Failed RM3 billion investment caused Khazanah ouster, says report

Singapore's Straits Times suggests that 2008 stake in UBS, lost when Lehman Brothers went bust, is one of the 'funny things' that Dr Mahathir Mohamad mentioned.

Khazanah Holdings, the government’s sovereign wealth fund, holds stakes in Telekom, Tenaga Nasional, MAS, CIMB, UEM and other big companies. (AFP pic)

PETALING JAYA: A failed RM3 billion investment by Khazanah Nasional in the global bank UBS in 2008 may have been used to push out the top management of the sovereign wealth fund, a Singapore news report suggested today.

The RM3 billion investment in UBS had been held by the US investment bank Lehman Brothers, and was wiped out when the bank went bankrupt in late 2008, the Straits Times newspaper said.

However, it also noted that Khazanah had pursued the matter aggressively and got back half the amount four years later from PriceWaterhouseCoopers, the administrators for Lehman Brothers.

The Straits Times suggested that it was this deal that indirectly led to the resignations of the entire Khazanah board of directors earlier this week.

Quoting unnamed “senior government officials familiar with the fund’s affairs”, the newspaper said Prime Minister Dr Mahathir Mohamad had been making a veiled reference to the UBS investment when he accused Khazanah of “doing all kinds of funny things”.

Khazanah was set up in 1994 by Mahathir. Its portfolio of investments has grown to encompass some of Malaysia’s largest companies, such as Telekom Malaysia, Tenaga Nasional, Malaysia Airlines, Malaysia Airports, UEM group, CIMB Group, and the IHH healthcare group.

Mahathir complained recently that Khazanah had strayed from its original objective of helping the Bumiputera community.

However, former premier Najib Razak has contended that Khazanah’s primary role was that of a sovereign wealth fund. He said it had been professionally managed, and that aid to the Bumiputera community was provided through Khazanah’s earnings and dividends to the government.

Given the size of its enormous financial holdings, Khazanah has been at the centre of speculation about who would have control over its activities.

As a government-owned company, Khazanah is nominally controlled by Minister of Finance Incorporated but Treasury officials have said real control was exercised through the Prime Minister’s Department.

After returning to power in May, however, Mahathir has given the cold shoulder to Khazanah managing director Azman Mokhtar, refusing several requests for an appointment.

Azman was appointed to his post in 2004 by the Abdullah Ahmad Badawi government when Mahathir had stepped down after 21 years in power. His term was due in mid-2019.

His resignation this week, with the rest of the nine-member board, was welcomed by Mahathir, as allowing him to “clear the deck” and allow the government to restructure Khazanah. “We do not regard everyone as guilty of everything, but this administration will not accept obvious wrongdoings,” Mahathir said in a statement. - FMT