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of the loan in 1983, UMNO's vehicle, Khidmat Bersatu, defaulted, failing to pay interest or principal after 1984, until at least July 1988, when court records revealed the dire state of affairs. By then, according to the records, UMNO owed Bank Bumiputra nearly RM300 million and other banks about RM86 million, while incurring RM61,000 a day in additional interest.[58] In the absence of any plausible explanation, analysts suspected the rental income was diverted to other UMNO investments, or to service debt.

UMNO's lifeline, shrouded in the usual secrecy, took the form of financially beleaguered, publicly quoted United Engineers (Malaysia) Bhd, an engineering and construction company. Although it had suffered five straight years of losses, had never built a major road or bridge and was nearly insolvent, United Engineers was tentatively awarded a RM3.42 billion government contract in late 1986 to complete 494 kilometres of the north-south highway stretching from Thailand to Singapore. A consortium led by the company — Projek Lebuhraya Utara Selatan Bhd., known as PLUS — would operate the privatized road network and collect tolls for 30 years along the entire highway. With tolls to be increased regularly, revenue across the life of the concession would total RM17 billion, United Engineers estimated, though the political opposition put it at RM54 billion. In addition, the government provided RM1.65 billion in "supportive construction loans", as well as financial safeguards against exchange rate fluctuations on foreign commercial loans, or a shortfall in toll collections. In brief, PLUS was guaranteed profitability, securing UMNO's financial base. Later, toll roads were expanded to cover much of the country, becoming highly unpopular in many cases.

The initially-unpublicized connection with UMNO was through the controlling shareholder in United Engineers, an equally obscure concern with a money-losing record called Hatibudi Sdn. Bhd. Formed in 1984 with a registered address in Daim's office, Hatibudi at one stage listed two of Daim's prot&eaute;gés, Halim Saad and Mohamed Razali Abdul Rahman, as directors and shareholders. After initiating a financial restructuring package that paved the way for Hatibudi to take over United Engineers, Razali resigned from the board. His shareholding in Hatibudi was transferred to Halim, who was also appointed chief executive officer of United Engineers. Public records showed that all but one of Hatibudi's shares were held by Halim.[59]

The UMNO link remained hidden until Works Minister S. Samy Vellu, under fire in Parliament over the contract, apparently inadvertently identified Hatibudi as an UMNO-owned company. He said Hatibudi's "trustees", by virtue of their standing in the party, were Prime Minister Mahathir, president of UMNO; Deputy Prime Minister Ghafar Baba, deputy president; Finance Minister Daim, treasurer; and Agriculture Minister Sanusi Junid, secretary general. In an affidavit submitted in a subsequent court case, Halim said he held his Hatibudi shares "in trust for the ultimate beneficial owner, UMNO".[60]

Exposed, UMNO political leaders acknowledged that United Engineers was being used to pay for the Putra World Trade Centre. "In the case of the north-south highway project, it is a means of UMNO solving its problems by repaying loans taken for the new UMNO headquarters building", said Najib Razak, minister of culture, youth and sports. In response to critics who questioned the probity of the case, Dr. Mahathir said, "We agree...but who is going to pay the RM360 million for the UMNO complex?"[61]

Lim Kit Siang, the opposition leader, delayed the formal awarding of the contract through a series of legal actions and a report to the police alleging corruption. He portrayed the choice of United Engineers as political favouritism that amounted to yet another financial scandal in a series that had plagued the Mahathir administration. Lim said the participation of the four UMNO trustees in a cabinet meeting that decided to privatize the highway was a criminal offence under the Emergency (Essential Powers) Ordinance, which prohibited any elected or public official from using "his public position or office for his pecuniary or other advantage".[62] By the time the Supreme Court ruled narrowly against him in early 1988, however, the hapless Lim and his lawyer, Karpal Singh, another opposition legislator, were behind bars, rounded up with dozens of other alleged troublemakers in Operation Lalang the previous year.

But before UMNO could secure its fresh source of funds, political turmoil within its own ranks put the coveted prize temporarily beyond reach. A High Court declaration on 4 February 1988 that UMNO was an illegal organization triggered a confused scramble by the competing Mahathir and Razaleigh factions to reconstitute the party and claim its assets. After Dr. Mahathir out-manoeuvred his rival and registered New UMNO, the government went ahead and signed the contract with United Engineers in March, despite uncertainty over the legal status of UMNO's 33.3 per cent stake in the company.[63]

The trouble was that with UMNO outlawed, the party was required by the Societies Act to place all its assets with the government's Official Assignee, for safekeeping or eventual liquidation. Dr. Mahathir's followers were able to counter legal moves that would have required them to disclose details of UMNO's many businesses, not the least embarrassing aspect of which was their bleak financial position. Liabilities were "massive", Daim admitted later, with RM600 million in borrowings, and interest at 10 per cent amounting to RM60 million a year.[64] Bank Bumiputra had received High Court approval to auction the Putra World Trade Centre and the land on which it stood, though the sale was postponed while UMNO tried to renegotiate a refinancing plan with its creditors. It was a magnanimous gesture, considering that UMNO had failed to make any payments for years, though not surprising, since UMNO effectively controlled Bank Bumiputra; in Daim's words, "As long as UMNO is the government, the bank will not disturb you."[65] The need to recover the assets gained added urgency with the approach of a general election. It had to be held by mid-1991, and would require a bigger campaign war chest than usual if Tengku Razaleigh's camp, as expected, joined the opposition ranks.

Dr. Mahathir exploited the same crucial advantage that had enabled him to register a

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