusan Malaysia carried an article about the liquidity problem faced by MOCCIS.
According to the article, MOCCIS’ problem started in 1998 when it suffered huge losses from investments undertaken in the middle of 1997.
Among its loss-making investments were a RM10.1 million boutique hotel in Pulau Langkawi, RM2.2 million in Silicon Vision International Corp and RM1 million in Telekom Advanced System.
On top of that MOCCIS also made downpayments (without getting any security or guarantee) to Isuta Sdn Bhd (RM13.6 million), United Mal Jap Air Conditioning (RM3.3 million) and to an individual named BT Chan (RM1.3 million). The parties later refused to return the deposits to MOCCIS.
The article further stated that the Government had given a soft loan of RM78.2 million to settle its debts but that was not enough to cover its operation needs.
MOCCIS had also broken the law by investing in subsidiaries without the permission of the Director General of Cooperatives, made down payments to companies which were not its subsidies and carried out investments with borrowed money instead of using surplus funds (Utusan Malaysia, 18.1.06).
In February 2009, the Chairman of SKM reported that the financial situation of MOCCIS had shown improvement and that it had a positive cash flow. It had recruited new members, revived its loan scheme and it had obtained financing of RM50 million from Bank Rakyat.
However it still owed members who had resigned arrears of RM13.4 million. They will be paid 20% of the amount owed until the whole amount is repaid.
Thus it means it will take 5 years to get the full refund. However bonus in arrears will only be paid after fees/shares owed have been settled.
4) Bank Rakyat: Lost RM65 Mil, Malpractices by MD and Officers
By 1975, Bank Rakyat, the cooperative bank which was established in 1954, was insolvent. It had accumulated losses of RM65 million. Suspicions regarding the financial standing of the Bank were raised when at its 19th Annual General Meeting, it tabled its 1973 and 1974 accounts, both of which did not have the prior approval of the Registrar General of Cooperatives. The 1973 and 1974 accounts showed that the Bank’s performance was profitable when in fact the Bank suffered substantial losses for those years.
The Registrar General of Cooperatives then conducted an enquiry into the Bank and at the same time the police also investigated its affairs. Anticipating a run on the bank, the Government came up with a guarantee that deposits in the bank were safe.
The White Paper on Bank Rakyat revealed that loans were approved even though they were beyond the level of the authority of the Managing Director or the committee of bank officials. There were no minutes to indicate the loan committee had ever met and its decisions were evident only by signature on the loan approval forms. There were instances where the applications, approvals and disbursements were made on the same day. In other instances loan disbursements were made prior to approval.
Sometimes loans were made in excess of the value of the security, and a number of loans which were approved were neither processed nor secured by any collateral. In one case, the borrowers who could not repay the loans ended up with a profit of RM180,769 because Bank Rakyat bought the two lands charged to the Bank from the borrowers.
Recovery of the loans was hampered by the fact that most of the borrowers were not creditworthy in the first place. In some instances, recovery was hindered by missing loan files.
As at 31 December 1975, several members of the Board and their immediate families had loans outstanding with Bank Rakyat amounting to RM1.13 million. Out of this amount RM1.02 million were in arrears. 3 of the borrowers never made any repayment at all on their loans.
The White Paper largely attributed the malpractices to the Managing Director and certain officers of the Bank. However if the Chairman, the Board of Directors, the Registrar General of Cooperatives Societies and the external auditor had properly discharged their functions and responsibilities, they could have prevented the management from perpetuating the malpractices and thereby reduced the losses of the bank.
5) The Cooperative Central Bank (CCB): Lost RM726 Mil, Chief Executive Charged
Around the same time that the 24 DTCs were in trouble, the Cooperative Central Bank (CCB) became insolvent. Formed in 1958, CCB was a bank for other cooperatives.
As at December 1987, its members comprised of 363,483 individuals and 266 cooperative societies. It also had 157,052 depositors and total deposit liabilities of RM1.8 billion.
Preoccupied with the 24 DTC scandals the Government was initially not aware of the seriousness of CCB’s financial problems. The actual extend of CCB’s losses were made known only when the audited accounts for the year ending 31 December 1986 were tabled in December 2007.
CCB’s audited 1986 accounts showed that it had suffered an accumulated loss of RM329 million resulting in deficit in members’ fund of RM251 million. CCB was insolvent as the funds had been completely wiped out and it was unable to repay its deposit liabilities to any extent.
In January 1988, Bank Negara assumed control of CCB to protect the interest of the depositors and to facilitate investigations into the affairs of CCB.
When CCB’s financial accounts for the year ending December 1987 were finalised it was discovered that the accumulated loss of CCB had deteriorated from RM329 million (in 1986) to RM726 million. The deficit in members’ funds also deteriorated from RM251 million in 1986 to RM652 million in 1987.
CCB could only refund 60 sen for every ringgit to each depositor.
The accumulated loss was largely attributed to gross mismanagement and the imprudent granting of large loans to a small group of borrower, many of whom were already non-performing. Bank Negara investigations revealed that loans had been extended with inadequate security or poor security and was further compounded by a lack of proper documentation.
To facilitate the recovery of the non-performing loans, Bank Negara froze the assets of 17 large borrowers in 2 instances on 22 December 1988 and January 1989.
A total of 40 large borrowers were also directed to surrender their travel documents to the Immigration Department.
The Government also placed a sum of RM323 million as a standby facility in case of a run on CCB. The RM323 million facility was fully utilised to settle borrowings and to fund heavy withdrawals in 1988 and 1989.
CCB’s fall also affected housing cooperatives as they were unable to complete their housing schemes when CCB, their main financier, got into financial trouble.
The former Chief Executive of CCB and its Assistant General Manager were jointly charged in court for 3 counts of criminal breach of trust.
In 1989 receivers took over the conduct of CCB’s business. In September 1993, the receivers were discharged and 2 persons were appointed to administer the affairs of CCB.
Subsequently in October 1994, some of the assets and liabilities of CCB were sold and transferred to PhileoAllied Bank.