State fund 1Malaysia Development Berhad’s (1MDB) “half-baked” disclosure of its RM42 billion debts has only raised more suspicion and questions instead of putting to rest all speculations about its controversial dealings, one of its strongest critics has said.
DAP lawmaker Tony Pua also noted that the summary of 1MDB’s expenditures revealed by the troubled company yesterday contained nothing new.
“It certainly does not ‘clear any confusion’, but instead it encourages even more suspicion and speculation as to why 1MDB is so unreasonably evasive,” the Petaling Jaya Utara lawmaker said in a statement late last night.
“None of the figures are new as we have already derived as much from the March 2014 financial statements. As such, none of the above explains the criticism heaped on 1MDB to date.”
Pua, who is also DAP national publicity secretary, was referring to a statement released by 1MDB yesterday, which provided a breakdown of its expenditure and explained what the RM42 billion was spent on.
Its president and group executive director, Arul Kanda Kandasamy, said there had been much speculation over the RM42 billion debt, particularly the RM27 billion which was alleged to be lost or missing.
“We provide a summary of what the RM42 billion debt has been used for, information that is fully disclosed in 1MDB’s audited and publicly available accounts from March 31, 2010 to March 31, 2014.
“We trust this clarification will help to clear any confusion on this matter,” Arul said.
According to charts enclosed with Arul Kanda’s statement, RM18 billion was spent on the purchase of independent power producers (IPP) while RM15.4 billion was invested in funds such as Brazen Sky and Aabar Investments.
After taking away RM5.8 billion in financial expenditure and RM1.7 billion in land costs, 1MDB is left with RM900 million in cash surplus.
Pua, in his statement, said that his question was the RM6.1 billion invested in Brazen Sky, money that was in Cayman Islands until the beginning of this year.
“Why is it that despite Arul Kanda announcing all of Brazen Sky’s investments have been ‘redeemed’, there’s still no cash at all in BSI Bank Singapore? This is despite Arul Kanda assuring us in February that the cash is sitting safely in the bank.”
Arul Kanda had stated on January 13 that 1MDB had redeemed in full the US$2.318 billion invested in a Caymans-registered fund, and repeated this statement in an interview with Singapore Business Times published on February 7.
Prime Minister Datuk Seri Najib Razak had said in March that some US$1.103 billion had been “redeemed” from Brazen Sky’s alleged offshore fund in the Cayman Islands and was now being “kept in US currency” at BSI Bank Limited in Singapore.
But in a parliamentary written reply last month to “amend” his earlier answer, Najib said the investment redeemed by 1MDB were assets in US dollars for the purpose of balancing its liabilities which were also in US dollars.
Second Finance Minister Datuk Seri Ahmad Husni Hanadzlah subsequently said that only “units” were kept in the BSI Bank account, but could not adequately explain what form these units were. He only said they were backed by sovereign wealth funds.
Pua said yesterday he had also repeatedly asked about the RM5.1 billion invested by 1MDB Global Investment Limited but said Najib, who is also finance minister, refused to reveal any information about it.
“What’s more, we were fully aware that 1MDB has RM5.1 billion ‘deposited’ with Aabar Investment,” he said.
“However, our question was why did 1MDB agree to such onerous ‘loan-shark’ terms to secure a US$3.5 billion guarantee from Abu Dhabi’s International Petroleum Investment Corporation (IPIC)? Why borrow and get to use only 60% of the funds?”
Pua added that 1MDB had used an exorbitant amount – RM5.8 billion – for financial expenditure, with a breakdown of RM4.5 billion for cost of finance and working capital, RM900 million for foreign exchange cost and RM400 million for taxes, indicated that its investment strategy was an “absolute disaster”.
“Is Arul Kanda trying to tell us that 1MDB took additional loans to pay interest to its loans and its taxes? Is he confirming that the returns from whatever assets purchased with the earlier loans couldn’t even cover interest and tax expenses, such that 1MDB had to borrow an additional RM5.8 billion to pay for them?