Friday, October 27, 2017

With outrageously creative accounting and a preposterous tax-payers’ bailout admitted by 1MDB itself, perhaps 1MDB will indeed be “on track to realise a profit”.

On Wednesday, I had accused the Prime Minister of peddling lies with the outrageous claim that 1MDB “is on track to realise a profit”, when 1MDB is nothing but a shell today laden with some RM40 billion of outstanding debt (including debts that have been assumed by the Ministry of Finance (MoF) over the past year).

1MDB tried vainly to defend the Prime Minister yesterday by spewing another set of half-truths and establish new standards of creative accounting.

I had, not for the first time, argued that 1MDB made some RM2.3 billion of losses from the sale of its acquired power plants to China General Nuclear Corporation.  And not for the first time, 1MDB tried to argue that 1MDB didn’t lose money because of dividends purportedly received from the energy subsidiaries.

Let me remind the CEO of 1MDB, Arul Kanda again - he had conceded to the Public Accounts Committee (PAC) that were the purported RM2.18b in dividends to be counted, he also needs to account for the huge RM3.5 billion in interest costs on the loan is taken to purchase those assets in the first place.

Only a half-baked CEO would tell his shareholders that he made money from the dividends, without taking into account the massive interest bill which was substantially higher than the purported dividends!

Worse, when I checked the financial statements of 1MDB’s energy subsidiaries, there was not a single year where they declared dividends to their 1MDB parent.  This meant that Arul Kanda cooked up the entire ‘dividend’ bullshit.

The Prime Minister himself declared that the proposed 1MDB rationalisation exercise practically ‘complete’ way back on 31 December 2015.  He said then, “it is therefore clear that 1MDB’s major challenges are now behind it as I promised they would be last summer.”

Except two years later, the plans are not only far from complete, they have completely unravelled.

As I’ve already highlighted previously, the RM7.41 billion deal to sell 60% of Bandar Malaysia which was the pillar of the 1MDB rationalisation exercise, has collapse spectacularly with no end in sight.

1MDB which had no ability to develop the massive property project had surrendered Bandar Malaysia back to the MoF, as proposed by the Public Accounts Committee (PAC).  And as 1MDB rightly pointed out, I was part of the committee which made the particular recommendation.

However, what PAC did not at any point in time recommend for the RM2.4 billion sukuk bond 1MDB borrowed for Bandar Malaysia to be also handed to MoF.  This is because the Auditor-General has confirmed that hardly a single sen from the above bond was actually spent for the purposes of the Bandar Malaysia project – a fact which was also conceded by Arul Kanda to the PAC.

Most shockingly however, as admitted explicitly for the first time by 1MDB in its statement to condemn me, was that 1MDB is expecting to “receive payments, over time” from MoF for the above debt-laden asset transfers.

In layman terms, it means that not only the tax-payers were forced to assume 1MDB’s debt, we bloody fools have to even pay 1MDB to assume these debts!

The above doesn’t yet include the fact that MoF has only recently in August, directly or indirectly bailed out 1MDB by making some US$600 million (RM2.5 billion) in settlement payments to Abu Dhabi’s IPIC.

Perhaps, I was wrong after all.  Despite being a shell laden with some RM40 billion of debts, Dato’ Seri Najib Razak was right to say that 1MDB “is on track to realise a profit” – with outrageously creative accounting and a preposterous tax-payers’ bailout.
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