Where is RM5.5 billion of 1MDB funds being invested, DAP asks

DAP lawmaker Tony Pua said sovereign fund 1Malaysia Development Berhad (1MDB) must come clean on the whereabouts of some US$1.56 billion (RM5.55 billion) of loan fund. – The Malaysian Insider file pic, January 13, 2015.

Controversial sovereign fund 1Malaysia Development Berhad (1MDB) must reveal where an additional US$1.56 billion (RM5.55 billion) of loan fund is being invested, DAP lawmaker Tony Pua said today.

He said according to the company's financial report for the first quarter of last year, US$1.56 billion had been placed in various investment portfolios in the "custody of a licensed financial institution with good credit ratings as rated by international credit rating agencies".

"The amount originated from a US$3 billion loan taken by 1MDB in March 2013 meant for a joint-venture investment with the Abu Dhabi government to form the Abu Dhabi Malaysia Investment Corporation (Admic). However, two years later, Admic remains stillborn while the balance of US$1.44 billion 'has been utilised by the company for working capital and debt repayment purposes'.

"The question I have is, where is the US$1.56 billion invested and located? Are these funds also similarly managed by a mysterious fund manager who cannot be named based in the financially secretive Cayman Islands?" the Petaling Jaya Utara MP asked in a statement today.

Pua had previously said that 1MDB's financial statements for the year ending March 2014 were filed in October 2014, where it was disclosed that the balance of US$1.23 billion (RM4.07 billion) invested in the Cayman Islands would be received in full before the end of November 2014.

But Pua pointed out that 1MDB chairman Tan Sri Lodin Wok Kamaruddin had on December 23 said that the fund only “expects to redeem the remaining amount in the coming months”, which was contrary to what was stated in the financial report, adding there was no sign of the money returning to Malaysia or to 1MDB.

1MDB had earlier invested US$2.32 billion in a “segregated portfolio fund” in 2013, and it was later revealed that the money was being managed by a fund manager in the Cayman Islands, a move which drew intense scrutiny and criticism from the opposition.

Some US$1.22 billion has been repatriated to 1MDB per the instructions of the board of directors on August 1, 2014 while the remaining balance of US$1.23 billion remains outstanding.

Lodin last month said repatriating the funds to Malaysia would have exposed the money to fluctuations on the foreign exchange market.

This followed the 10-month decline of the ringgit against the US dollar.

An estimated RM18 billion of 1MDB's money is parked in the Caymans.

Former prime minister Tun Dr Mahathir Mohamad has hit out at the firm, noting that a large part of the money raised from the issuing of debt paper by 1MDB was sent to the Caymans – a move which many, including the opposition, have questioned.

"Similar to the controversial Caymans investment, the US$1.56 billion investment with 'a licensed financial institution' was also classified as a Level 3 asset by the auditors in the financial report," Pua said today.

He added that an asset was classified as Level 3 when “fair value measurements are those derived from valuation techniques that include inputs for the asset or liability that are not based on observable market data (unobservable inputs)”.

"In layman’s terms, Deloitte Malaysia (the auditor) is saying that it has no way of verifying the real value of these 'investments'," the DAP national publicity secretary said.

Pua urged the fund's newly-minted chief executive officer Arul Kanda to be transparent and accountable in disclosing the nature and status of the additional US$1.56 billion investment, including the name and location of the fund manager and the rate of return of the investment.

"Furthermore given that Admic is unlikely to commence real work any time soon, will 1MDB consider redeeming these funds to assist with the debt repayment problems faced by the company? Malaysians deserve to know if 1MDB is in greater trouble than it cares to share," he said.

Critics have long questioned the fund's heavy debts, its use of money and its opaque operations. 1MDB had borrowings of RM42 billion and suffered a negative cash flow of RM2.25 billion in FY14 with its debt servicing at around RM2.5 billion.

- TMI