Another ‘top secret’ 1MDB bailout by 1MDB via TRX land buyback by the Ministry of Finance

During the last parliamentary session, I had asked the Minister of Finance what is the cost and size of the land in Tun Razak Exchange (TRX) which its wholly-owned subsidiary, Aroma Teraju Sdn Bhd acquired from 1MDB in 2015.

The reply which I had received from the Dato’ Seri Najib Razak on 31 July, was that the information was protected by a confidentiality clause between the buyer and the seller.

The answer is ridiculous because both entities are wholly-owned by the Ministry of Finance, which in turn is accountable to both the Parliament and the public at large, and hence such information should never be a secret. This is especially since the price of a piece of land is in no way a threat to national security, and the information is certainly not protected by the Official Secrets Act.

Therefore, for the current sitting, I had asked why the land size and price for the purchase of Tun Razak Exchange (TRX) land by MOF-owned Aroma Teraju from 1MDB cannot be disclosed even though both companies were wholly-owned subsidiaries of MOF.

Tony Pua minta Menteri Kewangan menyatakan apa sebabnya keluasan dan harga pembelian tanah Tun Razak Exchange (TRX) oleh syarikat Aroma Teraju daripada 1MDB tidak boleh diumumkan walaupun kedua-dua syarikat tersebut merupakan anak syarikat milik penuh Kementerian Kewangan

Once again, in the reply dated 6 November 2017, I received utter nonsense from the Finance Minister which justified his being awarded “Asia’s Worst Finance Minister 2016” by FinanceAsia.

Dato’ Seri Najib Razak responded by saying this was because of the agreement’s confidentiality clause to protect the commercial considerations of both parties. He goes on to say that these terms are consistent with the key terms used in the market among other similar transactions.

The Minister chose to ignore is that both Aroma Teraju and 1MDB are wholly-owned by MOF. What is the purpose of this secrecy when both parties in the agreement are owned by the Government?

There is only one reason for invoking this confidentiality clause, and it has nothing to with the purported “commercial considerations”. It is to cover up the fact that MoF paid over-the-top to buy back a fraction of the prime land it had sold at bargain basement prices to 1MDB in 2010.

Based on the 2011 1MDB Financial Statements, the 70 acre TRX land was acquired from the Government at the value RM194 million, or approximately RM64 per square feet in 2010.

However, in the same year that Aroma Teraju acquired the above-mentioned piece of land from 1MDB, the latter also sold other parcels of TRX land to other government related institutions.  Lembaga Tabung Haji acquired 1.6 acres for RM188.5 million or more than RM2,800psf.  Affin Bank, a subsidiary of Lembaga Tabung Angkatan Tentera (LTAT), acquired 1.25 acres for RM255 million or nearly an eye-popping RM4,700psf.

If Aroma Teraju paid any where near the prices paid by Tabung Haji or Affin Bank, it would mean that Malaysian tax-payers would be been ripped off beyond their wildest imagination.  Very simply, 1MDB purchased land from the Government at RM64psf and sold a fraction of the piece of undeveloped land back to the Government five years later at an exhorbitant thousands of ringgit per square feet.

I challenge the 1MDB, Arul Kanda or the Finance Minister to deny my allegations with facts and figures. Otherwise, it would merely confirm that the secrecy over a simple sales and purchase agreement between two government entities is really to cover up another one of the daylight robberies against the Malaysian tax-payers to bail out the debt-stricken 1MDB.

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Finance Minister’s convoluted answer on MoF takeover of 1MDB’s real estate assets was a blatant attempt to mask at least a RM3.2 billion bailout

I had submitted a question last week to the Finance Minister, Dato’ Seri Najib Razak which only required a simple straightforward, possibly 2-sentence answer.  I have asked the Finance Minister to “list the 1MDB real estate assets taken over by the Ministry of Finance (MoF) and the consideration paid for them”.

More importantly, I asked “did MoF take over the borrowings associated with these assets including, the RM800 million from SOCSO and RM2.4 billion in sukuk bonds”.  This question only required a simple “yes or no” reply, with the total borrowings assumed by the MoF, if any.

What I received was a long grandmother story which tried to obviously obfuscate the answer.

The Finance Minister tried to pin the blame or responsibility for the take over of assets on the Public Accounts Committee (PAC).  The PAC had indeed recommended that the MoF takeover these assets and I have no problems with that.

Anak-anak syarikat dan aset milik kumpulan 1MDB (TRX, Bandar Malaysia, tanah Air Itam, tanah Pulau Indah) seharusnya diserahkan kepada MKD, supaya dapat dikawal selia dan diuruskan dengan lebih rapi dan teliti. (pg 106)

To the second part of my question, again he shifted to responsibility to the PAC by quoting page 81 of the PAC report which stated that

…pinjaman SOCSO sebanyak RM800 juta oleh TRX City Sdn Bhd dan sukuk sebanyak RM2.4 bilion oleh Bandar Malaysia Sdn Bhd akan diuruskan, di mana ia akan kekal ditanggung oleh aliran tunai projek TRX dan projek Bandar Malaysia.

