26th May 2024 – (Hong Kong) “The Goldfinger”, a glitzy, big-budget Hong Kong movie produced in part by AMTD Group, is a fictionalised account of the rise and fall of George Tan Soon-gin’s Carrian Group, which was at the centre of Hong Kong’s biggest financial scandal prior to the 1997-98 Asian Financial Crisis. The movie, directed by Felix Chong and starring Tony Leung as a character based on Tan, sheds light on the corruption and weak financial regulation in Hong Kong during the 1970s and 1980s that enabled Tan’s audacious scams, and the ultimately successful efforts by the Independent Commission Against Corruption (ICAC) to bring him to justice. Though dramatised for the screen, the Carrian affair holds enduring lessons about the dangers of financial malfeasance and the importance of strong institutions to maintain the integrity of global financial centres.

The fall of Hong Kong’s Carrian Group in the 1980s was one of the most spectacular financial scandals of the era. At the centre was Malaysian businessman George Tan, who used charm, audacity and plenty of borrowed money to turn a small pest control company into a global conglomerate worth over $1 billion – before it all came crashing down amidst revelations of fraud, bribery and murder.

But what is less known is the alleged role played by Malaysia’s government and its longtime prime minister Mahathir Mohamad in enabling Tan’s shenanigans through lax oversight of the state-owned Bank Bumiputera, which funded Carrian’s meteoric rise. Declassified CIA documents from the 1980s shed light on the political scandal brewing in Malaysia at the time, which had the potential to bring down Mahathir’s administration.

The CIA report, dated March 1985, outlines how Bank Bumiputera’s Hong Kong subsidiary BMF had extended huge loans to Carrian and other Hong Kong property speculators during the 1970s real estate boom, and continued lending to Tan even after the 1981 property crash left his empire teetering on the brink. By 1983, BMF had racked up nearly $1 billion in bad loans, mostly to Carrian.

The report states that “circumstantial evidence suggests that the scandal extends into the Mahathir administration,” noting that as a state-controlled bank, Bank Bumiputera’s decisions would have required approval from the Finance Ministry and Central Bank. It was “unlikely that the government was unaware” of the bank’s overseas lending spree.

Most damning were the “alleged connections” between Carrian’s George Tan and officials from Mahathir’s political party UMNO, which the CIA called “the most potentially damaging aspect of the affair.” Trade and Industry Minister Tengku Razaleigh Hamzah was also implicated due to his close ties to several BMF officials involved in the scandal.

While the CIA had no smoking gun directly implicating Mahathir, the “hint of association has damaged the political standing” of his administration, the report concluded. Mahathir’s government had already taken heat for its initial “restrained” response to the BMF fiasco and its attempts to downplay the mounting losses.

Mahathir, who had styled himself as a champion of clean government, now faced a crisis that the CIA believed could potentially “bring about his ouster” if additional incriminating disclosures emerged. Worryingly for the PM, the report noted several “potential trouble spots” ahead:

The ongoing trial in Hong Kong of George Tan and his associates could reveal Malaysian links, though the CIA suspected the Hong Kong government might suppressing damaging testimony under pressure from Kuala Lumpur. Extradition and prosecution of the BMF officials involved also risked exposing high-level political connections, unless they were “‘bought off’ to deny any Mahathir administration involvement.”

The final report of the official Malaysian inquiry into the scandal could also pose problems if it implicated senior officials, though Mahathir’s government would likely heavily censor any such conclusions, the CIA believed. Intriguingly, the former Prime Minister Hussein Onn, by then an advisor to Petronas, had alleged that Bank Bumiputera’s domestic loan book was in equally bad shape, something that could hugely compound the scandal if proven true.

In the end, Mahathir managed to survive the political fallout from the BMF affair. The Committee of Inquiry’s final report, when it emerged, avoided pointing fingers at government higher-ups. Mahathir called snap elections in 1986, a year ahead of schedule, and won a resounding victory. Most of the key players, from Mahathir to Razaleigh to ex-PM Hussein Onn, remained major forces in Malaysian politics for years to come.

George Tan was eventually found guilty for his role in the Carrian fraud after a second trial in Hong Kong in 1996 and served three years in prison. But many questions remained unanswered about who facilitated and benefited from his schemes. Lorrain Osman, the BMF chairman who arranged many of the loans to Carrian, was extradited from the U.K. and jailed in 1993 for taking $12.5 million in bribes – but he never fully revealed on whose behalf he was acting.

The murder of Jalil Ibrahim, the Bank Bumiputera auditor who was investigating the BMF loans when he was killed in Hong Kong in 1983, remains an unsolved mystery. During the trial of the alleged hitman, the defendant claimed Ibrahim was silenced to prevent him from blocking further credit to Carrian, but this tantalising allegation was never conclusively proven.

Ultimately, the Malaysian people were left with the bill for Bank Bumiputera’s mega losses, which ended up totalling over 2.5 billion ringgit ($1 billion at the exchange rates of the time). The bank, originally established to aid poor Malays, had to be bailed out by Malaysian taxpayers and the state oil firm Petronas. The cruel irony was that a bank set up to help indigent Bumiputeras was used to enrich a handful of wealthy businessmen and politically connected elites.

Rather than radical transparency and accountability, the Mahathir government’s response was a cosmetic clean-up job that swept the true rot under the carpet. A few convenient scapegoats took the fall, but the underlying system of corruption and cronyism endured intact, waiting to enable the next scandal. This failure to learn the lessons of BMF would pave the way for ever-greater disgraces like the 1MDB affair three decades later.

The CIA archives on the BMF scandal provide a glimpse into a sordid saga that transfixed both Hong Kong and Malaysia in the 1980s, bringing down a high-flying tycoon and his bankers while nearly toppling the Malaysian prime minister in the process. It was a scandal of firsts – the first billion-dollar bank fraud, the first major case for the ICAC, and the first great test of Malaysia’s institutions and rule of law. On all three counts, it was an early warning of the troubles that would continue to plague Malaysia for decades to come.

More than just a salacious tale of a bygone era, the Carrian affair was the original sin for Malaysia’s modern culture of elite impunity and the hollowing out of its public institutions. Like the recently released movie “The Goldfinger” which fictionalises the exploits of George Tan, the CIA report hints at the ongoing relevance of this sweeping morality play about the dangers of unchecked greed and unaccountable power.

As Malaysia grapples with the fallout of the 1MDB scandal and contemplates the dawn of a new political era, the unlearned lessons of the BMF debacle deserve closer scrutiny. The names and faces may have changed, but the moral hazards remain the same. Only by confronting the ghosts of scandals past can Malaysia hope to finally exorcise the spectres of corruption and misconduct that still haunt its politics today.