KUALA LUMPUR — The National Audit Department revealed today that it found 1Malaysia Development Bhd’s (1MDB) management and decision-making less than satisfactory and disorderly.
“Overall, aspects to do with corporate management and internal regulation of the 1MDB Group were less than satisfactory. Some actions taken by 1MDB management and decisions by the board of directors were found to be disorderly,” it said.
In the executive summary to its declassified audit report on the sovereign fund, the department listed several examples of the mishandlings it found.
Top of the list were several major investments with high value between 2009 and 2015, made hastily through a resolution of the board without discussion and thorough review.
It also found that the fund’s management provided incomplete or inaccurate information to the board before a decision was made, and even made decisions without the board’s approval.
Audit report: 1MDB needs over RM42b to pay off loans
KUALA LUMPUR— The National Audit Department revealed today that 1Malaysia Development Bhd (1MDB) would need around RM42.26 billion to pay off the principal cost and interest of loans maturing between November 2015 and May 2039.
In the executive summary of its declassified audit report of the strategic fund, it said 1MDB would also need to provide massive fund to pay off high commitment on several years: RM4.88 billion on 2016, RM14.74 billion on 2023, and RM5.14 billion on 2039.
It said 1MDB would also need RM1.52 billion each year between November 2015 and May 2024 to pay off its loans.
The department found as of October 31, 2015, the balance of 1MDB Group’s loan or investment principal was RM55 billion, compared to its asset of RM58.6 billion. MALAY MAIL
Declassified 1MDB report corroborates DOJ findings
The declassified auditor-general’s report on 1MDB lacks several details due to the wealth fund’s refusal to provide complete documentation, but for key parts which it did investigate, the information corroborates with that of the US Department of Justice.
The Audit Department had, among others, examined the accounts of 1MDB subsidiary Brazen Sky Ltd…
The declassified auditor-general’s report on 1MDB lacks several details due to the wealth fund’s refusal to provide complete documentation, but for key parts which it did investigate, the information corroborates with that of the US Department of Justice.
The Audit Department had, among others, examined the accounts of 1MDB subsidiary Brazen Sky Ltd.
More specifically, the department looked at Brazen Sky’s redemption of “fund units” from its Cayman Islands investment with Bridge Partners International Investment Ltd.
Interestingly, the department noticed that the redemption into Brazen Sky’s accounts – done in stages from Sept 5 to Dec 8, 2014 – were immediately sent out to another 1MDB offshore subsidiary, 1MDB Global Investments Ltd (1MDB GIL).
In total, US$1.392 billion was redeemed into Brazen Sky’s accounts, and US$1.417 billion sent out to 1MDB GIL.
“The cash redemption from the segregated portfolio company (Bridge Partners) was found to have not complied with the 1MDB board of directors’ instruction for it to be returned to Malaysia.
“The cash transfers were not presented before the 1MDB board of directors for approval.
“The justification for the 1MDB management to transfer the money to 1MDB GIL could not be established, as 1MDB GIL too had its own fund to manage totalling US$1.56 billion as of March 31, 2014,” it said.
However, a more complete picture can be found in DOJ’s filings, which established that the money was sent to 1MDB GIL to be recycled back into Brazen Sky, to make it appear as if redeemed.
The DOJ’s figures of the recycled transactions also matched that of the auditor general’s report on 1MDB.
According to the DOJ, the “redemption” of the “fund units” originated from a US$975 million loan 1MDB took out with Deutsche Bank.
The DOJ’s court filing stated that part of that money was “recycled” by sending it to Brazen Sky Ltd through intermediaries, then sent out again through the same intermediaries before returning to the 1MDB subsidiary.
One of these intermediaries was 1MDB GIL.
“The purpose of this unnecessarily complicated funds flow was to create the appearance that fund units in the Brazen Sky Account were being redeemed for cash and being paid forward to 1MDB, thereby fraudulently disguising the fact that the fund units were illiquid and relatively worthless,” the DOJ said in its filing.
The web of transactions is too complicated to be listed here, but is available on Malaysiakini‘s microsite, ‘Stolen’ 1MDB Funds: The DOJ Lawsuit Revisited, under the ‘Options Buyback Phase‘.
Before the general election, Malaysiakini grilled 1MDB CEO Arul Kanda Kandasamy, who had refused to go on record on the purpose of the US$975 million Deutsche Bank loan.
He also insisted that the remainder of Brazen Sky’s US$940 million “fund units” with Bridge Partners had value.
However, with the 1MDB audit report corroborating DOJ’s filings, it remains to be seen if these “fund units” are, as the DOJ claims, “relatively worthless.”
MKINI
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