That was a most blatant slight of hand, and I actually had to double-check my own copy of the PAC Report because I didn’t recall any such recommendations. My memory certainly did not fail me because the statement on pg 81 was actually the proposal submitted by 1MDB to the PAC and not, a recommendation by the PAC!

However, while Dato’ Seri Najib Razak did not explicitly say “yes” or “no” to the above question, it is now clear as day that the MoF has effectively bailed out 1MDB to the tune of RM3.2 billion by taking over these debts!

It also meant that the Second Finance Minister, Dato’ Seri Abdul Johari Ghani’s prior insistence to the media that there was no taking over of 1MDB debts planned over the assets takeover was a blatant lie.

Malaysians are being raped two-times over the above transaction because these pieces of land were “sold” to 1MDB by the MoF at bargain basement prices.  The land for the 70-acre TRX was priced at RM64 per square feet (psf) for a total of RM194 million, while the 486-acre Bandar Malaysia was at RM72psf for a total of RM1.67 billion.

However, 1MDB has already sold parts of TRX to Tabung Haji and Armed Forces Pension Fund-owned Affin Bank for more than RM2,700 and RM4,500psf.  In total, 30.5 acre of TRX was sold for approximately RM3.5 billion.  At the same time 40% of Bandar Malaysia has been sold for more than RM1,000psf.  The proceeds of these sale has already gone into the pockets of 1MDB to service its mountain of debt unrelated to its property division.

Hence we were screwed first time when we practically gave the super-prime land to 1MDB for free, allowing 1MDB to blindly profit for billions of ringgit.  We are now screwed the second time, when MoF takes back the balance of the assets from 1MDB, now attached with a mega RM3.2 billion debt.

Malaysians can now understand why former Second Finance Minister, Dato’ Seri Husni Hanadzlah decided to quit the Cabinet.  The brazen bailout horrors which are taking place today are just mind-blowing – and the above refers only to the real estate transactions.

No Minister with an iota of integrity or credibility would want to remain in this Cabinet, bent on using billions of ringgit of tax-payers’ money to cover up the single largest kleptocratic crime by the Najib administration.

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1MDB Foundation RM690 million spend: “corporate social responsibility” or reckless and irresponsible vote-buying for the BN administration?

1MDB has proudly announced that since 2010, its foundation has spent RM690 million into "worthy causes" which had benefited 2.8 million Malaysians through 60 projects in education, healthcare, youth development and community services.

"Examples of such activities can be found on the 1MDB website, ranging from Dana PIBG grants and academic grants to SPM and STPM students to academic grants for Sri Murugan Centre and Unified Examination Certificate holders, as well as Dana Belia 1Malaysia and 1Malaysia Mobile Clinics,” the company elaborated in its statement.

1MDB also emphasized that the funds were generated from “its legitimate business operations, formerly in energy production and more recently, in real estate development”.

1MDB’s generous spending in corporate social responsibility (CSR) appears to set the ultimate benchmark for all other companies to emulate.  1MDB’s statement and outsized CSR spend were clearly designed to enhance the perception of the state-owned firm as a benign and benevelont corporation, a stark contrast against its much maligned global reputation.

The only problem, and the crucial one, is that 1MDB never generated these cash from its businesses past and present.

For its “profitable” energy business, 1MDB borrowed extensively to acquire them for an overpriced RM12.1 billion.  The borrowings were so big that the profits from the energy companies were insufficient to even service the interest of the relevant loans in the group, what more the principal.

As a result, 1MDB was “forced” to sell its energy business for RM9.83 billion, suffering a huge loss of RM2.27 billion.

However, at least 1MDB’s energy business was generating productive revenue.  1MDB’s real estate business never took off for the years in question.  The land 1MDB acquired was alienated to 1MDB by the Federal Government at bargain basement prices.  The company was sold undeveloped land to Tabung Haji and the Armed Forces Pension Fund (LTAT) group, who were cajoled into buying at astronomical prices.  For example, LTAT subsidiary, Affin Bank paid RM4,500 per square feet for a piece of land in Tun Razak Exchange, when 1MDB acquired it from the Government at only RM64 per square feet.

What is vital to note is the fact that despite the sale of land at astronomical prices, 1MDB still cannot settle its outstanding debts that remains in excess of RM35 billion today.

As we have discovered via the Swiss Attorney-General Office and the United States Department of Justice, at least US$5 billion have been misappropriated from the 1MDB funds while more than US$730 million of the amount have found its way into the Prime Minister, Dato’ Seri Najib Razak’s personal bank account in Malaysia.

Hence effectively, 1MDB wasn’t executing its CSR programmes from its cash pile arising from the company’s profits.  Instead, 1MDB was pretending to be a big profitable company, spending big on CSR via its mega-borrowings which it is now unable to service.

Worse, the burden of these loans are now dumped squarely on the shoulders of ordinary Malaysians who are forced to bailout 1MDB via the Federal Government.  In short, we Malaysians are footing the bill, with interest, the money that 1MDB has so “generously” spent on us via its CSR programmes.

This leads to the conclusion that 1MDB is not the benign and benevolent entity it sought to portray but a recklessly irresponsible one causing greater hardship on the rakyat.  And it did so with the clear intent to influence and “buy” votes for the general elections to prop up the corrupt Najib administration.

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