DATELINE

A billion-dollar bust

DAVID COBB June 4 1984
DATELINE

A billion-dollar bust

DAVID COBB June 4 1984

A billion-dollar bust

DATELINE

HONG KONG

Seven months after Hong Kong’s Supreme Court ordered the liquidation of the Carrian Group real estate empire, the biggest corporate failure in Asian history remains shrouded in enough mystery and intrigue to fuel a thriller. The firm left corporate debts of about $1.5 billion in the wake of its collapse. At the same time, police charged George Tan, the flamboyant entrepreneur who was chairman of Carrian, with “making false and misleading statements” about the financial condition of his conglomerate. Tan is now free on $330,000 bail, awaiting trial. Conviction could lead to a seven-year sentence, and Warwick Reid, a Hong Kong prosecutor, says that further charges will follow.

Carrian has been officially bankrupt since November, but the end for Tan began with a bizarre series of events one night last July when someone strangled Malaysian banker Jalil Ibrahim in the luxurious waterfront Regent Hotel and later dumped his body in a remote banana field. Hong Kong police charged Mak Foon Than, 32, an enigmatic Malaysian bodyguard and errand runner, with murder. Then they uncovered what one spokesman said were “all sorts of things that seemed odd” in the books of Bumiputra Malaysia Finance, at whose Hong Kong office Jalil had worked as assistant general manager.

Police have not linked Tan with the murder, but Jalil’s death and the investigation surrounding it have shone light where Tan did not want it. BMF—the Hong Kong subsidiary of Bank Bumipu-

tra, which is Malaysia’s largest financial institution and is under strict government orders to favor Malays and not Chinese in its lending policies—had loaned Tan, a Chinese, and the Carrian Group an astounding $708 million. Most of it was unsecured, and in total it represented more than 90 per cent of BMF’s entire loan portfolio. Tan had tried to keep his Bumiputra loans secret from some 60 other local and international banks from which he had also been borrowing large amounts—notably about $480 million from the mighty Hongkong & Shanghai Bank (H&SB).

Tan’s holdings started expanding rapidly in 1980. He bought a $247-million, 40-storey skyscraper near the waterfront to serve as the Carrian Group’s headquarters. From there he created a secretive, interlocking network of more than 200 subsidiaries and front companies with such names as Born Rich, Outwit, Deciding Deeds, Knife and Dagger, and Ample Gain. In the three years before Carrian’s collapse Tan had apparently been conducting complex financial transactions, borrowing through his subsidiaries to buy into insurance and shipping companies, taxicab franchises, fast-food stands, a travel agency and real estate throughout Hong Kong (as well as more than $80 million of property in the United States). Later he would show a paper profit by selling his properties to one or another of his manifold companies.

Tan was able to carry out his operations for two reasons: in the late 1970s and early 1980s, his high-profit years,

Hong Kong was enjoying a business boom. As well, Hong Kong is one of the world’s least-regulated financial markets, a no-questions-asked haven for Asian capital. Hong Kong regulations, such as they are, did not require Tan to disclose who his backers were.

Tan, trained as a civil engineer, fled Singapore after his first bankruptcy in 1972. He relocated in Hong Kong with what Fortune magazine estimated as “a stake of perhaps $1 million (U.S.)” from relatives and he made his breakthrough into big money in 1979 by gaining the confidence of the H&SB. When the H&SB vouched for Tan’s credentials and character, many other banks apart from BMF expressed eagerness to supply him with loans secured by little more than the Tan signature. Among them: Barclays Bank of London, Bankers Trust of New York and the Westdeutsche Landesbank of Düsseldorf. But many did not co-operate. Said one dissenting U.S. banker: “The moment I walked into Tan’s office, with marble statues, a fountain and Louis XIV furniture, it was too surreal to be believed. He just impressed me as a used-car salesman.”

The Carrian Group collapsed when the Hong Kong real estate market, on which the conglomerate had based its widespread enterprises, started to spin into a decline in 1982 because of fears of what China might do when the British lease on the colony expires in 1997. Soon his lenders realized that Tan’s mysterious backing in fact came not from huge amounts of Asian flight capital but from huge amounts of their own loans. And police say they quickly discovered that Tan has been an illegal resident of Hong Kong for 10 years and that after they arrested him they found he had Singapore, Tongan and Paraguayan passports in his name.

Still, when Tan has his days in court, expected within a month, the cause of his difficulties may prove to be less his overreaching ambition than the Hong Kong laws that encourage such quicksand empire-building. Said Derek Murphy, Hong Kong’s deputy commissioner for securities: “The Carrian fiasco shows the hideous levels of corruption that exist here because of the lack of regulation.”

Murphy believes that the affair should serve as a warning for the colony’s business community to eliminate the secrecy that allows public companies to operate without explaining who owns them as well as how much backing they have. Murphy added, “We simply cannot go on any more with the possibility of a Carrian erupting from nowhere and throwing everything into chaos.” The next 13 years will be tense enough without those added problems.

-DAVID COBB, with Daniel Burstein in Hong Kong.