Malaysia now global laughing stock as the US DOJ moves to seize some US$1 billion of assets stolen from 1MDB, while the Malaysian Government remain inexplicably oblivious to the grand theft

Yesterday, the Wall Street Journal (WSJ) reported that the US Federal prosecutors are poised to launch one of the largest asset seizures in U.S. history as they step up their investigation into billions of dollars siphoned away from 1Malaysia Development Bhd (1MDB).

The US Department of Justice are expected to seize more than $1 billion worth of assets, the single largest seizure in the history of the United States, which are expected to include properties and other assets purchased with money allegedly misappropriated from 1MDB.

Reuters have now confirmed the WSJ report. The U.S. Department of Justice filed lawsuits today saying that over $3.5 billion was misappropriated from 1MDB.

The lawsuits, filed in Los Angeles, seek to seize assets "involved in and traceable to an international conspiracy to launder money misappropriated from 1MDB".  The lawsuits said the alleged offences were committed over a four-year period and involved multiple individuals, including Malaysian officials and their associates, who conspired to fraudulently divert billions of dollars from 1MDB.

Those named included Riza Aziz, Dato’ Seri Najib Razak’s step-son, Low Taek Jho, or Jho Low, and Abu Dhabi government officials Khadem al-Qubaisi and Mohamed Ahmed Badawy Al-Husseiny.

More interestingly, the charge claimed that funds misappropriated from 1MDB were transferred to Petrosaudi, a company that had a joint venture with 1MDB, and thereafter to a high-ranking official in the Malaysian government it identified only as "Malaysian Official One".

The assets involved in the case include penthouses, mansions, artwork and even a private jet.

In the past, the Najib administration has consistently dismissed the WSJ allegations as “unsubstantiated malicious allegations” as part of a “global conspiracy” to “bring down a democratically elected government”.  The Malaysian investigating agencies took the que and refused to conduct any genuine investigations into the monstrous heist despite mounting evidence and damning Auditor-General and Public Accounts Committee Reports.

However, the shit has hit the fan with the latest actions taken by the United States authorities.  Surely, Dato’ Seri Najib Razak will not now turn around and accuse his golfing buddy, President Obama of being part of a global malicious conspiracy to bring down his Government?

As a result, we are now the butt of jokes to the world. The US authorities has moved to seize some US$1 billion of assets stolen and misappropriated from 1MDB, and yet the victim, the Malaysian Government insists that we weren’t robbed.

We call upon the Dato’ Seri Najib Razak to chastise our local regulatory authorities for their ineptitude in getting to the bottom the scandal which isn’t only the largest in the history of Malaysia, but also has set the ignominious record of being the largest seizure in the history of United States.

The Prime Minister must instruct the police and the MACC to follow the leads provided by the Department of Justice to charge all the relevant parties who have stolen billions from Malaysians, including but not limited to Riza Aziz and Jho Low. 

Most importantly, they must obtain and discover, who is the “Malaysian Official One” who has been accused of siphoning billions of ringgit of 1MDB’s borrowed wealth.

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What has happened to the complaint filed with the Malaysian Institute of Accountants against KPMG and Deloitte which were filed more than a year ago?

I have filed complaints against the auditors of 1Malaysia Development Bhd (1MDB) against KPMG and Deloitte Malaysia, their partners Ahmad Nasri Abdul Wahab and Ng Yee Hong, in March and June 2015 respectively with the Malaysian Institute of Accountants (MIA).

I had alleged that both firms intentionally and/or negligently failed to conduct sufficient and necessary due diligence and audit of 1MDB which have resulted in the filing of fraudulent 1MDB annual financial statements.

My complaint against KPMG was for its failure to take into consideration the material disclosures of the transactions which took place in 1MDB’s then US$1 billion investment to form an aborted joint venture with Petrosaudi International Limited in 2009-2010.

Of the above sum, Bank Negara Malaysia (BNM) has confirmed to the Public Accounts Committee (PAC) that US$700 million was siphoned to an unrelated company, Good Star Limited whose ultimate beneficiary was Low Taek Jho, or more popularly known as Jho Low.

