Within 3 years, MNB's loan portfolio of US$600m was the largest amongst Singapore banks. It made quick and deep forays into the Chinese business community with cross-holdings in Singapore, Malaysia, Indonesia and Hongkong. It made the authorities in the region wary of Soviet economic expansionism as a means of influence building to counter American power in Vietnam. But was there basis for this fear or was it a simple case of overtly aggressive bank lending. After all, Teo Poh Kong, an Asst General Manager of Overseas Union, and ex-BOA executive, recruited by MNB and given a long leash to run the entire operations, had boasted they will be a top bank in no time.
I joined the bank as a junior staffer in the Internal Audit Dept in the later half of 1970s. By then the bank was in decline, having been defrauded twice, massive loan write offs, reputational disasters, all leading to diminished counter-party lines and higher cost in money market fundings. From my perch in Internal Audit, I had front row seat in what was transpiring. Soviet apparatchiks that made up the management on the 5th floor had very little experience in commercial banking. The bank's loan portfolio was basically third and fourth tier borrowers. Collateral arrangements lacked valuations and legal documentation not perfected. Credit files hardly existed. There was a complete absence of evidence of loan evaluation and approval process.
One of the first task I did was to perform a credit audit on a group of companies that required qualifications such as to call into question the entire files in the Credit Dept. By that time, the department was manned by an entirely new team, including the manager. There was no one who was in a position to answer my audit queries. Under the circumstances, my audit coverage was extended to 28 groups. The state of affairs was an auditor's nightmare. This example illustrates the vacuum that existed. There were two borrowers etched in my memory -- Chen Kung and Sadanobu Ogawa. There were absolutely nothing in the credit files and the credit officers knew nothing. Some 20 years later long after I had left the bank, I came across an article in some magazine that mentioned Sadanobu Ogawa is the alias of Chen Kung. I presented a no-holds barred report pointing to the utter inadequacy of record maintenance, collateral imperfections, and quality of the loans.
The Russian management obviously knew the bank was in great trouble but had no idea it was that bad. I believe up to that point they had never seen such a frank and detailed audit report. Many years later I was told by HR the report impressed the Russians they wanted me transferred to the 5th floor as a special assistant. This never materialised which I put down to the throes the bank's problems were causing in Moscow that necessitated recalling the Singapore GM back to face economic crimes. There were whispers he faced the firing squad.
By the time I arrived at the bank, Teo and some other management staff had already exited. The accountant was planning his emigration to Australia. It seemed to me some shenanigans had transpired and some locals had taken the bank to the cleaners.
Was there Sovie agenda of infiltration into the region as some suspected. My opinion is nyet, very unlikely. There were no loans to politically connected persons, ruling out influence buying. Loans were to 3rd/4th tiered private borrowers, not to the top-tiered politically-connected families. That's often the route a new bank takes when it wants to expand fast. There wasn't a targeted market of strategic sectors. It's true MNB was highly exposed to the real estate sector in Singapore and Malaysia. It made some loans to the commodities sector in Indonesia which had the government concerned of the market being cornered. There were some who saw a Soviet loan trap in their ability to control liquidity and impact the economy of host country. Except it made no sense for the bank to pull the rug under their customers and hurt themselves. The USSR simply had no capability to weaponise financial muscle for political advancements. The fear was somewhat similar to today's propaganda on Chinese debt trap but it is nowhere similar in scale nor strategic base. Chinese loans are massive and primarily in strategic infrastructure and to state borrowers. MNB was more commercial lending and real estate development.
There was however the curious case of Amos Dawe. He came out of nowhere from a postal clerk to head a hotchpotch group of companies spreaded over the region. I had difficulty figuring out where his core business base was. The picture in my mind was a young man plucked out of obscurity, provided access to vast financial resources, go buy up some businesses and become the man about town. In quick time he owned a conglomerate called Mosbert group with presence across the region. It seemed to me a tangled mess of financial engineering going on with numerous inter-company borrowings meant to obscure funding sources. If he was a Manchurian candidate, there was not much strategic sense in his investments from Soviet point of view except in two ventures.
First was the floatation of a 5 month old Golden International Securities Ltd on a nascent Kowloon Stock Exchange. But that venture had all the trappings of financial fraud which involved Urban Councillor Peter Chan Po Fan, chairman of Kowloon Stock Exchange, rather than some insidious Soviet plot out to destabilise China as some Western observers suggested.
The second venture was Dawe's attempt to buy 3 American banks in Silicon Valley - the Peninsula National Bank, the First National Bank of Fresno, and the Tahoe National Bank. In 1974 Amos Dawe had secured a US$50m facility from MNB for this purpose. The layered funding drew the attention of a Singapore-based CIA agent who tracked the transaction that culminated in Dawe being indicted for wire fraud in 1975. Whilst the US is open to bank acquisitions by anyone, Dawe's MNB backing and the layering of the payments were highly suspicious. The Americans decided it was Soviet attempt to gain access to US technology secrets.
