Hard Evidence – Sanyan Scandal Exposes Taib!

SARAWAK REPORT
Friday, November 5th, 2010 GMT

Raw money - Sarawak's wealth ready for export

Evidence in a bitter court battle, currently being played out in Sibu, has laid out in devastating detail a mass of shocking information about the corruption at the heart of Sarawak’s State Government.

There has been little reporting of the case so far, because the Taib family have been doing their best to suppress it, however Sarawak Report has now obtained extensive documents relating to the hearing, all of which have been laid before the open court.

The case, which has been brought by the respected local businessman Dato’ Ting Check Sii against his former partner, Tufail Mahmud, brother of the Chief Minister, provides one of the closest insights so far into the illegal methods which the Taibs have used to extend their grasp over Sarawak’s wealth. It shows clearly the direct role the Chief Minister plays in orchestrating his family’s raid on businesses and state concessions and how they employ a network of tame businessmen and ‘nominees’ to manage and disguise their plunder of the State.

Concessions for sale and ‘nominees’ to disguise family interests

One of the most disturbing aspects of the case is Ting’s description of how Taib family members employ nominees to disguise favouritism by the Chief Minister in the granting of state licences and concessions. For example, in his written evidence Ting states:

“In 1987, I set up Sanyan Lumber Sdn Bhd which was given a timber concession. The shares of this company are held by me (50%) and Draman @ Morshidi bin Omar (50%) (as nominee of Datuk Tufail). Datuk Tufail told me that he needed to use a nominee because his brother was then and still is the Minister for Resource Planning. Datuk Tufail now denies Draman is his nominee, even though Datuk Tufail and I are the only joint bank signatories for this Company”.

Nominee shareholder Morshidi bin Omar hid Tufail's involvement as a beneficiary of a lucrative timber concession given by the Chief Minister to his own brother

Such admissions from Dato’ Ting about the way his business was operated are deeply damaging, because until recently he was one of the Taib family’s closest business confidants and one of Sarawak’s top Timber Towkays. For 25 years he partnered Taib’s younger brother Tufail Mahmud as the co-owner of the Sanyan Group, which controlled 25 separate companies. The group’s enterprises also benefited a number of the Chief Minister’s other brothers, including Arip Mahmud, Onn Mahmud and Ibrahmin Mahmud. Shares have also been handed to Taib’s own

Secret Shareholder - Taib's brother Tufail Mahmud

daughter Hanifah Taib, including one million shares in Sanyan Wood Industries. Indeed Ting has even confided to third parties that the Chief Minister had personally said to him:

“If you offer my brother more than 50% of the shares, then there will be more concessions for you!” [Abdul Taib Mahmud, Chief Minister]

That statement lays bare the Chief Minister’s corrupt management of his responsibilities with the sole purpose of self-enrichment. Ting has made clear that there was never any contribution from any of the Taib brothers towards the costs of the Sanyan Group and that they did not purchase their shares. Paying off Taib by favouring his brothers in this way was how Ting’s business was allowed to prosper.

However, it is clear that by putting his trust in such a bargain Ting enabled his own eventual downfall. The majority shareholding gave Tufail the opportunity to wrest control over the US$ 400 million conglomerate, even though he had not contributed a single ringgit towards it.

Court deposition - Ting's lengthy evidence exposes Taib family's business methods and the Chief Minister's abuse of his political power

Going public

Dato' Ting Check Sii, co-shareholder and driving force behind the Sanyan Group

It is for this reason that Ting is one of a growing number of businessmen who have made the brave decision to place his grievances against Sarawak’s ruling family before a public court. His evidence, whatever the outcome of the case, is compelling and based on inside knowledge.

Furthermore, his identification of Mr Moshidi bin Omar as a nominee of Tufail Mahmud and other allegations are substantiated by documented information available from the Registrar of Companies. Moshidi bin Omar has been listed as the shareholder of several concerns that are controlled by Tufail, yet he has no separate status as a businessman and he has regularly ‘sold’ his shares on to Tufail Mahmud when convenient to do so.

