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Tuanku Jaafar Clarifies Standard Chartered Bank Case

The recent Special Court order for Yang DiPertuan Besar of Negeri Sembilan Tuanku Ja’afar ibni Al-Marhum Tuanku Abdul Rahman to pay US$1 million (RM3.5 million) to Standard Chartered Bank Malaysia Berhad (SCBMB) was over a banking transaction and not a loan, according to his private secretary.

Datuk Abdullah Abas, in a statement, said press reports of the court judgment on Oct 15 had caused the public to form a perception that Tuanku Ja’afar had obtained a loan from the bank and having refused to repay the loan.

The suit arose after Tuanku Ja’afar on Feb 12, 1999, established through SCBMB a standby letter of credit (LC) worth US$1 million made in favour of the Connecticut Bank of Commerce (CB) in the United States for credit facilities to be extended to a US company called Texas Encore LLC which was set up to operate a business venture.

The statement said the LC was to be used as security for a loan to be given by CB, the beneficiary of the LC to Texas Encore with the LC secured against a fixed deposit of Tuanku Ja’afar exceeding the value of the LC.

Outlining the facts to clear public misconception, it said:

  • In April 1999 Tuanku Ja’afar became concerned with the business venture which was stagnant and requested that the LC be revoked. SCBMB, on Tuanku Ja’afar’s behalf, then notified its New York office and through them the CB that Tuanku Ja’afar had given notice to rescind the LC. At this time, no loan had been released by CB to Texas Encore.
  • Tuanku Ja’afar, through his representative informed SCBMB of his suspicions and requested that payment under the LC be withheld. An injunction was obtained from the Seremban High Court on Dec 18 1999 on Tuanku Ja’afar’s behalf to restrain CB from making a call on the LC or for SCBMB to uplift the fixed deposit to pay off the LC.
  • Notwithstanding the injunction, CB called on the LC and received payment from Standard Chartered’s New York office on Dec 24 1999.

The statement said it was later discovered that CB was closed down in June 2002 by the US Federal Deposit Insurance Corporation, a regulatory agency, for financial irregularities and Texas Encore, to which the alleged loan was given by CB, never carried out the business venture.

“It is clear from the facts that Tuanku Ja’afar did take steps to rescind the LC and prevent a call on the LC before any alleged funds were released by CB to Texas Encore. Despite these steps, CB called on the LC and payment was made by the bank,” it said.

The Special Court, set up to hear cases involving the Malay rulers, held that although Tuanku Ja’afar had informed SCBMB of his intention to rescind the LC, the LC was in law irrevocable and that the bank was entitled to set off the sums due under the LC with Tuanku Ja’afar’s fixed deposit.

“I am commanded and instructed to state that Tuanku Ja’afar did not at any time intentionally refuse to make payment under the LC as he believed that the LC was properly rescinded in April 1999. It was based on that belief as well as his suspicions regarding CB’s and Texas Encore’s credibility that Tuanku Ja’afar applied for an obtained the injunction against CB from making any call on the LC from lifting the sums placed in the fixed deposit. This injunction was disregarded by CB.

“Tuanku Ja’afar’s suspicions were proven correct when the US regulatory agency closed down CB for financial irregularities,” the statement said.

“I sincerely believe that the contents of this statement will provide a clearer picture of the entire matter and clear the misconception of the public in relation to the suits between Tuanku Ja’afar and SCBMB,” the private secretary said.

Source: Bernama

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  1. Windmill on December 19th, 2008

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    Windmill’s last blog post..Year-end Noblesse Oblige Awards

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