CIA leaked the Soviet plot to Raymond Sacklyn, publisher of a Hong Kong financial newsletter, Target. When the story broke, MNB's relationship with Dawe ended. The bank pulled the rug and Dawe was unable to complete the bank purchases.
Dawe plea-dealed and co-operated with CIA. He admitted to acting under instructions of the Soviets. MNB denied the allegations and claimed the loans to Dawe were strictly commercial transactions.The US dropped charges in 1979. Dawe was extradited to Hongkong where he faced financial fraud charges. In 1984 he was sentenced to 5 years in prison. After that, Amos Dawe completely disappeared. Some said he was liquidated by KGB.
Did Dawe lie to save his own skin in the US, or was he fronting for the Soviets? The later has weight given purchase of US banks made no sense to Dawe's business interest in the region. If so, he seemed to be an isolated case.
There was another interesting incident which never saw the light of day and of which I had personal knowledge. This had to do with an innocuous loan to a small bookstore somewhere in Beach Road, the name of which I no longer recall. The proprietor was Mr Cho, a nonentity other than he was a younger brother of Cho Jock Kim of the old Consolidated Holdings infamy, a customer of MNB. Mr Cho drowned in Brastagi Lake, Indonesia, where he was vacationing. To sort out his affairs, the bank needed a valuation of his stocks. My assistant and I were sent out to do an inventory count in a private residential house somewhere Serangoon Gardens side of Yeo Choo Kang Road. There I was, spending 3 days in the sweltering heat crouching bare-chested in the low attic, sorting the mess of books dumped callously there. As I counted, I would yell to my colleague who did the recording in the room below. Throughout the day I was yelling "Lenin Vol 13" x 10, "Karl Marx Vol 5" x 8, "Lenin Vol 13" add another 9, and so on. There were 47 volumes of Lenin, and 48 volumes of Karl Marx. 90% of the inventory was Lenin and Marx. Mind you, they were all hardcover books.
When the task was done I submitted the count list to the credit officer in charge. It was a pointless task as anyone with a half brain could see the inventory of communist ideology books were not worth the paper they were printed on. It was in fact illegal to sell such books in those days. As if to reinforce this point, a fairly well-known Indian lawyer was charged about that time for possession of a Karl Marx book. Since the gentleman practiced out of an office in Beach Road, I assumed he bought the book from Mr Cho's bookstore. The first question really is why should someone set up shop to sell something for which there is no real market? I could only comprehend it as an accommodation for the loans extended to Consolidated Holdings. Obviously the apparatchiks needed to promote communist ideologies on the bye. The second question is why was the bookstore allowed to sell banned books?
Was the MAS sensitive to the activities of MNB? I have no idea except I recall there was one inspection conducted by the central bank. I had no interaction with the inspection team.
Two years into my job at the bank, I realised MNB had set up an office for Dennis Lee, a partner in law firm Messrs Lee & Lee. He was put on a retainer. Dennis, of course, was the brother of Lee Kuan Yew. Was that influence buying or what, I have no idea.
Now there was one huge-sized officer at the bank whom I shall call 'K'. He was in military intel during his national service days. Outwardly he was anti-establishment, bad-mouthing the government every which way. I sensed it was all a facade and secretly he was collecting info for whatever his purpose. Many years after leaving the bank, K stood for election under an opposition banner and lost. Somehow I still felt he was a PAP plant. K came across as obnoxious for almost everyone in the bank and none really wanted any social chat with him. For some reason, he favored my company, but I sensed he was really taxing my brain on the bank's loan affairs. Several months after I left the bank, I received a call from K who inquired if I would please have lunch with a certain 'WMM' who was once a partner in the law firm Lee & Lee. K explained WMM had some questions regarding MNB. My antennae shot up immediately, but since I was no longer an employee, ethics of confidentiality no longer apply. Out of curiosity I accepted the invitation. However, it turned out to be a non-event. I expected an interrogation but all I faced was just some polite innocent questions. There was no deep probing. I did not know what to make of that meeting.
I believe MNB was run as a commercial bank, not as conduit for Soviet cloak and dagger adventurism. But when the need arises, those they coddled can be compromised to accommodate their agenda. Amos Dawe and the bookstore at Beach Road certainly fit the bill. MNB's massive loan problem was the result of a reckless expansion phase of quantity over quality, of clueless Soviet apparatchiks out of KGB masquerading as management, and the key to the vault in the hands of a single local manager, the good old Teo Poh Kong. I think the fear decades ago, of the Soviets using MNB cash to subvert and destabilise the region, is the same as today's debt trap xenophobia attached to China's loans to African states and countries involved in the One Belt One Road project.
Coming up - Part 3 (Wirecard)
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