Goodmatch Sdn Bhd, another Sanyan Company

According to the court documents, the Sanyan subsidiary Goodmatch provides another key example of the abuse of nominees to disguise a conflict of interest on the part of the Chief Minister and his family. Goodmatch Sdn Bhd was used by Ting and Tufail in 1993 to enter a joint venture with the Japanese Noda Corporation in the construction of a plywood factory.

Sibu plywood factory - turning rainforest into throwaway furniture

Goodmatch was not only granted a timber concession by the State Planning and Resources Minister (ie the Chief Minister, Abdul Taib Mahmud), but was also accorded 5 years ’Pioneer Status’ for the joint venture project, later extended for a further 5 years, by the State Finance Minister (ie the Chief Minister Abdul Taib Mahmud), thereby allowing it a 100% tax exemption!

According the Sarawak Government’s official portal, Pioneer Status is meant to apply to ”strategic projects in hi-tech industries with heavy capital investment, high R&D content or intensive linkages”, so how a plywood factory might qualify is an interesting matter. Meanwhile, Tufail Mahmud clearly considered it prudent to disguise his shareholding in this favoured company by again using Mr Morshidi Omar as his nominee Director and Shareholder for the first five years, holding 55% of the shares to Ting’s 45%.

Indeed, the registered company documents show that Tufail did not publicly become a Director of Goodmatch until 2002, when the pioneer status period and timber licence had expired. Likewise, he had not publicly become a shareholder until 1998 when Goodmatch ‘sold’ 54.997% of its shares to him, leaving Ting with his 45% and Mr Morshidi Omar continuing as a Director, but with a mere RM1.00 stake in the company! Given that Goodmatch is a subsidiary of the Sanyan Group which was co-owned and controlled by Ting and Tufail, the conclusion that Morshidi Omar is indeed merely a nominee (as stated by by Ting) is therefore inevitable.

Goodmatch - original Director was Morshidi bin Omar

But, should there be any remaining doubt, Tufail’s own evidence to the court proves Morshidi Bin Omar’s status as a nominee. Even though Mr Omar had originally been registered as the public owner, Tufail now acknowledges simply:

“Goodmatch was incorporated with myself and the Petitioner [Ting] as shareholders and directors”

By 1999, Goodmatch was receiving over RM10 million in profit from its joint venture activities alone, 55% of which was going to the Chief Minister’s brother.

Chief Minister is complicit

Dato’ Ting’s evidence makes abundantly clear that the Chief Minister himself is totally complicit in these arrangements and abuses his political power to control them. In the case of Sanyan Lumber for example, after 16 years of annually renewing its timber concession Taib cancelled it, immediately after Ting and Tufail fell out as business partners. In his testimony Ting explains:

“The timber concession Licence was not renewed in July 2003 and was instead given to Misi Gagah Sdn Bhd, a company controlled by Datuk Tufail through other nominees of his…. Misi Gagah now occupies the former office of Sanyan Lumber and utilises its former staff whose salaries continue to be paid by Sanyan Lumber until Labour Department put a stop to it in the middle of 2006″.

The lucrative timber licence was handed to a 'new' company however it operated with the same staff in the same office, all still paid by Sanyan Lumber. Ting says that Taib had merely transferred the licence from one nominee for his brother to another.

Sarawak Report therefore challenges Datuk Tufail and the Chief Minister to explain why the same office and staff should continue to be maintained by Sanyan Lumbar, unless at least some of the shareholders of the new company to be awarded the licence were not the same as the old one? This incident clearly demonstrates the ruthless action that the Chief Minister is prepared to take to keep his family’s control of key timber licences and to extract maximum profit from bleeding businesses in Sarawak.

