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Cliff Buddle

A DISTINGUISHED economist, driven by a desire to boost his bank's status on the world stage, became involved in one of the biggest financial scandals ever seen in Hong Kong, the High Court heard yesterday.

  Rais Saniman, 60, played a key role in the Bumiputra fraud which caused losses of more than US$800 million (HK$6.17 billion).

  Saniman, former head of the Malaysian company's international banking division, pleaded guilty to two charges of conspiracy to defraud relating to US$238 million.

  The court heard he hoped to make huge profits for the Bank Bumiputra Malaysia Berhad (BBMB) by investing in Hong Kong's booming property market of the early 1980s.

  But the high risk gamble backfired when the market crashed and the bank was left facing massive losses.

  Saniman was extradited to Hong Kong last year from France, where he was working for the Organisation for Economic Co-operation and Development.

  He is to be sentenced by Mr Justice Stuart-Moore today and faces up to seven years' imprisonment.

  Prosecutor Martin Wilson QC said the complex fraud involved secret, unsecured loans made by the bank's Hong Kong subsidiary, Bumiputra Malaysia Finance Ltd (BMFL), to the Carrian Group in 1981-82.

  He told the judge: 'We say this was a deliberate course of action, dishonestly undertaken, in which breath-taking sums of money were made available to the Carrian Group, no doubt in the hope that all would come well in the end and the bank would not suffer.'   Mr Wilson said Saniman knew such loans should not have been authorised by BBMB. He also knew the payments would not have met with the approval of the regulatory authorities and spun a web of deceit to cover up their true nature.

  'That deliberate course of conduct was wholly unacceptable and exposed BBMB to a catastrophic risk to its economic interests which, in the end, materialised,' Mr Wilson said.

  BBMB was established in 1965 and BMFL began trading in Hong Kong in December 1977.

  Saniman, described as a man of extensive banking and economic experience, joined BBMB as chief economist in 1971. He became senior general manager of the international banking department in 1978.

  Although not resident in Hong Kong, Saniman made frequent visits to the territory. Mr Wilson said he was closely connected with BMFL and was an authorised signatory to its three principle Hong Kong bank accounts.

  By September 1981, US$292 million had already been switched to Carrian-relatedcompanies by others involved in the conspiracy.

  Saniman was approached by Carrian and asked for a further loan of US$138 million, the court heard.

  Mr Wilson said it was necessary to disguise the fact BMFL was to be further exposed. This was done by forming seven new companies, not traceable to Carrian, to handle the funds.

  BMFL's funding base was not large enough to cope with the huge loans. Saniman used his influential position to help secure extra funding from the parent company, the court heard.

  On September 19, 1981 the applications for the new loans were approved at a board meeting. This was on the basis the advances would be secured by shares worth well in excess of the loans themselves.

  But the firms involved were all HK$2 companies which had been recently incorporated and had no assets of value.

  The decision to approve the loans was made before the applications had even been tendered.

  Mr Wilson said: 'It would be an understatement to say that the money was released with unseemly haste.'   The funds began to move on September 23, 1981. Within the first week US$70 million had gone. In October another US$58 million was transferred. The balance of $10 million was switched on December 1.

  When it was thought that the deception might be discovered, seven further companies were formed and their names substituted for the ones formerly used.

  'The whole process was a fiction,' said Mr Wilson.

  Similar methods were used to dishonestly lend another US$100 million to Carrian between December 1981 and February 1982, the court heard.

  The second set of loans was disguised as 'money market transactions', which are not subject to scrutiny.

  In February 1982 auditors Touche Ross began to express concern that the loans made by BMFL were not sufficiently secured.

  Mr Wilson said Saniman came to Hong Kong in March 1982 to try to reassure the auditors by signing a letter on behalf of BBMB stating the parent company would underwrite BMFL's liabilities if their debtors became insolvent. Carrian crashed in 1983.

  As a result of the fraud, BBMB also faced disaster. The Malaysian Government intervened and a rescue operation was carried out.

  Saniman left Hong Kong. He was arrested in Paris in April 1987.

  Following a legal battle he returned to the territory on February 2, last year.

  Saniman's responsibility for the fraud was not as great as two directors of BMFL who had already been dealt with by the courts, Mr Wilson said.

  Mohammed Shamsudin was jailed for 41/2 years in January 1987 after admitting fraud plot charges and accepting bribes. This sentence was later reviewed and increased to 10 years.

  Lorrain Osman was sentenced to 12 months' imprisonment in June 1993 for involvement with the US$292 million loan.



Saniman admits key role in huge banking fraud