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MIED IN THE DOCK

Contributed by Anonymous on Monday, December 14 @ 01:29:56 CST

MIC
The Malay Mail,
Trustees have 30 days to account for financial losses and abuse of power
Monday, December 14th, 2009 10:45:00
KUALA LUMPUR: The MIC’s billion-ringgit educational flagship Maju Institute for Education Development (MIED) is in turbulent waters, following a legal notice against its eight trustees by one of its own members alleging serious irregularities, ranging from financial mismanagement to abuse of power.


The action, by prominent lawyer politician  S. Vigneswaran, is expected to open the vault of “secrets” in the alleged issue of personal loans of some RM100 million to individuals, company officials and at least one trustee. Alleged flaws in awarding contracts for the construction of MIEDrun Asian Institute of Medicine, Science and Technology University (AIMST) University in Semeling, Kedah, would also come under scrutiny. The trustees, including chairman and MIC president Datuk Seri S. Samy Vellu, have 30 days to account  for financial losses, abuse of power and other alleged discrepancies under the Companies Act. Sources said prominent individuals with close links to MIC leadership and former political leaders would be asked to explain their role in this fiasco that has wrecked the credibility of the party and the MIED that operates on government grants and public donations. Vigneswaran, a former MIC youth leader and current MIED member, yesterday confirmed that he had launched the derivative action under Section 181 of the Companies Act 1965 against the eight trustees. The section allows MIED, as an entity, to sue to recover or punish its trustees, directors and officers for losses, fraud, negligence and other failures. Vigneswaran, who is also coordinator of the Barisan Nasional Supporters Club, that deploys youth support for the government during by-elections and political events, said he was exercising his rights as a member to “right the wrong”. He declined further comment. The eight trustees are Samy Vellu, deputy MIC president Datuk G. Palanivel, former Senate president Tan Sri G. Vadiveloo, former MIC vice-president Tan Sri K.S. Nijhar, former MIC treasurer-general Tan Sri M. Mahalingam, former MIC vice-president Tan Sri M. Kumaran, Tan Sri K. Ampikaipakan and Datuk Dr T. Marimuthu. Vigneswaran is seeking damages on behalf of MIED for losses to the company arising from: ● The trustees giving out loans on interest in contravention of the company’s Memorandum and Articles of Association without a money-lending licence. He contends that such acts are void loan transactions that have and are resulting in the company suffering losses estimated at more than RM90 million. ● The trustees sanctioning loans and withdrawals for the company’s and/or its subsidiaries’ director and/or officers and/or their nominees in contravention of the company’s Memorandum and Articles of Association. This, he claimed, resulted in more than RM10 million in losses to the company. ● The trustees’ breach of fiduciary duties and breach of trust, whereby the company suffered losses from  transactions and contracts awarded to the construction of AMIST University, the nation’s first private university. ● The trustees appointing fellow  trustee Vadivello to a salaried office of the company and in making an unauthorised payment of RM350,000 to him. ● Their action in holding office as a trustee for the current year in breach of Section 143 of the Companies Act, and clause 12 (b) and clause 17 of the company’s Articles of Association. ● Their action to operate the board with an unlawfully constituted composition of the board resulting in the company being exposed to adverse legal position. He noted that Samy Vellu, Mahalingam, Nijhar, Marimuthu, Vadivello and Kumaran having retired by virtue of section 129(2) of the Companies Act have been operating with no resolution passed for the current year to  re-appoint them annually since their respective retirements. An AGM should have been convened last year, to obtain the sanction of members to allow the six trustees, who were already above the age of 70 in 2008, to continue in office for the year 2009. MIED is not a business entity.  It is a Section 24 company, or a trust organisation that is limited by guarantee. There are many limitations on what MIED can and cannot do, and has a board of trustees instead of directors who are elected by the life members. The assets of the MIED, whose core business is providing study loans, includes Institute Teknologi Negeri and Vanto Organisation which were once wholly owned by MIC. The institute sourced millions of ringgit from the Indian community, received about RM300 million from the government and acquired a RM220 million loan from Bank Pembangunan Malaysia to build the AIMST campus on a 228-acre site in Semeling. The cost of construction ballooned from an initial RM230 million to close to RM500 million. Nijhar wants matters resolved internally MIED founder member and trustee Tan Sri K.S. Nijhar has asked members not to “put the cart before the horse” in the crisis that has besieged the educational institute considered MIC’s jewel in the crown. He requested that members could still resort to external intervention if their grievances were not resolved internally at general meetings that would be called soon. Nijhar sent a text message to MIED members, a copy of which was also sent by him to The Malay Mail, following the letter by S. Vigneswaran to the trustees and another from Datuk S. Subramaniam to the  Companies Commission of Malaysia. He noted that eight members of the MIED, all non-trustees, out of a total of 30, have asked the trustees to call for general meetings to resolve outstanding issues. The trustees, he said, are meeting soon to discuss this request and that irrespective of any views on the legality of the board, the dates and agenda for the adjourned AGMs and other general meetings would be fixed soon. He said letters by Vigneswaran and Subramaniam would be tabled at these meetings, and the two could raise issues and decide on the course of action to be taken on each of the matters. “I would request that in the interest of MIED that these matters be resolved internally.” Safeguarding the interest of members SECTION 181 is a statutory derivative action introduced by Parliament in 2007 that allows members of organisations and minority shareholders to act to safeguard their interest and that of the corporation against abuse, mismanagement, fraud and losses, but without incurring a huge personal cost. The court decides on the issues brought before it and decides to grant leave or otherwise to proceed with the class action. The section allows MIED, as an entity, to sue to recover or punish its trustees, directors and officers for losses, fraud, negligence and other failures. The law requires the person taking the class action to give 30 days’ notice to affected officers for them to respond or take action before an application is made to the court for remedies.

