Was US$1 billion payment to Abu Dhabi fraudulent, Pua asks 1MDB

The 1MDB audited accounts in March 2014 failed to disclose its loan from the Deutsche Bank consortium to Deloitte Malaysia, says an opposition lawmaker. – AFP file pic, September 23, 2015. 

1Malaysia Development Bhd (1MDB) allegedly hid a loan taken from an international consortium of banks from its auditor, Deloitte, for the purpose of carrying out a “fraudulent round-tripping exercise” with its payment to Abu Dhabi’s International Petroleum Investment Corporation (IPIC), said DAP lawmaker Tony Pua.

He said the source of the US$993 million 1MDB paid to IPIC for terminating its options was unclear and that news reports had suggested it either came from the US$1.22 billion 1MDB redeemed from Cayman Islands or its US$975 million loan from a consortium of six international banks in October 2014.

“The question must now be asked if 1MDB executives have carried out a fraudulent round-tripping exercise to use the undisclosed US$975 million to pay off the terminated options, pretending that the funds were sourced from the redeemed investment in Cayman Islands.

“Was this an audacious cover-up exercise as nothing tangible was ever redeemed from Cayman Islands because the money previously ‘invested’ with Petrosaudi (International Limited) has been lost?” asked Pua in a statement today.

Pua said he became suspicious when 1MDB’s March 2014 audited accounts did not disclose its loan from the Deutsche Bank consortium to Deloitte Malaysia.

Instead, 1MDB disclosed that it redeemed US$1.22 billion from Cayman Islands, only for the funds to be immediately and “substantially utilised” to pay for the options. This, and the alleged secrecy over the loan, rang alarm bells, he said.

The investment in Cayman Islands was derived from 1MDB’s exit from a “controversial investment” with Petrosaudi International Limited in September 2012, said Pua.

“Now, 1MDB also must provide a clear and direct explanation as to why the Deutsche Bank consortium loan was never disclosed to its auditor, how much was paid out in total for terminating the options and the actual source of funds for the payment – whether from the Deutsche Bank loan or from the Cayman Islands redemption.

“The failure to be transparent will only lead to justifiable speculation that nearly US$2 billion is now ‘missing’ – US$1 billion allegedly paid to IPIC but not acknowledged in the latter’s accounts, and US$1 billion apparently redeemed from Cayman Islands which immediately vanished.”

The Wall Street Journal reported on Thursday that another US$993 million allegedly paid to IPIC by 1MDB remained unaccounted for, 10 days after allegations surfaced that a US$1.4 billion payment was made by 1MDB to IPIC in 2012.

- TMI