The former Securities Commission (SC) chairman Ali Abdul Kadir has made a shocking statement that Halim Saad's RM3.2 billion debt to United Engineers (M) Bhd (UEM) is a 'private matter' between Halim and 'the private company'! ( The Edge Financial Daily , June 23)

UEM is 100 percent government-owned, and that means Halim owes the taxpayers RM3.2 billion. Does that not make this affair a national issue of paramount importance? Aren't the people of this country entitled to be informed of the progress made in recovering this debt?

Imagine that such an important public issue should have been so nonchalantly brushed aside by someone who had occupied the seat of chairmanship of the Securities Commission for five years (until Feb 2004).

In view of the peculiar background of Halim Saad and the UEM-Renong group, Ali Abdul Kadir's cavalier reply has inadvertently cast a poor light on the integrity of the SC, in particular to its effectiveness in enforcing compliance from crony companies linked to the ruling clique.

Halim is no ordinary businessman and neither is the UEM-Renong group an ordinary conglomerate. The latter has long been recognised as a vehicle carrying assets of Umno and its leaders, and Halim as CEO was a trustee (as well as beneficiary) of this vast business empire.

At its heyday, UEM-Renong was Malaysia's pre-eminent corporate giant controlling 11 listed companies, was flushed with lucrative government projects and unlimited bank loans. However, its weak management and reckless expansion proved to be its downfall when the Asian financial crisis struck in 1997.

Buried under RM30 billion of debts, it managed to survive only after a series of government bailouts involving more than RM10 billion of public funds.

By 2001, it was apparent that the continuing insolvent state of the UEM-Renong group proved to be a lingering drag on the entire stock market. With the dual purpose of making a final massive bailout of the group as well as to polish the badly damaged image of the stock market, the government bought over UEM completely (which then controlled the entire conglomerate through Renong) and removed Halim from the management.

The latter, being the symbol of Malaysia's cronyism then, was made the fall guy, so as to create the illusion that thenceforth, Malaysia had rid itself of cronyism.

Following the buy-over of UEM, the government moved quickly to have it de-listed. The latter's move was easily seen as an attempt to obviate the group's monumental debt burden away from public glare.

But there was another hidden agenda, which was not so obvious. It was to let Halim off the hook on his obligation to pay UEM RM3.2 billion, a sum proposed by Halim and accepted by UEM in 2001, pursuant to Halim's put option granted to UEM in 1998 for the 32.6 percent stake of Renong.

Halim is not known to have honoured this RM3.2 billion deal other than making his first instalment payment of RM100 million in 2001.

Investors who had their fingers burnt at the height of the Asian financial crisis will surely recall the fateful days in November 1997, when the stock market was convulsed by a bombshell dropped by the Renong group.

It was then announced that UEM, a member of the conglomerate, had suddenly forked out massive cash to buy over a big junk of Renong Bhd shares from some anonymous sellers for no apparent reason.

For this transaction, UEM paid out RM2.3 billion cash to buy over 723 million shares representating 32.6% of Renong Bhd. Considering the facts that UEM shareholders's fund was only RM2.9 billion and its net current assets were no more than RM0.1 billion, the market was stunned by this unbelievably senseless move.

First, it put the company in great financial difficulties in the midst of tight liquidity all round, in an environment of fast falling stock and currency markets. And UEM had to borrow heavily to complete this purchase.

Second, it placed shareholders' value in a precarious state, as the entire stock market was then in a highly-jittery state, having fallen almost 50 percent from its high (composite index 1,271) earlier that year in a major sustained downtrend without any sign of bottoming out.

There was hence no conceivable reason why UEM should have entered into such an atrocious deal.

To the discredit of the Securities Commission, it has failed to give a proper public account on this seemingly mysterious and inexplicable transaction which was severely detrimental to the shareholders' interests.

Market reaction was instantaneous. In the ensuing stampede to get out of the market, within the month of November 1997, UEM shed two thirds of its value, Renong 40 percent, and the KLSE composite index 30 percent.

In the absence of any creditable explanation, this Renong move was perceived as a raid on its own coffers - an act of daylight robbery on the investment of its minority shareholders. Knowing Renong's link to the ruling power elite, the market was seized by fear of similar raids on other blue chip counters, resulting in free falls that extended over the entire market.

Under intense public pressure, and out of a desire to restore some measure of public confidence, Halim as CEO of the Renong group was eventually made to placate the investing public by personally granting a put option to UEM for the same 32.6 percent stake in Renong Bhd (the RM2.3 billion was subsequently increased to RM3.2 billion to include the holding costs).

Halim's put option was, of course, a step in the right direction as it offered some form of compensation to the shareholders, apart from an implicit acknowledgment of guilt. Regrettably, that pledge of atonement remains unfulfilled. There is no reason why the government should absolve Halim of this commitment.

An enormous public stake is involved in this issue. Prime Minister Abdullah Ahmad Badawi, who has repeatedly vowed to deliver a clean and transparent system of governance for the country, should now step in and account to the people.