And Here's to Another Tale of Irresponsibility...Arul Kanda Lies to Cover Up Yet Another Lie

1Malaysia Development Bhd (1MDB) President Arul Kanda is a liar extraordinaire.

1Malaysia Development Bhd (1MDB) yesterday issued a lengthy statement to deny many assertions made by Tun Dr Mahathir Mohamed against the company. I agree that strictly speaking, some of the figures which were cited in the former Prime Minister’s critiques were inaccurate. However, the gist of the arguments was definitely sound.

Arul Kanda’s many responses within the statement therefore did not address the key questions which key critics like myself have raised many times previously. However, one particular response by 1MDB proved that Arul Kanda is a liar extraordinaire.

The statement said that “despite Tun Mahathir’s vigorous claims, it is a fact that Arul Kanda never said he “saw the cash”. He is on the record as saying he had “seen the statements”, referring to the fund unit ownership and redemptions.”

This was in reference to the balance of US$1.103 billion of investments located in Cayman Islands which was redeemed in January this year and parked in BSI Bank Singapore. The controversy was whether this amount was “cash” or in “assets”.

The above however, is an outright lie to cover up another lie.

In an interview with the Singapore Business Times published on 7 February 2015, Arul Kanda clearly stated that while the funds amounting to US$1.103 billion would not be repatriated back to Malaysia, it would be kept in US dollars “as we have US$6.5 billion (RM23.06 billion) in bonds out there, in which interest payments come up to nearly US$400 million (RM1.4 billion) a year.”

The 1MDB President specifically said, “the cash is in our accounts and in US dollars. I can assure you (about that)... I have seen the statements.”

It is therefore disingenuous for 1MDB to just quote Arul Kanda having “seen the statements” without also quoting the sentence, “the cash is in our accounts and in US dollars.”

The 1MDB statement then further added,

"There was indeed a misunderstanding on information provided by 1MDB to MOF, which required the original Parliamentary answer to be subsequently amended. This is a matter of public record and has been acknowledged by 1MDB."

"As the President of the company, Arul Kanda takes full responsibility for this misunderstanding and will ensure better communication with all stakeholders."

This conceded “misunderstanding” is however, completely unbelievable. Firstly, is Arul so incompetent as make a mistake between US$1.1 billion of cash as opposed to assets or “units” of indeterminate value?

Secondly, if there was indeed “misunderstanding” in the response provided to the MoF, why did Arul not immediately correct the massive mistake on the 10 March when the “cash” answer was provided and widely published?

Instead, Arul waited until more than 2 months later on the 19 May after I had posted the question again in Parliament, before issuing the correction. If I didn’t ask the question, the truth would never have surfaced. Such a massive delay in clarifying the mistake is the height of irresponsibility by the 1MDB President.

Arul Kanda had tried to bluff gullible Malaysians that 1MDB got back all it’s money and even “made a profit of US$488 million” in the entire Petrosaudi to Caymans transactions. He even cooked up the excuse that the money needs to be kept in US dollars because it is needed to service the interest of 1MDB’s US dollar bonds. The above proved that Arul Kanda is an unscrupulous liar and a man without any honesty and integrity.

Was Arul Kanda forced to finally admit that there was no “cash” in BSI Bank was as a result of being caught with his pants down, after Singapore authorities handed evidence to Bank Negara Malaysia?

It begs the question, why is the Prime Minister, Dato’ Seri Najib Razak and the Board of Directors of 1MDB still entrusting such a person to manage and “turnaround” the country’s largest scandal in history?

Tony Pua

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Najib, a Master Manipulator at Work - Capped Debt at 55% GDP a Mockery

Dato’ Seri Najib Razak should stop providing false appearances and assurances on the Federal Government budget using highly misleading statistics.

Bernama reported yesterday that the government remains committed to strengthening public finance without jeopardising growth, while providing fiscal support for reform initiatives.

"Our fiscal targets for 2015 remain intact. The deficit will be further reduced to 3.2% of the gross domestic product (GDP) from 3.4% in 2014," Dato’ Seri Najib Razak said at the Budget 2016 Consultative Council meeting today. Najib, who is also finance minister, said the federal debt would be capped within 55% of the GDP.