*******

RM100 million down the drain?
MIED contravened tax laws when giving out study loans with interest, sources say
Tuesday, December 15th, 2009 11:12:00
KUALA LUMPUR: The MIC’s education arm, Maju Institute for Education Development (MIED), can do nothing if none of the estimated 10,000 students repays study loans amounting close to RM100 million. This is because the MIED had illegally given out study loans that carried an accruing interest rate of six per cent per annum. Sources said the RM100 million, outstanding as of end 2008, would have to be written off and it was pointless blacklisting the defaulters as the MIED has no legal recourse for loan recovery. “Such acts are void loan transactions that have  and are resulting in the company suffering losses,” said a source. The sources said MIED was only authorised to give scholarships under its Memorandum and Articles of Association. “Any disbursement of money to the needy are only by way of scholarship or grants,” said a source. Now, the billion-ringgit MIED has tax issues: failing to pay tax on all monies collected with interest; failing to declare the interest as income; and failing to declare and pay tax on funds placed in fixed deposit. The matters came to light following continuous checks by The Malay Mail on the issue of loans of some RM100 million by MIED to individuals, company officials and at least one trustee. A can of worms was also opened by prominent lawyer-politician S. Vigneswaran who, in his capacity as a MIED member, has filed a legal notice against eight trustees of the institute, giving them 30 days to account for financial losses, abuse of power and other alleged discrepancies under the Companies Act. Vigneswaran, a former MIC Youth leader, initiated the derivative action under Section 181 of the Companies Act 1965 against the trustees. The section allows MIED, as an entity, to sue to recover or punish its trustees, directors and officers for losses, fraud, negligence and other failures. “Giving loans with interest requires a money-lending licence. MIED does not have one, so all monies collected with interest are illegal. “Further, all monies collected with interest are taxable. Failing to pay tax is another breach of the law and failing to declare the interest as an income is evading tax,” Vigneswaran wrote in his blog that has been getting a big following since he launched his crusade to “right the wrongs in MIED”. Another source noted that since MIED had acquired tax exemption status, it should disburse all funds received for its intended purposes (like donations and grants) within 18 months. “Failing to do so, the income is deemed taxable. If the funds are placed in fixed  deposits (like the millions collected as government grants and donations were and are kept) as in the case of MIED, it becomes taxable.” MIED is not a business entity. It is a Section 24 company, or a trust organisation that is limited by guarantee. There are lots of limitations on what MIED can and cannot do, and has a board of trustees instead of directors who are elected by the life members. The assets of the MIED, whose core business is providing study loans, include Tafe College, Institute Teknologi Negeri and Vanto Organisation which were once wholly owned by MIC. The institute sourced millions of ringgit from the Indian community, received about RM300 million from the government and acquired a RM220 million loan from Bank Pembangunan Malaysia to build the AIMST campus
on a 228-acre site in Semeling, Kedah. The cost of construction ballooned from an initial RM230 million to close to RM500 million.

 
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