Anwar reveals more 'dubious dealings' involving 1MDB

KUALA LUMPUR - Why would a company invest RM3.5 billion in cash in another company, only to sell it five months later to the same party at RM4.1 billion, thus making a clean profit of RM615 million?

This was the crux of concerns raised by Opposition Leader Anwar Ibrahim regarding the deals between 1Malaysia Development Berhad (1MDB) and PetroSaudi International Limited.

According to Anwar, 1MDB registered a clean profit of RM425 million in its first year of operation ending March 31 last year, as announced by both prime minister Najib Razak, who chairs the company's advisory board, and its chief executive officer Sharol Halmi.

“The profit was due to the sale of investment in 1MDB PetroSaudi Limited, which was a joint venture company between 1MDB with PetroSaudi International Limited.

"In the transaction, 1MDB had invested in 1MDB PetroSaudi Limited as much as RM3.5 billion in cash. Barely five months later, 1MDB sold off the investment to the same partner, PetroSaudi International Limited at a price of RM4.1 billion and registered a clean profit of RM615 million,” said Anwar.

However, Anwar said that the sale was done in installments which will take another 11 years to complete.

“This means that the revenue of RM4.1 billion can only be obtained fully by March 31, 2021 based on the transaction date according to 1MDB’s account which was March 31, 2010.

Anwar pointed out that it was doubtful that 1MDB could recover the RM4.1 billion based on an observation by auditors KPMG in their report on 1MDB’s account last year.

A note in the report says:

“The Group and the Company held notes receivable amounting to RM4,139,125,000 as at 31 March 2010. A valuation was performed by an independent financial advisory firm to support the assessment of the appropriateness of the carrying value of the notes receivable as at 31 March 2010. This valuation was carried out based on certain sets of assumptions. It should be noted that these assumptions are critical to the result of the assessment. The notes receivable are backed by a corporate guarantee issued by the ultimate holding company of 1MDB PetroSaudi Limited, PetroSaudi International Limited PSI). Management believes that PSI is in good financial standing and has the ability to meet all obligations required as documented in the Corporate Guarantee Agreement”.

'PAC must probe'

Anwar said the auditors noted that they relied solely on 1MDB’s word that PetroSaudi International Limited had good financial position and was able to fulfil all financial demands like what was stated in its Corporate Guarantee Agreement document.

"The KPMG auditors did not state their assurance whether the debt of RM4.1 billion could be repaid by PetroSaudi International Limited because it was not guaranteed by bank nor the government,” explained Anwar.

Raising the matter in parliament, Anwar urged the Public Accounts Committee under Meeting Regulation 77 (1)(d) to investigate the dubious accounting.

“I urge the PAC to investigate the case as it involves the prime minister, who is also the Finance minister acting as the 1MBD advisory board chairman and the issuance of government bonds worth RM5 billion," he added.

Saying a bond worth RM15 billion will be issued to finance 1MDB’s operation, Anwar reminded that 1MDB had suffered losses amounting to RM158.3 million in the first 6 months of 2011.

Earlier this year, Anwar revealed how 1MDB was linked to Sarawak chief minister Abdul Taib Mahmud .

“Last year PetroSaudi paid over RM1.5 billion to takeover UBG Bhd, the financial arm of the business empire owned by Taib Mahmud’s family that was facing difficulties. Where did that money come from?” he asked.

The financial statements, Anwar said, suggested that 1MDB’s "financial merry-go-round" was an attempt to bailout and enrich BN's cronies.

- Harakahdaily