In fact, KPMG performed the arguably record-breaking feat of signing off the March 2010 financial audit within 3 weeks after being appointed in September 2010, after the original auditors Ernst & Young (EY) were sacked. EY had refused to sign off 1MDB’s financial statement due to irregularities in the transactions with Petrosaudi.

Most crucially, KPMG also intentionally and/or negligently failed report the fact that 1MDB’s sale of its shares in the joint venture with Petrosaudi and their conversion into a loan took place after the March 2010 financial year.  As a result, 1MDB was able to report artificially inflated profits and failed to disclose the key transactions which were highly dubious within 1MDB Petrosaudi Limited.

Deloitte Malaysia had taken over from KPMG after the latter was sacked by 1MDB in December 2013.  KPMG had refused to sign off the March 2013 accounts because it was unable to verify the authenticity of 1MDB’s US$2.318 billion investment in a dodgy investment fund parked in Cayman Islands.

I had accused Deloitte Malaysia of intentionally and/or negligently failing to conduct sufficient and necessary due diligence and audit of the cash flow and liquidity risk 1MDB.   Deloitte endorsed 1MDB as a going concern on 5 November 2014, after which 1MDB immediately failed to repay a RM2 billion loan at the end of November 2014.

This was because Deloitte Malaysia has failed to perform a thorough authentication and verification of 1MDB’s investment in the Cayman Islands, which turned out to be fraudulent.  Of the US$2.318 billion investment, US$1.15 billion has "disappeared" into the now exposed fake Aabar Investment PJS Limited which was incorporated in the British Virgin Islands.

The balance of US$940 million was supposedly kept in BSI Bank, Singapore.  However, the sum appears to have disappeared altogether after the Singapore authorities shut down the bank for facilitating money laundering.

In addition, Deloitte Malaysia has failed in its audit of 1MDB’s financial statements for March 2013 and 2014 when it failed to properly expense the stock options which 1MDB had granted to Aabar.  The failure to account for the stock options granted, worth at least US$993 million (RM4 billion) meant 1MDB reported over reported profits of RM778 million in 2013 and under reported loss of only RM669 million in 2014.

As of today, 1MDB has yet to file its accounts for March 2015 while Deloitte remains their auditors.

It is now 16 and 14 months since I’ve filed the respective complaints with the MIA.  The MIA is the statutory body established the Accountants Act, 1967 to regulate and develop the accountancy profession in Malaysia.

However, I have not heard from MIA in more than a year.  No action seems to have taken place.  Investigations, if any, appears not to have achieve any outcomes.

I call upon the MIA Council led by its President, Dato Mohd Faiz Mohd Azmi to explain the snail’s pace of dealing with the above complaints, despite their severity and scale, as well as the involvement of high profile public interest.

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"Nothing to hide", but PAC Chairman deletes BNM findings on Good Star Limited's ultimate beneficiary being an individual unrelated to Petrosaudi

The opposition members of the Public Accounts Committee (PAC) disclosed yesterday that PAC Chairman Datuk Hasan Arifin had deleted a key sentence/paragraph from the PAC Report on 1MDB after the report has been concluded by the committee.

This  key  section  states  that  Bank  Negara  Malaysia  has  been informed  by  the  relevant overseas authorities on a voluntary basis that the ultimate beneficiary of Good Star Limited is an individual unrelated  to  the  Petrosaudi  group. 1MDB has  made  payments of  US$700 million  and  US$330 million  in  2009  and  2011  respectively  even  though the funds  were meant for its investments with Petrosaudi.

Datuk  Hasan Arifin responded  yesterday  evening  that “the  deletion  of  two sentences in no way affects the final report by the Public Account Committee's (PAC) on 1MDB”. He said the sentences were deleted because of their unclear status or being investigated and were not for public consumption.

Firstly, if the “two sentences” were indeed inconsequential to the PAC Report, why did the Chairman find it necessary to delete them in the first place?

Secondly,  the  PAC did  not  at  any  point  empower  the Chairman  to delete  these  sentences. The fact of the matter is that the final meeting of the PAC which included members of the backbenchers and  the  opposition,  approved  the  final  draft  which  included  the  above information.