None of the above statistics stated by the Finance Minister is any where near accurate due to various creative manipulation of government expenditure, especially over the past 5 years.

We already know that much of the Government’s expenditure are via newly created Ministry of Finance subsidiaries which undertook RM157.5 billion of loans guaranteed by the Federal Government as at 31 December 2014. If the above contingent liabilities figure were to be included in the official federal government debt, it would add up to nearly 70% of our GDP.

Hence it is a mockery that Dato’ Seri Najib Razak continues to insist that the Federal Government debt remains “capped” within 55% of GDP.

In addition, the contingent liabilities figure doesn’t even reflect all the Government’s “off balance sheet” expenditure.

In a Parliamentary reply on 8 June 2015, Dato’ Seri Najib Razak stated that “up till May 31 2015, there are nine government-owned companies via the Finance Ministry Incorporated (MKD) which has expenditures that have been classified as off balance sheet, currently borne by the government.”

For example, one of these wholly-owned MKD subsidiaries, Pembinaan PFI Sdn Bhd (PPFI) has borrowed and spent RM27.9 billion on various projects. However, none of these projects or expenditures was ever reflected in any of the Budgets tabled over the past five years. The result is a significantly understated budget deficit.

In fact, the PPFI loans from the Employees Provident Fund (EPF) and Kumpulan Wang Amanah Persaraan (KWAP) do not even get reflected as a contingent liability of the Government via a clever financing agreement between PPFI and the Government.

What the Ministry of Finance has done was to shift various sorts of expenditure “off balance sheet”. As a result, these expenditures which are ultimately bourne by the Federal Government, are hidden from the annual budget figures and statistics. These off-balance sheet expenditures are a clear loophole for the Government to spend well above what has been officially approved by the Parliament in the Budget.

The Finance Minister also admitted that as a result of these off-balance sheet expenditure, “the annual payment for this between 2015 and 2020 is between RM4.76 billion and RM11.62 billion”. This represents the commitment on future government expenditure without the debt or liabilities reflected the budget or balance sheet today.

All of the above mean that the official debt of the government is severely understated to keep the figures below the 55% debt limit. The budget deficit is correspondingly understated to give a false picture of a low, sustainable or reducing deficit. These render the figures meaningless.

It is hence disingenuous for the Prime Minister to continue using these figures to give the façade that “the government remains committed to strengthening public finance”.

If Dato’ Seri Najib is really serious about commitment to “strengthening public finance”, the Government must exercise transparency in these off-balance sheet projects and incorporate all these expenditures into its annual budget tabled for approval in the Parliament. Only then can we be assured that the budget and debt statistics reflect the actual spending by the Government, allowing the Members of Parliament and financial analysts to evaluate the prudence and appropriateness of Government policies.

Tony Pua

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Who to Trust: The Home Minister or the IGP?

Why are there conflicting status reports on the investigation of 1Malaysia Development Bhd by the Home Minister and the Inspector-General of Police?

I had asked the Home Minister, Dato’ Seri Zahid Hamidi for my parliamentary question on the 10 June 2015 to state

"…kedudukan siasatan pihak Polis ke atas penyelewengan dalam urusniaga 1MDB yang telah menyebabkan kerugian berbilion-bilion ringgit."

"Adakah Low Taek Jho telah disoalsiasat sebab dokumen-dokumen yang terbongkar menunjukkan bahawa wang 1MDB telah disalurkan ke dalam akaun beliau?"

The Home Minister completely avoided responding to whether Low Taek Jho has been investigated. However, he surprised everyone by claiming that the Police have completed their probe into debt-laden 1Malaysia Development Bhd (1MDB) and is now waiting for further instructions from Attorney-General (A-G).

In referring to a police report lodged by former Batu Kawan Umno division vice-chairman Datuk Seri Khairuddin Abu Hassan, Zahid said the case was classified under Section 409 of the Penal Code for criminal breach of trust by public servant or agent.

"The investigative papers have been referred to the A-G on March 9 this year for further action," he said.

