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i may have heard wrongly but the subject may be at advance negotiation to buy a bank, a fairly large bank!

"Just some contexts for Joe Public as well as the Securities Commission and MoF officials to chew on."

The problem for Joe Publics like myself is that members of the PAC appear to talk in code or they don't really have a good grasp of the issues. Just sound bytes and more sound bytes. Maybe, it's my own fault for not having a Malaysiakini subscription. So I hope someone, anyone, who has read the good stuff in Malaysiakini will be so kind to enlighten those of us on the other side just what laws Sharir Samad thinks Khairi had or might have violated in the ECM-Avenue merger?

Further, both Sharir Samad and Dr Tan Seng Giaw are adamant that government funds or money was used. Dr Tan further said that he was troubled by the fact that ECM Libra did not need to finance the merger. The company didn’t need to come out with any money. It was all done by Avenue and that is the finance ministry’s money.

To laymen, this could be taken to literally mean that lots of money was dished out by the Avenue side. This is downright misleading.

About the only sensible thing the PAC has said thus far is that there appears to be a conflict of interest since the father-in-law is the head of the Ministry approving a merger between two companies and his son-in-law is a special employee in one of them. I agree with that assessmnent but this must not preclude the sons-in-law of future prime ministers from making an honest living. If both the family members concerned are in deep pooh, then they deserve to be in their predicament for not being transparent at the outset.

So what was rational for the merger? Consider this statement in ECM Libra's announcement on January 19, 2006:

"RATIONALE FOR THE PROPOSED MERGER

In a joint statement made on 17 January 2006, Bank Negara Malaysia and the SC had envisaged that there would potentially be 17 investment banks emerging from the implementation of the framework for investment banks.

In view of the changing financial landscape, both ACRB and ECM Libra believe that the Proposed Merger is timely and imperative in order for both groups to create a larger and more robust investment bank that is able to withstand and compete within a more competitive landscape.
Both ACRB Group and the ECM Libra Companies are established players within the financial services industry, each group having their key strengths. The Proposed Merger thus represent a window of opportunity for both groups to yield various benefits latent in the assimilation of the ECM Libra Companies with the existing businesses of AICB (ultimately renamed ECM Libra Avenue Berhad) such as the generation of synergies in financial products and services, which would widen the market accessibility and diversification of financial services offered by the enlarged AICB group.”

What is so objectionable about the rationale? NOTHING.

Next, the mechanics of the merger did not require large cash outlays from Avenue that one might have inferred from Dr. Tan’s statements. All ECM did was to inject its income producing assets into ECM Libra Avenue in exchange for paper, that is 442,000,000 shares. And there is no guarantee that the shares will hold the theoretical price at the time of issue. ECM Libra’s shareholders may well cry foul if the shares they have swapped for loses their shine in the stock market .

I hope the PAC at its next meeting might ask or consider the following points:

a. Was it entirely co-incidental that the joint statement by BNM and the SC envisioning the framework of 17 investment banks was made on Jan 17, just two days before ECM-Avenue merger was announced? BNM and SC are effectively under MOF control and one gets the feeling that the timings were somehow staged.

b. Is the PAC satisfied that the Avenue group now holds a fair share of the enlarged entity? The share price of ECM Libra was rammed up to a close at RM1.06 on Jan 17 and it is clear in ECM Libra’s announcement on Jan 19 that the size of ECM Libra’s capitalization will have an important bearing on the number of “consideration shares” to be issued to the ECM Libra side.

