Tabung Haji scandal and illegal dividends

By P PREM KUMAR & ALIFAH ZAINUDDIN / Pic By BERNAMA

The government yesterday released a damning report on Lembaga Tabung Haji (TH), highlighting illegal dividend distributions since 2014, assets shrinkage of more than RM4 billion and claims of accounting irregularities to mask a higher profit.

The report, which was tabled in Parliament by Minister in Prime Minister’s Department (Religious Affairs) Datuk Seri Dr Mujahid Yusof Rawa (picture), showed a financial hole of RM4.1 billion between total assets and liabilities, making the fund ineligible to pay dividends to depositors.

Investigation by independent auditor PriceWaterhouseCoopers (PwC) unearthed that TH has total assets of RM70.3 billion against RM74.4 billion in liabilities at the end of 2017, a hole of RM4.1 billion.

The pilgrim fund’s financials indicated that every ringgit of its liabilities is backed by 94.4 sen in assets. The assets to liabilities ratio had widened from an estimated 98 sen to RM1 indicated by the central bank at the end of 2015.

“TH did not have enough assets to cover its liabilities and they still declared hibah (dividends) since 2014. I leave it to your imagination to think of how they obtained the money to make the payouts,” Mujahid told the media at the Parliament lobby yesterday.

The state-owned fund, with nine million depositors and manages thousands of Malaysian Muslims to perform the haj every year, had acted against TH Act 1995.

The bylaw that governs the fund prohibits dividend and bonus payments if the assets slide lower than its liabilities. TH is also not allowed to pay the yearly hibah if it is not profitable.

Mujahid said dividend payments made since 2014 had not met the requirement of assets against liabilities and that there must be distributable profits.

The minister, who is in charge of TH, warned of larger gaps in the pilgrim fund’s financials.

“The hole is getting bigger. If I may say, it is more than RM4.1 billion today. This is not sustainable,” he stressed.

Meanwhile, Malaysiakini, which quoted PwC’s financial position review for 2017, claimed TH had paid hibah using depositors’ savings and the fund had masked its profitability by structuring deals to show profits.

The online news portal said TH sold shares in BIMB Holdings Bhd  for a profit before buying back the stake. The report also said the pilgrim fund’s subsidiaries had announced high dividends, but were not fully paid to TH.

“This would only lead to the hibah being funded out of the cash from the depositors’ savings funds, and not the profits declared,” PwC said in the financial position review.

The report said TH sold RM2.55 billion in shares to generate a gain of RM553 million, but spent RM2.69 billion buying back the same shares, according to Malaysiakini. TH is a major shareholder in BIMB with about a 52% interest in the holding company of Bank Islam Malaysia Bhd, the country’s first Islamic bank.

The financial scandal has also forced the government to embark on a comprehensive turnaround plan to plug the hole.

“That is why a recovery plan is urgently needed and that is what we have agreed on,” he said.

Mujahid said the comprehensive turnaround plan at TH will include a special-purpose vehicle (SPV) to take over, rehabilitate and maximise recovery of the state-owned fund’s underperforming assets.

The SPV has been approved by Cabinet and will be rolled out before the end of the year.

TH will also b e placed under the supervision of Bank Negara Malaysia (BNM). Currently, the pilgrim fund is solely governed by its Act. BNM has no regulatory oversight of TH.

“The Cabinet has discussed the turnaround plan and given our full endorsement so that TH’s financial position is restored and confidence regained,” Mujahid said, adding that more details on the plan will be revealed today.

The minister, however, assured depositors that dividends for financial year 2018 (FY18) will still be paid out, in line with the two prerequisites stated in the Act.

“I believe TH will be able to make a small profit to announce dividends. TH will announce the amount by year-end as their accounts have not been closed yet,” he said.

The 2017 Auditor-General’s Report last week revealed that TH has failed to record an impairment totalling RM227.81 million on its investments in several subsidiaries and associates. This is due to inconsistencies in its asset impairment policy, which was changed every year. In fact, the policy was modified twice in FY17.

The new management, led by former Bank Islam CEO Datuk Seri Zukri Samat, is expected to announce more revelations related to the fund today.

TH lodged two reports with the Commercial Crime Investigation Department at the end of last month, implicating former chairman Datuk Seri Abdul Azeez Abdul Rahim, former CEOs Tan Sri Ismee Ismail and Datuk Seri Johan Abdullah, as well as four current top officers.