Taib’s tentacles reach into every business

Towering shame? The Sanyan Building in Sibu, Sarawak's tallest building

Ting’s evidence to the court about the development of the Sanyan Group provides a clear exposition as to how Taib imposes his family interests on all the business in the State of Sarawak, profiting from every enterprise. The Towkay points out that he provided all the money and management that went into building the conglomerate and then constructing its famous headquarters, the Sanyan Tower in Sibu. The only contribution brought by the Mahmud brothers was their crucial relationship with the Chief Minister.

Despite this, says Ting, Tufail Mahmud always insisted on the lion share of the profit and a controlling majority of company shares, a demand that was impossible to resist given the power of his brother to grant and remove key licences. Records show that Ting’s salary was also half that of Tufail’s. Sources say it was frequently joked at the Sanyan Group that while Ting was the Day Manager at Sanyan, Tufail looked after the Night-shift. This was a reference to Tufail’s lengthy absences during office hours and to the bedroom furniture that he had imported into his office in the Sanyan Tower.

On the other hand it is plain that businessmen like Ting benefit from tempting rewards, courtesy of the Chief Minister, for as long as they cooperate with the Taibs’ greedy demands. Indeed it was famously noted that on the completion of the Sanyan Tower the State Government decided to move its offices into eleven stories of the building, thus ensuring that Sanyan managed to go straight into profit at a time when there was a reported glut in office space. Pelita Towerview Sdn Bhd is the subsidiary of Sanyan Holdings which owns the Sanyan Tower, of which Tufail has a 56% shareholding and Ting a 44% shareholding, meaning there was a clear conflict of interest in Taib’s decision to spend taxpayers’ money on renting the offices.

Likewise, from the moment that Ting went into business with Tufail and also his brother Arip in the early 80s, his evidence makes clear that a string of valuable contracts came the way of their various enterprises. Such rewards would have been unlikely for a less well-connected company, which is why the Taib family members are to be found enjoying such a mass of Directorships across the State, sitting on Boards for which they have no qualification and to which they have contributed nothing.

Sanyan and Archipeligo Shipping

Onn Mahmud - Brother of the Chief Minister and Gatekeeper Boss of Archipeligo Shipping

In this manner the Sanyan Group’s first venture in 1983 was Binta Corporation Sdn Bhd. The court depositions explain that this was one of a series of shipping companies, which benefited from contracts with Archipeligo Shipping to provide transportation services from Tanjong Manis Port. Archipeligo Shipping had in turn been handed a monopoly over handling all shipping in Sarawak by the Chief Minister and was it was entirely owned by another brother, Onn Mahmud.

The clear purpose of Archipeligo, has been to act as a classic Taib ‘gate-keeper’ company, with no infrastructure and few staff, purely to enable Onn to privately ‘tax’ and control the shipping of all the logs leaving Sarawak. Several insiders have confirmed to Sarawak Report that all foreign exporters were required to pay backhanders in US dollars into a series of Taib-owned companies set up in Hong Kong in order to be allowed to conduct their business of shipping logs from Sarawak.

Under the system the weight of the logs exported was totalled each month and Kin Kwok Shea, Onn’s office manager in Hong Kong, would then inform the shipping companies of the cut they had to pay and into which of the various Taib-owned companies in Hong Kong. This practice was publicly exposed by the Japanese Tax Authorities in 2007 , when they demanded tax be paid on these undeclared business kickback expenses by Japanese shipping companies.

The tax authorities revealed that at least US$10 million had to their knowledge been paid into Regent Star Company in Hong Kong, of which Kin Kwok Shea is the registered shareholder. Key inside sources have confirmed to Sarawak Report that in fact Shea, like bin Omar is only a nominee, this time for Onn Mahmud, who in turn represents his brother the Chief Minister of Sarawak as the true beneficiary of the shipping kickbacks.

Regent Star's nominee shareholders

The money raised by Archipeligo for the Chief Minister amounted to billions of ringgit annually, according to the insiders, who describe it as the Taib family ‘cash cow’ or ‘gold mine’. It is this operation that provided the foundation of the family’s wealth until Sarawak’s world class rainforest heritage was finally stripped bare earlier this decade.

