A government auditor was warned by an officer in the Attorney-General's Office not to interfere with the Malaysian central bank's foreign exchange dealings after he questioned whether such trades complied with regulations.
Mr P. Kanason Pothinker, a former assistant auditor-general, was testifying yesterday at the Royal Commission of Inquiry (RCI) into billions of ringgit worth of forex trading losses suffered by Bank Negara Malaysia in the 1990s.
He told the panel that he had raised concerns about whether the central bank was allowed to engage in forex trading under the Central Bank of Malaysia Act 1985 with his seniors at the Auditor-General's Office and with officers from the Attorney-General's Chambers (AGC).
According to Mr Kanason, 78, during the meeting between staff from the Auditor-General's Office and from the AGC, Tan Sri Ainum Mohd Saaid, who in 1992 was the AGC's head of advisory services, had said the trades did not comply with the Act and that a written reply would be provided.
Mr Kanason said when he followed up on the written reply, Ms Ainum told him over the phone: "The higher-ups said stop meddling." He told the panel he did not know who the "higher-ups" were.
Subsequently, he said, the AGC wrote that the matter was to be resolved between the Auditor-General and the central bank governor.
The RCI hearing on the first day, Aug 21, concluded that the central bank lost RM31.5 billion in forex trades between 1991 and 1994 and that the figure was concealed from the bank's financial reports. "We have to find out who asked for it to be concealed," RCI chairman Mohd Sidek Hassan said last week.
Another witness yesterday, former bank employee Ishak Ismail, said the bank did not adjust its accounts to cover up its forex losses.
"As far as I am concerned, there was no cover-up and everything was done in accordance with the accounting policies and procedures existing at that time," said Mr Ishak.
The hearing continues today.