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Logo of Phnom Penh Post newspaper Phnom Penh Post - National Bank governor for the chop

National Bank governor for the chop

N ATIONAL bank governor Thor Peng Leath will be dismissed from his post in coming

weeks, sources say.

The firing will take place after the official results

of an independent audit commission set up by the Prime Ministers to investigate

the Credit Bank of Cambodia (CBC) affair, and irregularities of the National

Bank governor and associates, according to several senior government

sources.

"The decision to fire him has already been made," said one

senior government official.

Caught in the fall-out for political reasons,

according to senior officials, will be MP Sam Rainsy's wife - the National Bank

deputy governor, Tioulong Saumura.

"Fire Thor Peng Leath to limit the

damage of the banking scandal and fire Saumura for larger political reasons,"

said one senior official. "It will be the recommendation of the

committee."

Saumura, in an interview with the Post, said any

investigation would show she had done nothing wrong, and that any such move

could be interpreted as political harassment. If the rumors were true, she said,

she would strongly demand that reasons be given.

At a meeting of the

Council of Ministers on 7 June, the two Prime Ministers ordered National Bank

governor Thor Peng Leath not to leave the country pending the outcome of the

investigation, according to senior government officials who attended the

meeting.

But the audit commission was not formally approved as of 14

June and the CBC has re-seized control - with armed guards - of it's property

and assets.

The National Bank governor, who remains in authority, has

refused to intervene telling government appointed auditors it is a "private

affair."

The CBC was officially closed and it's assets seized by the

National Bank on 6 May, citing a string of violations of Cambodian laws,

including failing to maintain minimum capitalization and refusal to provide the

government with basic reporting of bank activities.

The bank and it's

principal shareholders face a number of criminal and civil charges in Canada and

Cambodia ranging from laundering drug money to defrauding creditors.

The

scandal expanded when the National Bank governor and other officials were

accused of illegal and irregular practices by giving preferential treatment to

the CBC and allowing assets to be removed from the bank after it's official

seizure.

But despite these embarrassing revelations in public in recent

weeks, the government appears to have further lost control of the situation in

recent days.

On 7 June, when the independent auditors appointed as

liquidators showed up at the CBC, they were met by AK-47 wielding "private

security guards" who refused them access to bank premises - on the order of the

CBC chairman Sy Veng Chun. The guards, who remained in control of bank premises

at press time, were dressed in official police uniforms.

The effective

re-seizing of bank assets by the CBC appears to make a mockery of government

claims to have taken control of the CBC.

Says a senior official following

the scandal: "When armed guards hired by a private company are able to prevent

government appointed administrators from entering a seized bank, then it really

raises questions of whether the government is either sincere or in

control."

Also on 7 June the government-approved accounting firm which

serves as liquidator of the closed bank received letter from Sy Veng Chun

ordering them "to postpone your activity at the Credit Bank of Cambodia from 29

May 1995 on... We will no longer allow you to go in and out of the credit bank,"

according to the Cambodia Daily newspaper.

Chantol Sun, secretary of

state for the Ministry of Finance who is expected to be chairman of the new

audit committee, told the Post on 10 June that shutting out the auditors was

unacceptable. "This is crazy. We will order the administrators to be allowed

in."

He said that the CBC scandal "is the trigger that will begin the

cleanup of the banking system. We are very serious about this."

The

government is officially in control of bank assets, although they have been

barred from the premises by the CBC. On May 11 Thor Peng Leath announced that

"the decision to withdraw the license was taken... to protect the interests of

banking customers. We immediately placed a team of National Bank administrators

at the premises of the Credit Bank... "

"We are now in the process of

appointing an independent, professional administrator from among a group of

international auditors accredited to work with the National Bank," the governor

said.

In reality, the auditor has received "virtually no cooperation"

from either the CBC or from Thor Peng Leath since being appointed last month,

according to the auditors and government officials.

When the auditor

protested being ejected at gun point to both the Ministry of Justice and the

National Bank governor last week, they were informed by the National Bank

governor that this was "a private matter" and the National Bank would not

intervene. As a result, one month after the CBC was seized, neither the National

Bank nor any independent auditor are on bank premises or in control of the

assets.

"This is an embarrassment," said a senior government official.

"Now they can change whatever accounting, whatever books they want."

The

latest embarrassment is one in a series that have prompted the two co-Prime

Minister's to intervene. On the night of June 7 at a meeting of the Council of

Ministers, they ordered the formation of a special audit committee controlled by

the Ministry of Finance to investigate alleged improprieties by the National

Bank and investigate the CBC affair.

In regards to the allegations of

National Bank malpractice, Sun Chantol said "we will get to the bottom of this.

