Page 3 of
5 Brunei's
fund of wealth and scandal By
Geoffrey C Gunn
billion by the end of the
decade, the modus operandi of the
institution came under the searing glare of local
and international media in mid-1998, when the
British media exposed the fact that the
Sultanate's largest conglomerate, Amedeo, under
the control of the Finance Minister and head of
the BIA, Prince Muda Haji Jefri Bolkiah (b.1956-),
youngest brother of the Sultan, had collapsed.
Amedeo left debts estimated at US$16
billion, thus depleting BIA assets by the same
amount. In June 1998, investigation into the
misuse of BIA funds in the Sultanate was entrusted
to a Finance Task Force, headed by senior
government officials with international advisors.
It is probably no coincidence that, in
August 1998, the Sultan named
his eldest son Al-Muktahee Billah as Crown Prince,
dispelling rumors and firming up his line of
descent.
Stripped of his official
positions, Jefri fled the country, just as the
Sultan assumed the position of Finance Minister.
On September 21, 1998, the government stated that
27 companies led by Amedeo Corporation had been
placed under investigation and taken over by the
government on suspicion of misappropriating funds.
The companies included an amusement park, an
international school, a hotel, and firms connected
with fisheries, insurance and telecommunications.
Prince Jefri While Jefri briefly
returned to Brunei in October 1998, having sold
off some of his holdings including the Asprey
Group, couturier Romasz Starweski, and jeweller
Hamilton & Inches, the gesture did not mollify
the Sultan and Jefri returned to exile in July
1999. That month, auditors Anderson Consulting
confirmed that Amedeo would default on debts
estimated at US$3.7 billion, most owed to the BIA.
Amedeo subsequently collapsed leaving creditors
unpaid. [12]
Domestically, the
construction industry took a hit. For more than
four years Amedeo had been involved in grandiose
multi-million dollar projects in the Sultanate.
Such exemplars of "showcase capitalism" [13] to
borrow a phrase that has been used to refer to the
economic model associated with Indonesian
President Suharto (1967-1999), include the
Prince's private office, the now abandoned private
mosque in Jefri's office grounds, and the Jerudong
Hotel.
According to a journalist with the
Borneo Bulletin, the lion’s share of the projects
was for the prince and his family. Of B$6.2
billion injected into Amedeo from the BIA and
others, only 10% could be regarded as having been
spent on infrastructure improvements. These
include a power station, a communication tower,
and an international school. Such projects of
"excessive and unnecessary standard" built by
foreign workers, according to the journalist, did
not create employment for locals or raise their
skill levels.
As testified by numerous
abandoned Jefri-controlled projects in Brunei, the
Amedeo-fueled construction boom only created an
illusion of economic progress. In fact, with the
bursting of the economic bubble in 1997, the void
felt by the collapse of Amedeo caste a pall over
business confidence in the Sultanate. [14] In
1999, the government injected some US$208 million
into development projects in a bid to shore up the
construction industry left idle by Amedeo's
demise. [15]
In an unprecedented lawsuit,
sensational by any standard, Sultan Hassanal
Bolkiah accused Jefri of squandering more than
B$40 billion in state funds. Besides the above
mentioned investments-turned-sour, Jefri
reportedly spent B$2.75 billion over a 10-year
period buying himself 2,000 cars, 17 airplanes,
including a private Airbus A310, several yachts,
quantities of jewellery, and more than a dozen
homes and other "trophy" investments. [16]
The Sultan chose a public and legal way to
gain restitution only after private negotiations
collapsed. In fact, as Jefri subsequently
revealed, negotiations between lawyers of both
parties had been going on for one year prior to
the settlement of the case in May 2000. [17] As a
regional newsmagazine opined of the civil suit,
the unprecedented legal action stands as "a modest
advance for the rule of law and a public
affirmation of the ruler's responsibility to their
subjects," as well as a step forward for the
people of Brunei. But what did the people of
Brunei obtain? Was this a triumph for rule of law
and public accountability?
In Civil Suit
No. 31 of 21 February 2000 filed in the High Court
of Brunei Darussalam, the first defendant (Jefri)
was charged by the plaintiffs, the State of Brunei
Darussalam and the BIA, with illegally
transferring a sum in excess of US$14.8 billion.
Altogether, Jefri, his son Prince Hakim, and 71
others, stood charged in the civil court of
misappropriating B$40 billion deemed to belong to
the State under control of the BIA. On the same
date the court had imposed a freeze upon the
assets of Jefri and the other defendants
worldwide.
