Does the end justify the means in the Tabung Haji saga?

 Do we need to keep investors happy or is there more to it?

It appears that the dust has settled, at least for now as the judicial process takes over, on the Tabung Haji (TH) “mismanagement” issue.

It was widely commented upon following the release of the full royal commission of inquiry (RCI) report just before a state election.

There were allegations of embezzlement (sakau) and unadulterated corruption at this investment institution.

Presumably the intention was to throw dirt on the past administration.

Mind you the full RCI report had been on the back burner for almost three years before its release.

Some say, tactically speaking as in urban guerrilla political warfare, it was kept under wraps for an opportune time such that its release could inflict the highest degree of damage to the political opposition.

Sadly, that was not to be as the state election results stand testimony.

To add a degree of altruistic intent, the reason offered was that it could not be released earlier as the flagship, TH, was being given time to keep its policies and practices in order.

It was vehemently argued that releasing the RCI findings earlier might have affected TH’s credibility as an institution set up specifically to enable investors to finance their trips to the holy land (through consistent savings).

Worse still, it was rationalised that its depositors, largely from the country’s heartland, may have withdrawn their deposits en masse. This desperate action would have resulted in financial chaos with spillover effects on other financial institutions in the country.

To the naïve, uninformed and politically ignorant, this justification had a degree of credence.

A lawmaker had highlighted possible offences (crimes which include financial deception, falsification of accounting records, the unlawful distribution of ‘hibah’ dividends), as the Tabung Haji Act 1995 forbids declaring or paying profits when liabilities exceed assets.

To top it off, as a safe measure, criminal breach of trust is included. That is indeed a mouthful but then politicians are known for rhetoric, most times self-serving, and in certain instances illogical.

To date two ex-ministers have been charged. At the crux is the Attorney-General’s Chambers’s decision to charge the ex-CEO and ex-chief financial officer with “misleading the board” under Section 417 of the Penal Code.

The legal system only looks at the charge and decides on guilt or innocence. The reasons for such a criminal act, altruistic or not, are inconsequential.

In TH’s case it is common knowledge that the beneficiaries of this “misleading” were the investors who were paid handsome dividends. This state of affairs should not have been so as the provisions of an Act were breached.

It is obvious that the persons involved at TH accrued no gains. It is neither embezzlement nor corruption — if so, the charges would be completely different and fall under the MACC Act 2009 or Anti-Money Laundering, Anti-Terrorism Financing and Proceeds of Unlawful Activities Act 2001.

Nonetheless, this episode was milked for what it is worth to cast aspersions reflecting on the integrity and level of corruption of the government of the day.

The inquiry examined TH’s management and operations between 2014 and 2020. It concluded that the combination of high hibah commitments, governance weaknesses and accounting shortcomings affected its long-term financial sustainability.

For context, the RCI found that pressure to maintain high hibah payouts contributed to the deterioration of the fund’s financial position and pushed it towards riskier investment decisions. Unfortunately, these led to certain investments turning sour.

In its report, the RCI said LTH continued declaring attractive hibah between 2014 and 2017 despite its weakening financial position, presumably increasing pressure on management to generate higher returns.

“The attractive returns encouraged more deposits from savers, increasing TH’s financial obligations while creating expectations that similar levels of hibah would continue”.

It is obvious here who benefitted from the higher returns – the investors. Surely there is a moral justification here as the interests of the investors was paramount – Where is the “sakau”, or embezzlement as alleged by certain quarters.

How it was done, through revaluations of assets or flouting global accounting standards and whether or not there was criminal intent, is left for the courts to decide.

This expectation on higher investment returns cannot be denied. An element of greed entered the equation and no one questioned it, notwithstanding the audited accounts.

By law, no crime can be justified by the circumstances leading to it or supporting it within the ecosystem.

In an unrelated incident to provide perspective, on Nov 2, a 43-year-old unemployed father of five was sentenced to six months’ jail for stealing RM394 worth of baby formula and groceries from a supermarket in Kelantan.

It was commented that an accused’s financial hardship and family responsibilities did not automatically warrant a lighter sentence.

A proverb from the Tirukkural, an ancient Tamil literary work written by philosopher Tiruvalluvar, was quoted by the magistrate.

This only reinforces the point that the reason is inconsequential, heart breaking as it is.

In the case of TH, where is the moral ground? The investors received dividends which they were not entitled to as the Act specifically provides the stipulation on the relationship between the assets and liabilities before dividends can be declared.

In brief, investors have no good title to the dividends as it was a result of a criminal act purportedly committed by the ex-CEO and ex-CFO in misleading the board – who themselves are held to account on their fiduciary duties (healthy, professional scepticism).

This has resulted in a burden to the government in relation to the special purpose vehicle created to prevent the pilgrim fund from insolvency (circa RM10 billion).

Who will take the high road to return the dividends for the affected years. Now that TH is in a healthy state perhaps future dividends should be channelled not to the investors but to fund the special purpose vehicle.

This is food for thought in the years where “sakau” is being freely thrown about to show fellow politicians in a bad light — just to score points.

The word “sakau” has deep negative connotations. It should be used judiciously and not crowed about at any half opportunity. This action is in itself unethical

As the man fed his hungry children, does the end justify the means? Do we need to keep investors happy or is there more to it – what are their obligations? - FMT

The views expressed are those of the writer and do not necessarily reflect those of  MMKtT.