The country's multi-billion ringgit pension fund has been accused of seeking to bail out an ailing bank by taking over its parent company, Rashid Hussain Bhd (RHB).

Among those who are up in arms over the reported 'bailout' of Malaysia's fourth largest bank by the Employees Provident Fund (EPF) is Selangor DAP chief Ong Chee Keng.

Ong said that the matter was of public concern as EPF was entrusted with making prudent investments in order to maximise dividends for its contributors - the Malaysian workers.

He said he was distressed over news reports that EPF would buy over Utama Banking Group's 32.79 percent stake in RHB, which as of March 31 was reported to be in RM3.4 billion of debt.

According to EPF's first quarter investment performance report, the state-owned pension fund manages RM267 billion in investments.

However, some have questioned the many questionable investments by EPF, whose dividends average only 4.5 percent in the past eight years.

Should the deal be inked, EPF would become the majority shareholder of the financial-services conglomerate as it already owns a 30.9 percent in the company.

EPF's initial RM2.3 billion investment in RHB was valued at RM10 per share but after the 1997/98 financial crisis, it is now worth RM178 million, or 80 sen a share.

It was also recently reported that EPF had made paper losses of some RM5 billion in recent years due to imprudent investments.

Linked to Taib Mahmud

Although Utama Banking Group have denied receiving any offers from EPF, the resignation of RHB's chairperson Sulaiman Abdul Rahman Taib on Thursday and EPF's silence over the matter have fueled speculation that the deal was imminent.

The resignation of Sulaiman, who is Sarawak chief minister Taib Mahmud's son, is also speculated as a move to pave way for EPF to restructure the ailing company.

According to The Wall Street Journal yesterday, EPF had previously flexed its muscle by blocking a shareholder vote on a US$190 million (RM684 million) exchangeable bond that the company had planned to sell to refinance part of its staggering debt.

DAP's Ong said that EPF must be held accountable and be transparent in procuring new investments so that it can provide dividends higher than the inflation rate.

"Over the past few years, EPF have been underperforming and paying even less dividends than Amanah Saham trust funds and Lembaga Tabung Angkatan Tentera (trust fund for armed forces)," Ong told reporters today.

Bad loans

The opposition leader also handed a memorandum addressed to EPF chief executive officer Azlan Zainul this morning, urging the latter to clarify the rumoured takeover.

"We hope that this is not another decision made to 'save' certain parties for being reckless and taking unnecessary risks that will eventually lead to lower returns for contributors," he said.

RHB is also currently embroiled in a RM1.43 billion suit against its former owner and prominent businessman Rashid Hussain and five his former bank associates over gross negligence when granting huge loans in the mid-1990s.

The suit was filed by RHB Capital Bhd and its two subsidiaries - RHB Securities Sdn Bhd and RHB Equities - for breach of duty and negligence.

The plaintiffs argue that the net effect of negligence over a principal sum of approximately RM500 million caused a company within the RHB group to absorb the losses.

They are seeking RM1.43bil which amounts to the principal sum of RM500 million plus interest.