Upping the ante, on May 6,
council for Prince Jefri produced an affidavit
made on behalf of Jefri alleging that Pehin Isa,
Home Minister cum special Adviser to the Sultan,
received hundreds of thousands of dollars from the
Prince on a yearly basis. While this was widely
received as a scurrilous allegation, it pointedly
raised questions of public probity. Nevertheless,
the Sultan always appeared to remain in control of
events. Just as the international media picked up
on the family feud, so such offerings as
"Washington Post Attacks Prince Jefri," and
"Prince Jefri's Fall From Grace According to
Asiaweek," were posted on web sites linked to the
official Brunei Darussalam Home page. [18]
On May 10, 2000, the court ruled against
appeals by Jefri and his son Prince Hakim to
resist disclosing the source of their funds, as
well as the source of their living expenses. Jefri
had claimed such disclosure would constitute self
incrimination under section 12 of the BIA Act.
They also failed in their bid to evict the chief
justice. The High Court ordered the Prince to
reveal the source of his funds within five days,
although still he temporized. Having failed in his
appeal, the case was referred to the Privy Council
in London, the highest court of review for Brunei.
In the end, an out-of-court settlement was
reached between the Sultan and his estranged
brother. Ending the three-month court battle, the
Sultan (via Minister of Education Pehin Abdul
Aziz, who headed the Task Force investigating the
missing BIA funds) publicly announced that Jefri
had agreed to return all monies he had taken from
the BIA, including hotels, land and other assets
in Brunei and overseas. The exact terms of Jefri's
settlement, and a separate settlement for Prince
Hakim were not revealed, however.
But what
can be concluded of this affair for the public
interest, rule of law, accountability and
financial transparency? It is notable that the
contest was framed in two discourses. The first
and private discourse was that between estranged
brothers, a dynastic fallout, that, at the end of
the day, saw reconciliation in line with the
providence of God and the blessings of His
Majesty. The second and legalistic and public
discourse was that played out in the civil courts
between the State and BIA as plaintiffs and Jefri,
et al, as defendants. Even so, as explained below,
moral blandishments as much as legal actions on
the part of the Sultan left Jefri stripped of most
of his major remaining assets, just as the Sultan
retained the power to control the Sultanate’s
wealth.
In the wake of Amadeo At
the end of the day, it was clear that the private
settlement solution was optimum for the Sultan -
all was in the family, the boundary of the Royal
economy was not publicly breached as a full public
disclosure threatened. Locally, the Court's
victory was portrayed as the Sultan's victory and,
ipso facto, that of the rakyat or subjects. While
Jefri had claimed that the forces behind the case
were the Islamic conservatives, it is noteworthy
that the boundary between Jefri's private life,
widely disclosed in international media, and
public life, was not breached either in formal
court documents or within Brunei. Unity of the
royal family and indeed their privileges were
preserved intact. There would be no further public
disclosures; the secrecy of the BIA was, after
all, unimpeachable.
As the author was
quoted in the Bangladesh Times (June 29, 2000),
"It's a victory for the Sultan and the status
quo." [19] The same paper also reported comments
by Hatta Bin Zainal Abidin (leader of a Brunei
"opposition" party) who stated, "His Majesty the
Sultan was very concerned about the security of
the nation. That’s why he agreed to an
out-of-court settlement." What the settlement
above all reveals is the lack of checks and
balances in the Brunei political system, one
dominated by the Sultan and his acolytes.
Even so, having reneged upon the
settlement deal by refusing to declare his
financial assets, Jefri faced down contempt
proceedings filed by the BIA in the London High
Court. Eventually, in February 2006, the family
feud was ostensibly settled. The Sultan agreed to
drop all charges against Jefri. In 2007, Jefri
initiated legal proceedings against his former
barrister charging him with embezzlement of
assets. Meanwhile the dispute rekindled with both
sides accusing the other of reneging on the terms
of settlement.
As a first step towards
overseeing the liquidation of Amadeo assets, a
Singapore-based firm of accounts was commissioned.
On August 11, some 10,000 items belonging to
Amadeo went on auction, but drawing more snide
comment than winning back significant dollars. In
short time, perhaps owing to a sense of urgency,
the Sultan saw to the creation of Global
Evergreen, a government-owned company, headed by
Education Minister Pehin Abdul Aziz, to deal with
the legacy of Amadeo.
This was a case of
top-down crisis management as 200 creditors
launched an avalanche of suits and counter suits
becoming, in Aziz’s reported words, "a national
issue, perhaps a national disaster". For his part,
Jefri promptly returned "his" Airbus A310 to the
Sultanate as an indication of more assets to come.
But foreign (Australian/NZ/British)
financial investigators hired by Evergreen also
fell foul of Home Affairs Minister and long-time
advisor to the Sultan, Pehin Isa, especially when
their leads or the paper chase led his direction.
Pehin Isa also heads immigration, and, according
to press accounts, ordered a raid on Evergreen
offices blocking the foreigners’ departure.
The Evergreen affair thus became a matter
of diplomatic concern with the intercession of the
concerned High Commissions on behalf of their
nationals. According to an Australian High
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