The Public Accounts Committee (PAC) will continue investigating Khairy Jamaluddin's involvement in the merger of government-linked financial services company Avenue Capital Resources Bhd with investment advisory firm ECM Libra Bhd, although he has sold his stake.

Asked if Khairy would now be let off the hook, PAC chairperson Shahrir Samad said: "It is not my call, I'm only one guy here. Whether Khairy should be let off is not the issue.

"Government funds are being used to pay for this merger. I'm more interested in why government funds are being used."

Among the questions the PAC will be asking is whether Avenue Capital Resources would lose control under the merger. It is widely held that ECM Libra's shareholders will sit on the newly formed board as chairman and chief executive officer.

Khairy, 31, had bought 10.2 million ECM Libra shares with a loan taken from three separate transactions of 1 percent each from Libra chairperson Kalimullah Hassan, CEO Lim Kian Onn and chief operating officer Chua Ming Huat.

As the son-in-law of Prime Minister Abdullah Ahmad Badawi - also finance minister - his involvement has raised questions on grounds of conflict of interest and nepotism.

However, newspapers today reported that he had sold his stake so that he could focus 100 percent on his political career - he is currently Umno Youth deputy chief.

DAP parliamentarian for Kepong Dr Tan Seng Giaw, also a PAC member, said 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," he said.

The merger was financed by Aroma Teraju Sdn Bhd, which owns 29.5 percent of Avenue Capital. (The Ministry of Finance Incorporated - the government's investment arm - has a 55 percent stake in Aroma Teraju, while Bank Simpanan Nasional holds the remaining 45 percent.)

Tan also said local stockbroking firm K&N Kenanga Bhd "is not qualified to act as financial advisor to ECM Libra Avenue, as it is not a auditor or a merchant bank".

"This business transaction is something we want to get the bottom of, because government money is being used," he said, adding that the PAC would meet finance ministry officials on Aug 25.

'Right to know'

Opposition politicians have also picked up on Khairy's decision to sell his shares.

Keadilan vice-president Sivarasa Rasiah said Khairy sale of the shares was a reaction to political pressure from former premier Dr Mahathir Mohamad, who has kept up a barrage of criticism against the decisions of Abdullah's administration.

"The critical question, however, (revolves around) the merger - there are insufficient facts to show there wasn't a conflict of interest," Sivarasa said when contacted.

"Avenue Capital is a government asset, and we have all the right to know the facts. The financial health of a government asset was at risk from such private deals."

He also said he was "quite disappointed with the PAC's handling of its investigation into the merger".

"Khairy is connected to decision makers like (Abdullah), who is finance minister. This deal came about by undue influence," he alleged.

PAS secretary-general Kamarudin Jaffar called on the government to dissolve the merger, saying that Avenue Capital's internal organisation had been taken over by ECM Libra's shareholders.

In a statement, he called on the Securities Commission, as the investigating and regulatory body on public mergers.

Kamarudin said the finance ministry, as the main shareholder of Avenue Capital, should dissolve the deal, as it would mean that the company would be controlled by a smaller firm.

According to PAS' calculations, he added, Khairy had lost RM612,000 through the sale of shares and not RM200,000 as claimed.

(Khairy had said he sold the 10.2 million shares at 65 sen each, having paid 71 sen when he purchased them.)

DAP veteran leader Lim Kit Siang questioned why Khairy had stated that the sale was to a Malay buyer.

"Why did Khairy play the race card by claiming that, although there were better offers for the shares, he sold the block to a Malay buyer to protect the bumiputera equity ownership, when he had in the first instance acquired the 3 percent stake in ECM Libra last year with a RM9.2 million loan?" he asked in a statement issued today.

He asked if Khairy was suggesting that bumiputeras disposing equity purchased from non-bumiputeras are acting against Malay interests,and that shares acquired by bumiputeras from non-bumiputeras must never be sold to non-Malays.