Declassified report on Malaysia’s 1MDB shows funding anomalies

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/ (May 16): A newly-declassified report on scandal-plagued state fund 1MDB shows investigators expressed widespread concern about anomalies in its accounts, as Prime Minister Mahathir Mohamad accelerates efforts to reopen probes into the company and the actions of his predecessor.

While there were no massive surprises in the summary of the report, and it did not mention former premier by name, the report said 1MDB officers took investment actions against or without full knowledge of the board of directors on several occasions, while giving inaccurate or conflicting information to stakeholders.

1MDB, set up in 2009 to fund domestic infrastructure projects and whose advisory board Najib once chaired, didn’t submit management accounts for the year ended March 2015 and bank statements from foreign financial institutions. The audit team said it couldn’t access computers, notebooks and servers at 1MDB for the purpose of crosschecking and analyzing its findings.



“Overall, corporate governance and internal controls in 1MDB were less than satisfactory,” the summary said. “Some actions by 1MDB’s management and decisions by the board of directors were carried out in a manner that wasn’t proper.”

The audit report on 1MDB had been protected since 2016 by the Official Secrets Act. Mahathir’s move to release it comes as he seeks to tighten the net around Najib, whom he defeated in an election last week, and other officials over the multi-billion dollar scandal surrounding the fund’s actions dating back some years. Mahathir has barred Najib from leaving Malaysia in the meantime.

“By declassifying the file, is showing Malaysia and the world that he means business and is very serious in getting to the bottom of 1MDB,” says Ahmad Martadha Mohamed, an associate professor at Universiti Utara Malaysia. “The timing is a little surprising, rather fast as it’s done before even the nominations for a new cabinet is complete. The executive summary shows what transpired and confirms certain suspicions there were some shady investments made.”

Mahathir, who was once Najib’s mentor and ally and who is back in power after a prior stint as premier from 1981 to 2003, accused him repeatedly on the campaign trail of being a “thief” over alleged graft at 1MDB. Najib has denied any wrongdoing and was cleared by the attorney general at the time, while the fund has consistently denied any misconduct.

The 1MDB sandal spawned global probes as investigators tracked a money trail stretching from Switzerland to Singapore and the U.S. The Department of Justice alleges that US$3.5 billion from the fund went missing.

Malaysian financier Low Taek Jho has been ordered by a U.S. court to turn over his US$250 million yacht “Equanimity” to the U.S. authorities who plan to sail it from Indonesia and sell it in the U.S.

The yacht is among more than US$1.5 billion in assets that the U.S. claims Low and his accomplices acquired with money they siphoned from 1MDB.

Debt Payments



The declassified report found, among others things, that 1MDB used 288 million ringgit (US$73 million) of government funds to pay interest on its debt, which went against the monies’ original purpose. 1MDB raised 3.98 billion ringgit from domestic debt and issuance, of which only 246 million ringgit was invested in two property projects, while 2.16 billion ringgit was advanced to the company.

1MDB said in March that all its funds are fully accounted for.

Swiss prosecutors said on Tuesday that they want to start talks with investigators in Malaysia as soon as possible to better coordinate various criminal probes into the sprawling case.

The Office of the Attorney General of Switzerland “is very much interested in renewing dialogue with the competent authorities in Malaysia” and “favors an exchange between partnering authorities at their earliest convenience,” it said in an email.

Singapore authorities also weighed in. The city-state has cooperated extensively with their Malaysian counterparts on past requests on the matter and is ready to extend further assistance, the Monetary Authority of Singapore and the Commercial Affairs Department said in an email early Wednesday.

Swiss Attorney General Michael Lauber has been publicly critical of the lack of cooperation that his team of prosecutors got from Najib’s government. Singapore has punished banks over lapses related to 1MDB, seized assets and jailed bankers over the scandal.

Source: The Edge Markets








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