Mahathir Ally, Businessman Tan Sri A.P. Arumugam, Is Linked To Ringgit Currency Trades
Boxing Squirrel@Oxbridge.edu
Wall Street Journal Summary:
A MALAYSIAN businessman is
among the beneficiaries of the ringgit's fall.
Tan Sri Arumugam has described himself as
a close associate of President Mahathir, a
sharp critic of currency traders, showing
how difficult it is to tell friends from foes in
today's complex global markets.
Full Article:
October 16, 1997
Mahathir Ally Is Linked
To Ringgit Currency Trades
By MARCUS W. BRAUCHLI and LESLIE LOPEZ
Staff Reporters of THE WALL STREET JOURNAL
In the weeks before Malaysian Prime Minister Mahathir Mohamad
startled a sober World Bank meeting by accusing Western currency
dealers of conspiring against developing nations, a foreign-run investment
fund placed a succession of foreign-exchange trades against the Malaysian
ringgit.
The fund, CAM Catamaran Fund Inc., run by Luxembourg-registered
securities firm Caspian Holdings, made money on many of the currency
trades. But the beneficiaries weren't only Western financiers in New York
or London. Among backers of Caspian and the fund, according to past
and present Caspian employees, is Tan Sri A.P. Arumugam, a Malaysian
businessman who has described himself as one of Dr. Mahathir's close
associates. His investments include companies in which Dr. Mahathir's
children in the past have been business partners or directors.
There is no evidence Tan Sri Arumugam knew the specifics of the
Catamaran Fund's investments, nor is there any allegation of illegality. Yet
the participation, even indirectly, of an old ally of Dr. Mahathir in the kind
of activity for which the prime minister displays such anger shows how
difficult it has become to distinguish friends and enemies in the
evermore-complex global markets.
Mahathir's Attack on Traders
At last month's meeting in Hong Kong of the World Bank and
International Monetary Fund, Dr. Mahathir assailed currency traders for
becoming "very, very rich through making other people poorer" and
accused the West of trying to keep down developing countries. He has
called the Hungarian-American financier George Soros a "moron" and last
week said he feared a Jewish "agenda" against Malaysia. His comments
followed harried efforts by Southeast Asian governments this summer to
prevent foreign investors from dumping the region's currencies, as the
area's economies were hit by financialmarket turmoil.
Financiers and diplomats have lashed back, saying such views are
misdirected and show shallow understanding of the integration of global
financial markets. They suspect that many Southeast Asian investors,
including Malaysian companies, contributed to the ringgit's decline by
selling the currency to buy U.S. dollars.
'Like Many Other Businessmen'
Dr. Mahathir's office didn't reply to faxed questions about Tan Sri
Arumugam's investments. But an aide to Deputy Prime Minister Datuk
Seri Anwar Ibrahim sought to distance top officials from Tan Sri
Arumugam, saying the deputy prime minister, who is also finance minister,
was unaware of any investment by Tan Sri Arumugam in Caspian or its
hedge fund. "He [Tan Sri Arumugam] is just like many other businessmen
who claim to be close to Malaysian political leaders," the aide said.
Tan Sri Arumugam didn't reply to telephone inquiries or faxed questions.
Caspian officials say the amount of money held by the Catamaran Fund is
only about $12 million, which, even if leveraged by borrowings, is a
droplet in the $1 trillion-plus-a-day global foreign-exchange market. And
there is no indication that Caspian or the Catamaran Fund ever influenced
or sought to sway the value of the ringgit.
The size of the fund "is peanuts," said Steve Clayton, Caspian's managing
director in Malaysia. He described himself as a friend of Tan Sri
Arumugam and added that "to my knowledge" Tan Sri Arumugam isn't a
Caspian shareholder directly, though "I wouldn't know whether he is a
shareholder through nominees."
Private Company
Christopher Heath, who founded Caspian in 1995 and still guides it,
declined to say if the Catamaran Fund has ringgit positions, though he said
it has more than 150 investments now in about 30 different countries. But,
he added, "the ringgit is not a feature of our trading policy." There is no
indication investors in the fund were informed regularly about specific
trades or investments, including the ringgit trades.
Noting that Caspian is a privately held company, he also declined to
discuss the holdings of any specific investor in either Caspian or the
Catamaran Fund. But other shareholders and people familiar with
Caspian's business said Tan Sri Arumugam, through an offshore shell
company called Mount Vernon Investments Ltd., is one of a number of
developing-country shareholders in Caspian and the Catamaran Fund, a
link that underscores the interwoven nature of global finance that Dr.
Mahathir attacked. Tan Sri Arumugam has boasted of his close ties to
senior Malaysian officials, including Dr. Mahathir and the deputy premier,
Datuk Seri Anwar. Earlier this year, by Caspian's own account, Tan Sri
Arumugam arranged for the prime minister to address a private London
gathering of Caspian clients.
In many ways, Caspian is a paragon of Western-based financial houses
that specialize in emerging markets across Asia, Latin America and
Eastern Europe. Among its cornerstone shareholders: Ssangyong
Investment & Securities Co. of South Korea, National Finance &
Securities PCL of Thailand, Commonwealth Bank of Australia Ltd., and
Vector Casa de Bolsa, the financial-services arm of Mexico's Pulsar
International SA de CV.
Underscoring the breadth of difference between Dr. Mahathir's harsh
views of such activities and those of other Asian leaders, Philippine
President Fidel Ramos and Singapore Prime Minister Goh Chok Tong on
Tuesday both implicitly rejected Dr. Mahathir's calls to control Asian
markets. "The remedy lies not in turning away from the world but in
embracing it closely," Mr. Ramos told a forum in Hong Kong. "We in the
Philippines are bringing down all barriers to globalization."
--Raphael Pura contributed to this article.