Therefore:

i) has the PAC considered the fact that the share price of ECM Libra began to fall steadily after the announcement of the merger on Jan 19 (from an intra-day high of 1.12 on Jan 11, to RM1.06 on Jan 17 to 66 sen just before the suspension. Therefore should the PAC examine whether the ECM Libra share price had been artificially maintained at above the RM1 price level to facilitate a higher number of shares to be issued to the ECM Libra side, to the detriment of the Avenue side?

ii) does the Pac intend to query the SC and MOF whether they had conducted a review of the number of consideration shares to be issued to the ECM Libra side since the price of ECM Libra shares had fallen back to pre-merger levels? Should there be a review in future deals if no review was made in this case?

c. Bernama reported that Khairi Jamaluddin (“KJ”) had on August 11, 2006 disposed of his entire stake of 10.20 million shares in ECM Libra Avenue Berhad at 65 sen per share, which would have led to a loss of RM612,000 since the shares were purchased at 71 sen. Yet KJ has been reported in the Star to say that he made a loss of RM200,000. As KJ had originally purchased 12,990,000 shares in ECM Libra, he would have been entitled to receive the same number of ECM Libra Avenue shares following the 1 for 1 swap formula. Yet Bernama’s report suggested that his entire stake at the time of sale comprised 10.20 million shares. Will the PAC examine the discrepancy in the number of shares bought and sold? Will the PAC deem it necessary to determine whether the unaccounted for shares may be due to the fact that KJ only received 10.20 million shares in the share swap because he had already sold 2,790,000 ECM Libra shares at an average price of 85-86 sen per share before January 19 thereby having made a profit of approximately RM400,000?
d. If the foregoing analysis is correct, will the PAC examine whether the sale had violated any “insider trading” rules?

JEFF OOI says: Many thanks reader Birdseye. You have asked questions that even senior business editors like Wong Sulong, P. Gunasegaram and Rajan Moses don't bother to ask. And your questions are valid ones even for the Joe Public. I may have to wrote another Open Letter to the PAC members based on your observations.

My original sentiment on KJ was he is being spotlighted because he is the SIL of AAB and a young rush and coming potential future leader, thus each of his step would naturally attract his fair share of critiques.

However, after reading his comment that he rather make a loss (of few hundred thousands) than selling his stakes in ECM-Libra to a non-malay, this shows he is NOT WORTH to be a leader in this country called Malaysia.

Malaysians DO NOT need a future leader who borders on the line of racial dis-preference (KJ you know what the stronger word should be).

Hopefully PAC and BNM would investigate to the bottom of this ECM-Libra Avenue deal especially the source of funding.

"...instead of selling it to a non-Malay....."

Let's follow Nazri's famous quote and shout "RACIST!" 42x! to the future PM of Malaysia!

He had to make such statements in order to climb up the political ladder. Previous Youth leaders have done it and he's no exception. Unfortunately in his haste to be up there he has offended some people, TDM included. We can also understand why he's in a hurry, his FIL may be a one termer.

Jeff,

I hope you will write an open letter because I feel the authorities are simply not doing enough to stem out practices that are at variance to common sense.

I get the feeling that because of the brouhaha that surrounds KJ, matters that concern the Avenue side may not have been adequately addressed.

Thanks.

I must admit that it is a little refreshing to see questions coming out of the PAC regarding the ECM and Avenue alliance. I wonder though if the same would have happened if the current political climate was not in it's current chaotic state. Are they just out for political mileage? Will we ever see a truly robust check and balance system in place?

If we want a proper system of checks and balances,we have to fight for it.

Nothing is given free,from even from a Mr Nice Guy like ABB.

I watched him talking about his son's business on TV,I was half expecting him to follow the famous line -used effectively previously by LKY and TDM.

"My children are unfortunate,if their do not have a Prime Minister as their father,they would have gone up much faster,much more succeessful or even earn much more money."

You believe?I don't!

ALthough AAB was not so direct,but it was fairly clear to me he was going along that line and said:See,my son makes all his profit from overseas,when Petronas is involved,it was small money.

Got it?

will someone please flush KJ down the toilet?

the toilet is cleaner..so no need to soil it..

Jan: "He had to make such statements in order to climb up the political ladder".

_________________

Even so, I feel he's really walking on thin ice with these kind of statements. I used to harbor some hopes - seeing he's Oxford ed and all but lately .....

I wonder when are Malaysians going to make their political statement. Anybody here got ideas on what to do with their votes come the next election?

With so much passion and focus displayed here discussing Khairy/ECM Libra, is anyone going to take Mahathir up on his giving consent to investigate his children? How about the relatives of other politicians?