Report: RM3B Loss Caused Khazanah Ouster

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Dr Mahathir’s targeting of Khazanah was due to it losing RM3 billion in investment, according to a report by Singapore’s Straits Times.

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.

The report said Khazanah had in 2008 “embarked on a highly confidential investment strategy” whereby the sovereign wealth fund placed some of its money with experienced banker Luqman Arnold, who through his investment group Olivant, was also managing some of Europe’s top financial powerhouses.

Dubbed as “Operation Twist”, it morphed into “Operation Red” involving Khazanah, Olivant and Spain’s Santander Bank as partners, acquiring 2.6 percent interest in Swiss Bank UBS.

The entire shareholding in UBS was held in accounts under Lehman Brothers.

“That deal, however, collapsed when Lehman Brothers went bankrupt in lateSeptember 2008.

“The entire shareholding in UBS was held in accounts managed by the failed Wall Street bank, resulting in the complete wipe-out of Khazanah’s RM3 billion investment,” said the report.

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

The daily suggested that it was this deal that indirectly led to the resignations of the entire Khazanah board of directors last week.

Quoting unnamed “senior government officials familiar with the fund’s affairs”, the report 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 who 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.

Since leading Pakatan Harapan to federal power, Mahathir had refused several requests from Khazanah managing director Azman Mokhtar for an appointment, leading to the board’s en masse resignation.

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, 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.

Earlier reports:

Jul 28, Three Potential Candidates for Khazanah MD

Jul 26, All Nine Directors of Khazanah Board Quit, Leaves Leadership Decision to PM