Datuk Hasan Arifin tried to defend his unilateral decision by claiming that the statement “is unclear or being investigated”, hence “is something prejudicial”.

The  PAC  Chairman  should  inform  the  Parliament  and  all  concerned,  what  exactly  is  so unclear about Bank Negara’s findings that “the ultimate beneficiary of Good Star Limited is an individual unrelated to the Petrosaudi International Ltd”?

This  finding  is  crucial  to  the  entire  investigations of 1MDB  because  the  company  and  its executives  have  testified  to  the  PAC  that  Good  Star  Limited  is  a  subsidiary  of  Petrosaudi. However,  the  company  was  unable  to  provide  any  concrete  evidence, such  as  a  company search or certificate  of  incorporation  from  the  relevant  authorities,  despite repeated requests, to back up its claims to both the Auditor-General and the PAC.

All  1MDB  could  provide  was  a  letter  dated  2015  from  Petrosaudi  to  1MDB  making  a  claim that Good Star Limited was part of the Petrosaudi group. This letter would certainly hold no water in any court of law and the PAC would make itself a laughing stock of the world if we were to accept the letter at face value.

Hence, is  the  PAC Chairman  questioning  and  challenging  the  authority  and  investigative findings of Bank Negara Malaysia?

If he is questioning the findings of Bank Negara, then why did he persistently, as recorded in the Hansard on at least 5 occasions, refused our request to call Bank Negara to testify to the PAC? Is there something that Datuk Hasan Ali is aware of, which he doesn’t want PAC members to find out?

In the light of the above, as well as the latest developments involving the complete collapse of 1MDB’s debt-asset swap agreement with IPIC, we once again call upon the PAC Chairman to call for an  immediate  PAC  meeting  and  officially  re-open  our  investigations  on  the troubled 1MDB. The  failure  to  do  so  under  the  current  circumstances  would  mean  the failure of the PAC to fulfill our duties and obligations to the Parliament and the rakyat.

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All critics of debt-stricken 1MDB have been finally vindicated with tabling of the PAC Report

For  more  than  a  year,  the  critics  of  1Malaysia  Development  Bhd  (1MDB) –  the  Sarawak Report,  which  has  been  banned  by  the  Malaysian  government,  the  Wall  Street  Journal, which has been accused of orchestrating a conspiracy against the country and myself, who is being investigated for “activities detrimental to parliamentary democracy” over the same matter were accused of doctoring documents and publishing lies.

The  tabling  of  the  Public Accounts Committee  (PAC) Report  today,  with  the  accompanying transcripts of all its proceedings since 19th May 2015 in Parliament has now fully vindicated us. The findings  of  the Auditor-General, summarised in  the  106-page  PAC Report  and  the relatively brief conclusion by the PAC confirms gross mismanagement and wanton neglect of all principles of good governance and accountability.

Most  importantly,  1MDB  deliberately  hampered  the  investigations  by  the  Auditor-General and the  PAC  by  giving  half-truths,  withholding  of  crucial  information  as  well  as defiantly refusing to  supply  simple  bank  statements  of  its  overseas  accounts  to  allow  the  audit  of multi-billion ringgit money trails.

Despite certain shortcomings of the report – the failure to obtain the crucial information of 1MDB’s foreign banking transactions, and the failure to secure additional key witnesses like former CEO, Mohd Hazem Abd Rahman, Bank Negara officials, auditors Ernst & Young and even controversial figures like Low Taek Jho – the evidence put forward based on available documents were overwhelmingly damning for 1MDB.

This crucially include the first joint venture agreement with Petrosaudi International Limited where 1MDB  was  meant  to  invest  US$1  billion  for  a  40%  stake  but  US$700  million  was misappropriated  to  Good  Star  Limited. The  Auditor-General  has  found  evidence  that  the transaction  took  place without  the  knowledge  and  approval  of  the  Board  (7.3.4, 7.3.5). Interviews  with  the  then 1MDB  Chairman,  Tan  Sri  Mohd  Bakke Salleh showed that he quit the Board in disgust a few weeks after discovering the dodgy, in his refusal to condone the actions of the insubordinate action of the Management.