Sources say that another advantage of the Archipeligo monopoly during this period was that the company had sole control over the gathering of logging statistics, enabling it to provide false information to the government (run by the M.D’s own brother), which was then passed on to international bodies such as the International Tropical Timber Organisation. In this way Sarawak was able to give an impression of sustainable logging and to disguise the level of greedy plunder that was actually taking place!

In this context Ting’s Sanyan Group managed to get a wealthy living performing contracts for Archipeligo to supply services to the shipping companies. They received these contracts , thanks to the preferential treatmetn allowed by Onn towards his brothers Arip and Tufail (who were Ting’s partners). Sanyan then subsequently took advantage of lucrative logging concessions and developed saw mills thanks again to the active support of the Chief Minster.

Dancing with the devil?

Insiders have confirmed to Sarawak Report that in the same way that the Mahmud brothers used nominees to disguise their shares and directorships, they themselves perform the role of nominee for the Chief Minister. The bulk of the profits of the Taib business empire in Sarawak goes straight to Abdul Taib Mahmud himself. This pattern matches the documentary evidence uncovered by Sarawak Report in the United States, showing that Taib secretly requires his family members to hold their shares in trust for him and it explains his vast wealth and string of properties in Malaysia and abroad.

Abdul Taib Mahmud - the mastermind behind the operation

Our sources have further disclosed the astonishing information that Taib controls his family nominees by forcing them to sign undated resignation letters and share transfer forms, which the Chief Minister keeps! If any of these family nominess fall out of favour the Chief Minister is then able to deploy their own signatures to have them removed! Onn Mahmud himself is believed to have fallen out of favour in this fashion prior to the kickback scandal and he has been sidelined from most of the Taib family businesses in recent years.

The experience of Dato’ Ting shows that, likewise, businessmen who profit by ‘playing the system’ are in equal danger of the same ruthless treatment from the Taibs. In his evidence he reveals that by first allowing Tufail to take the controlling majority of shares and then permitting him to bring in more family members as Directors onto the Board, he ultimately gave his partner the means to wrest control of the company that he had done so little to create. Ting writes:

“In 1998 [Tufail] requested that his brother Dato Haji Ibrahim bin Mahmud be appointed a director of Sanyan Holdings and [I] acceded to his request. In early 2003, he again requested that his daughter Anita Hamidah Tufail be appointed a director and I also acceded to his request. With the addition of his family members to the Board of Directors he was able to sieze control of the company and disregard [my] interests”.

Falling out

Daughter Anita Tufail - College graduate and new Sanyan Director. She thought she knew how to run the company better.

Ting blames the breakdown in relations between the former partners on this decision to allow college graduate Anita, a girl in her 20s with no business experience, to join the Board. He says Anita immediately set about criticising the way Sanyan Holdings was run and relations rapidly soured. By using the votes of his brother Ibrahim and his daughter, Tufail was able to enact a Boardroom coup and remove Ting from his position as Managing Director of the entire company and all its subsidiaries.

Having now taken control of the multi-million dollar company for which they had paid and done nothing, the Tufail family then stopped the payment of all salary and dividends due to Ting and went to extreme lengths to have him removed from his office in the Sanyan building and to sack all the long-term staff who were considered
faithful to Ting. Ting relates that this vindictive treatment was even extended to one of his nephews, a qualified engineer and an employee, who was demoted to the role of toilet attendant!

Sarawak Report believes there can be no clearer proof of the level of corruption that the Chief Minister Abdul Taib Mahmud has inflicted on his country over the past 30 years than the scandalous evidence brought forward in the Sanyan case. The Taibs will be doing their utmost to make sure that the judiciary find against Ting’s suit for compensation and the rightful return of his company, but they cannot hide the facts that have been brought before the courts.