We want to know why bank assets were allowed out after the CBC was seized. We

want to know why a loan was given by the National Bank to the CBC" to create the

minimum capitalization that resulted in the issuing of an operating license last

year.

The CBC scandal began unfolding in March, when the CBC principal

shareholders lost 1.5 million dollars in Chicago futures trading. This prompted

a Canadian securities firm Marlieu Lemire to seize the assets of the traders -

including the CBC bank. It soon unfolded that the CBC bank had few assets and

had misrepresented it's financials to Cambodian authorities and to the Canadian

securities firm.

The National Bank - particularly governor Thor Peng

Leath - are accused of irregularities in the licensing, supervising, and later

closing of the CBC.

At issue is a highly unusual 1994 loan from the

Cambodian National Bank and approved by the bank governor to CBC bank chairman

Sy Veng Chun and his wife Leng Ky Lech. The $3 million loan of government funds

was to establish minimum capital requirements which then allowed the National

Bank to issue a private bank operating license to the CBC. According to

Cambodian law, the National Bank is not allowed to make private loans and should

not be accepting a loan - from it's own reserves - in lieu of capital deposits

to establish a private bank.

Further, it emerged in April that principal

CBC shareholder Leng Ky Lech is under indictment for 8 counts of laundering drug

money in Montreal.

But further disturbing to Cambodian authorities and

to the CBC bank creditors, the National Bank governor authorized the removal of

funds to personal associates after the bank's assets were frozen on 6

May.

Bank documents obtained by the Post show that former commerce

minister and newly appointed Ambassador to Washington Var Huot deposited

$145,000 in 100 dollar bills in his personal account at the CBC on 4 May. The

move was viewed as highly unusual given that it was well known that the CBC

assets were about to be frozen on 6 May.

It was also illegal as the funds

were government money. In a telephone interview from Washington, Huot

acknowledged that the funds were government money intended for use at the

Washington embassy. He said that he deposited the money in order to transfer it

to Washington, but refused comment when asked why the money was only deposited

and no request for transfer was made. He also refused comment when asked why he

withdrew the money from the government account - which could have been directly

transferred to Washington - and deposited it in the CBC, which has no

relationships with a foreign bank to allow for direct transfer.

But what

appears to be one of the most egregious and unusual moves was the withdrawal of

Var Huot's money, with the written permission of Thor Peng Leath, on May 8, two

days after all the banks assets were officially seized.

Chantol Sun said

that the new audit commission will investigate both the CBC and the National

Bank handling of the affair. "The government is taking the right action to

oversee the audit. We want to bring to the surface any irregularities of the

CBC, to see whether they met their minimum requirements. We want to look into

the reports in your newspaper that funds have been transferred after the closure

of the bank. We want to know why action was not been taken by the proper

authorities. We want to know who authorized the transfer of money from the CBC

after the bank was closed. And we want to know why the National Bank governor

gave a loan of government money without permission."

He said "we will

take action to ensure that all discrepancies have been brought to the surface so

that the banking system is reformed and that it is fundamentally sound. That is

the objective. And we will complete it in a matter of days." Chantol Sun said

that he expected the audit committee to begin investigating by 16 June and it's

conclusions and recommendations made "in a week at the most."

Thor Peng

Leath has denied all charges of improprieties. "These allegations are false," he

told the Cambodia Daily on 6 June. "Somebody would like to de-stabilize the

government through the National Bank of Cambodia."

Thor Peng Leath has

accused deputy governor Saumura of being part of a "political plot", according

to diplomats and other government officials. No one has accused the deputy

governor of any involvement in the banking scandal or other

improprieties.

Says Saumura: "I wonder who would be able to topple the

government through de-stabilization if the National Bank hasn't done anything

wrong? If the leadership of the National Bank is faultless, then the governor

should not be worried. If the leadership of the National Bank has done something

wrong it is normal that the scandal is made public. These are not political

questions. They are technical questions, period. Either there has been irregular

or illegal conduct by officials of the National Bank or not."

But senior

government officials say that the two Prime Ministers will use this opportunity

to also fire Saumura. "The decision to fire Thor Peng Leath and Saumura has been

made," said one source.

Saumura told the Post on 13 June that "this a

simple corruption case. No government in the world is immune to scandal. I don't

see why any scandal should de-stabilize the government if the government takes

proper action and takes the right sanctions. This is a very democratic process.

Instead, after taking the right steps such as forming the audit committee, the

government will be more stable than before and the image of the banking system

will be stronger. It shows the government is serious about a strong, sound

banking system."

She vowed to fight any move to oust her. "Only people

who have done something wrong should be sanctioned. Any investigation will show

I have done nothing wrong. I have done what is within my power to limit the

damage, to avoid a blow to the image of our country. At the moment they are

trying to silence my husband, one kind of harassment is to take action against

his wife."

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