Kuala Lumpur – Former Prime Minister Tun Dr Mahathir continues to expose 1 MDB scandals. In his blog he recently published a two-part article outlining the 1 MDB saga. The following is the full text of his first part article:
1.1MDB is not a wealth fund as it is touted to be. Except for the one million Ringgit contributed by the Government, the rest of the RM 42,000,000,000 (forty-two thousand million) is borrowed money. Borrowed money cannot be regarded or classified a wealth. It is a liability which imposes on 1MDB or in case of its failure the Government to repay the interest and the principal. The sum is so huge that if the Government cannot pay them it could be bankrupted. This has happened to Greece.
2.The possibility of this happening imposes a heavy responsibility on the management of 1MDB and oversight by the Government. And very quickly it became clear that the executives and board of 1MDB did not take their responsibilities seriously.
3.Shahrol, the CEO of 1MDB borrowed five billion Ringgit from the banks without the knowledge and approval of the Board of Directors.
4.The borrowings were at high interest rates. In one case Goldman Sachs was paid a 10% commission for raising a loan with a 5.9% interest. This means that 1MDB gets only 90% of the loan but has to pay interest on 100%. It is the same with the principal.
5.The money was apparently used to buy power plants at well over the market price. The licences for some of the plants were due to expire. If the purchases were delayed until the expiration of the licences the prices would be for less than market price.
6.But the management seemed not to care about getting the best prices. As a result when the plants were sold to the Chinese, 1MDB suffered a loss of more than one billion Ringgit.
7.There are two other cases where the CEO Shahrol had acted without the approval of the directors of 1MDB. He entered into a joint venture (JV) with Petro Saudi before a proper and intensive due diligence was carried out. Then he invested USD 1 billion in the JV also without approval of the board.
8.The investment was so big that it demands for thorough and extensive due diligence before it could request for approval by the board of directors. The CEO really has no authority to invest such a huge amount. But this was what he did.
9.It is unthinkable that on three occasions the CEO, Shahrol, would act without following the rules of the company. In the memorandum of the company Section 117 states that all the affairs of the company must be approved by the Adviser of 1MDB, i.e. by Dato Sri Najib, the Prime Minister and Minister of Finance.
10.While Shahrol may be brave enough to act without the board’s approval, it is unthinkable that he would act without Najib’s approval. The responsibility for the three actions by Shahrol must have been made after, or on the instruction of Najib, the company’s Adviser. If not he would have been scolded and probably sacked by Najib.
11.Then 1MDB was unable to pay interest of two billion Ringgit on the loans. It had to borrow in order to pay. The borrowings have thus increased to RM 50 billion due probably to subsequent borrowings. This increase in the amount of borrowings is recorded in the PAC report.
12.Then it was reported that Najib had 681 million USD, equal to 2.6 billion Malaysian Ringgit in his personal and secret account in Ambank. No Prime Minister of Malaysia should have so much money in his own account. He should reject any such gift. If it is not a crime, it is morally wrong.
13.At first Dato Sri Najib denied the truth of the report. He said he could not be so stupid as to put the money in his account. His stooges all echoed his words.
14.Then he admitted that he did have the 2.6 billion Ringgit in his account but it was a gift. Then he explained that it was a donation from an Arab for his actions against I.S. and his interest in Islam.
15.Then the Arab became a prince and subsequently the late King of Saudi Arabia.
16.None of his explanation can be believed. No one would give this huge amount to anyone even if he had done something for Islam or for any other cause. The belief is that the money came from 1MDB, the only source of such sums accessible to Najib. He denies of course but he has no documentary evidence to prove the money is not from 1MDB.
17.Then IPIC which was appointed as guarantor for the loans for 1MDB made a statement to the authorities in London that a sum of 1.7 billion USD which was due to it had not been paid by 1MDB. It therefore refused to pay the USD50 million interests due on the loan taken by 1MDB.
18.1MDB said it had paid the money to a subsidiary of IPIC named Aabar PJS Ltd (British Virgin Islands).
19.IPIC says that Aabar PJS(BVI) is not an IPIC company although it has a company by almost the same name i.e. Aabar PJS Ltd. This company had received no payment from 1MDB. IPIC implied that the company the 1MDB paid to was a false company.
20.There was a suggestion of fraud and Arul the CEO of 1MDB admitted that it may have paid to the wrong company. But 1MDB insist that IPIC should pay the USD50 million interests as it was the guarantor of the loan. 1MDB would not pay.
21.A guarantor could be obliged to pay if 1MDB was really incapable of paying. But a guarantor is not obliged to pay simply because 1MDB refused to pay. Besides IPIC as guarantor had not been paid the USD1.7 billion which was due.
22.As both 1MDB and IPIC would not pay the interest on the loans, there would be a default. This will cross default other loans taken by 1MDB. Since 1MDB is a fully-owned Government company the defaults will affect the Government’s credit-worthiness. The Government may not be able to borrow any more in the market.
23.The Government will have financial deficits which may lead to bankruptcy if the loans are not serviced and the principal paid.
24.In the meantime the 2.6 billion Ringgit in Najib’s account were said to be moved into Singapore banks. Singapore was said to have frozen accounts of several people pending investigations for money laundering. Though no mention was made that the frozen accounts belong to Najib, as a financial center Singapore cannot be seen to cover up an obvious case of money laundering.
25.Bank Negara had made a report to the Attorney General presumably on Najib’s money in Ambank. But the A.G. dismissed the report, claiming that there was no wrongdoing by the Prime Minister. Similarly the report by MACC was also dismissed by the A.G. The contents of those reports were made official secrets to prevent public scrutiny. But the OSA is not meant to cover up possible crimes.
(1 MDB Saga Part 2 to be continued)