While  the  Management  insisted  that  Good  Star  Limited  was  a  subsidiary of  Petrosaudi International, no evidence  was presented by 1MDB from the relevant authorities to the AG or the PAC to prove such claims. The AG’s Report also confirmed that besides the original US$700 million  transferred in 2009, 1MDB  further  transferred  an  additional  US$330 million to Good Star in 2011.

The  AG  and  PAC  have  also  been  able  to  establish  multiple  questionable  transactions between 1MDB and Aabar Investment PJS Limited, which is established in the British Virgin Islands “Aabar (BVI)”. It has been previously reported that Aabar (BVI) was granted 49% options to acquire 2 power companies, Tanjong Power and Genting Sanyen, in exchange for International Petroleum Investment Corporation (IPIC) providing a US$3.5 billion guarantee for 1MDB bonds issued in 2012. These options were terminated in 2014.

Based on the Option Termination agreement sighted by  the AG, 1MDB was to compensate Aabar with a “refundable deposit” of US$300 million.  However, 1MDB reported that it has paid US$993 million to Aabar (BVI). (7.3.10)

Worse,  the  AG  and  the  PAC  has  also  been  informed  that besides  the  above,  1MDB  paid Aabar  (BVI)  further  sums of  US$855  million  and  US$295  million  as  unexplained “top-up security deposits”. (7.3.13)

Under the original “Credit Enhancement Agreement” signed in 2012, 1MDB has already paid Aabar (BVI) US$1.367 billion. (7.3.9)

Hence, in total, 1MDB has paid US$3.51 billion to Aabar (BVI) for “security deposits” and “option termination” apparently for the US$3.5 billion bond guarantee provided by IPIC!

What  is  damning  is  the  fact  that  1MDB  could  not  provide  any  concrete  documentary evidence that Aabar (BVI) is in anyway related to Aabar Investment PJS of Abu Dhabi, which is the susbsidiary of IPIC.  The Auditor-General noted that Aabar (BVI) is not listed as IPIC’s subsidiary based on the audited accounts of IPIC. (7.3.11, 7.3.12).

In  addition,  the  AG  Office  clearly  stated  that  they  could  not  verify  that  the  above transactions disclosed  by  1MDB  actually  took  place because 1MDB  failed to submit  its overseas bank statements  and  other  relevant  documents  for  verification, despite repeated requests and reminders. (7.3.13)

There are many other shocking misdeeds and transgressions which have been disclosed in the PAC report, which won’t be listed here in my statement. However, what is clear is that there  is  more than sufficient  damning  evidence  to  indict  not  only  the  entire  top management, but also the entire Board of Directors.

The  PAC  Report  has  requested  that  former  CEO,  Datuk  Shahrol  Halmi  Azral  and  other related parties be investigated for all of the shenanigans cited, and reprimanded the Board of Directors for their failure. The  Inspector-General  of  Police  must  take  immediate  action  to investigate  Datuk  Shahrol and his associates. I will go further to call not only for Datuk Shahrol Halmi be sacked with immediate effect, but the entire Board of Directors who have failed to protect the interest of the Government and the tax-payers to be removed as well.

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Why has the Royal Malaysian Police not investigated 1MDB's missing Cayman Islands investment funds?

I  had  asked  the  Minister  of  Finance  who  is  the  investment  bank  which  is  managing  the balance  of  the  proceeds  in  the  form  of “units”  which  was  redeemed  from  1MDB’s  Cayman Islands investment amounting to the reported RM940 million.

I  received  the  reply  yesterday stating  that “no  investment  bank  was  appointed  to  manage state investment firm 1MDB's funds in the Cayman Islands.”

The lies by 1MDB and the Minister of Finance have now come a full circle, which strengthens the suspicions that there was never any substantial money invested in the Cayman Islands. The investment was purportedly made with the US$2.318 billion proceeds from the disposal of 1MDB’s investment with PetroSaudi International Limited.

Instead, the supposed opaque investment now looks like a cover story for 1MDB to hide the fact   that   the   billions   of   dollars   invested   with   PetroSaudi   have   been   lost   through embezzlement  and  pilferage. In  fact  the  entire  scam  was  so  well-thought  through  that  it fooled international auditors KPMG and Deloitte for years.

However,  the  chickens  finally  returned  to  roost  when  1MDB  was  forced  to “redeem”  the funds from Cayman Islands.

Under pressure from debtors, 1MDB CEO Arul Kanda hurriedly announced on 13 January 2015 that "following a commitment made by the Chairman of the Board of Directors in a statement dated 23 December 2014, 1MDB can confirm that it has now redeemed in full the US$2.318 billion invested by the company in a Cayman Islands registered fund”.

Again, under pressure to explain what exactly has been “redeemed”, Arul Kanda told the Singapore Business Times on 9 February 2015 that “The cash is in our accounts and in US dollars. I can assure you (about that) . . . I have seen the statements.”

The Minister of Finance further confirmed on 11 March 2015 in Parliament that the “cash”was held in BSI Bank in Singapore.  He further explained that the money wasn’t repatriated to Malaysia to avoid the hassle of Bank Negara approvals.

However, following a damning exposé by the Sarawak Report that BSI Bank denied the existence of cash held in the 1MDB account, the Minister of Finance retracted his earlier reply in Parliament.  On 19 May 2015, and informed the House that the redeemed proceeds were “assets” and not cash.

But a few days later, the mystery had deepened when Second Finance Minister Husni Hanadzlah claimed that what was held in BSI Bank were “units”, when he was asked to clarify on the exact nature of these “assets” in Singapore.

On 10 June 2015, without explaining what these “units” really were, Arul Kanda blamed the entire fiasco of cash to assets to units on “miscommunications on the matter”.

Now, the latest reply from the Finance Minister has proven that Arul Kanda and 1MDB has “miscommunicated” not only on the form of proceeds which were redeemed from the
Caymans investment. The reply showed without a doubt that Arul Kanda and 1MDB lied about the fact that the balance of the US$940 million investment in Caymans were redeemed in the first place.

The purported “investment” is still stuck in Cayman Islands and could not be liquidated.

Even more shocking was the claim by Dato’ Seri Najib Razak that there was no investment bank fund manager for the “units”! How can there be “units” if there is no fund manager?

1MDB must be the first investor in the world who can hold fund manager-less units creating a brand new class of investment assets!

If not,  all of the above points to the fact that lies after lies after lies were told by 1MDB and the Government to carry out a massive cover up of the loss of billions of ringgit by 1MDB over its investment in and with PetroSaudi International.  For the billions we have invested in PetroSaudi, we are now in possession of worthless or even fake and fraudulent “units”.

Why hasn’t the Royal Malaysian Police conducted a thorough investigation over the missing funds and these dodgy “units” even after I have made my police report exactly in March a year ago?

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Did 1MDB's top executives mislead the Board of Directors in its investment with Petrosaudi International Limited?

The latest set of 1MDB minutes exposed by The Sarawak Report dated 18 September 2009 revealed the fact that the top executives of the company clearly misleading the Board of Directors with regards to the US$1 billion investment with Petrosaudi International Limited.

According to the document, Mr Casey Tang, 1MDB’s Executive Director of Business Development briefed the Board that “Petrosaudi is ultimately owned by King Abdullah and the Kingdom of Saudi Arabia”.

Casey, who is currently on Bank Negara’s wanted list to assist with its investigations on 1MDB, said so to convince the Board on the merits of investing nearly all of the RM4.3 billion proceeds from its first fund-raising exercise to acquire 40% of the joint venture company with Petrosaudi.

After the joint venture agreement was signed, 1MDB further deceived the Malaysian public in its press statement on the 30 September 2009 that claimed that

Malaysia and Saudi Arabia today entered a new era of economic cooperation with the setting up of a US$2.5 billion joint venture company, which will spearhead the flow of foreign direct investments from the Middle East as well as make strategic investments in high impact projects here [in Malaysia].

The language of the entire press release was to give the impression that 1MDB was really forming a joint venture with the Saudi Arabian government, when in reality, they were merely entering into a transaction with an insignificant company registered in Saudi.

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