Firstly, I’m disappointed that there was no reference made to the police report which I had made personally on the 4 March 2015 against the various parties relating to 1MDB, including Low Taek Jho.

However, I’m even more surprised that the investigation over 1MDB has been completed and submitted to the attorney general more than 3 months ago on 9 March.

This is because on 9 March itself, Tan Sri Khalid Abu Bakar had confirmed that police are investigating the debt-ridden 1Malaysia Development Berhad (1MDB), with a new task force formed to probe the strategic investment company. He said the task force set up several days ago by the Attorney General (A-G), which included the Malaysian Anti-Corruption Commission (MACC), the A-G Chambers and the police.

"We are part of the task force set up by the A-G. We are investigating those reports lodged," he said on that day.

Since then Bernama reported on 22 March 2015 that the IGP reiterated, “as the police have received information and reports on the case, the special squad [to investigate 1MDB] felt that we should undertake an investigation without having to wait for the report of the National Audit Department.”

Even as late as a week ago on 4 June 2015, the Inspector General of Police (IGP) was still pleading for time and patience from the Malaysian public for the investigations to be completed.

"I don't want to speak on behalf of the task force. I am not their spokesperson but I just want to confirm that the investigation is being carried out. So I don't want to give out any details of the investigation. This is because if I divulge details of the investigation, it will disrupt the task force's probe," he said

In fact, Tan Sri Khalid Abu Bakar even alluded to the fact that none of the key protaganists like Low Taek Jho or the top management of the 1MDB scandal have been called for questioning when he asserted, “…in commercial cases such as this, we do not arrest first and then investigate. We have to investigate it first and then only make the arrest if needed”.

However, if the Home Minister is telling the truth, then we have to ask what is the A-G doing sitting on the investigation papers for the past 3 months?

The glaring question therefore is, how is it that Dato’ Seri Zahid Hamidi could inform the Parliament that the Police have completed their probe into 1MDB and the investigation papers have been sent to the A-G on March 9 this year when everything the IGP has publicly announced points to the complete? Or is this another example of the Home Ministry’s left hand being totally clueless about what the right hand is doing, a state of affair which is becoming the norm rather than the exception in the Najib administration?

Tony Pua

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Arul Kanda Beating Around the Bush Yet Again

Arul Kanda’s denial doesn’t explain why Deloitte Malaysia has not been able to commence audit on 1Malaysia Development Bhd (1MDB).

Earlier today, I have issued a statement alleging that “1MDB is already more than 2 months past the 31 March financial year end for this year and yet no work has been started at all by the auditors on the holding company. No dates have also been set by the company or by its sole shareholder, Ministry of Finance for the audit to begin.”

Unfortunately, Arul Kanda’s commendably immediate denial misses the point and is an attempted misdirection.

He claimed that “the audit of a major 1MDB subsidiary, Edra Global Energy Bhd, has already commenced and is well under way”.

I asked about the holding company, 1MDB, where all the controversy over its funds, cashflow prblems and alleged misappropriations lie, but Arul tells us that the audit has commenced on its subsidiary.

What’s more, the commencement of audit work for Edra isn’t at all surprising. It is expected because the company is preparing for their initial public offering.

However, what Malaysians want to see is the March 2015 financial statements for “the holding company” which I highlighted in my statement. We want to know about the controversial assets held in various overseas banks. We want to know what is the true debt situation in 1MDB and the extent of the company’s cashflow problems.

All we got from Arul Kanda in his denial was “the board and management of 1MDB met Deloitte as early as February 2015 to discuss commencement of an audit after the financial year-end of 31 March 2015.”

Unfortunately, what we didn’t get from Arul Kanda was, when the audit will actually commence. More worryingly, we would like to ask the President of 1MDB, why is it that since the discussion was more than 3 months ago, the audit for 1MDB has not yet commenced?

Arul Kanda separately highlighted the fact that “1MDB is currently undergoing a thorough review and investigation of its accounts by the National Audit Department.”

Let me state that the fact that the Auditor-General (AG) reviewing the past financial statements of 1MDB does not in any way justify the fact that the statutory audit for 1MDB has not commence. These are two different and independent processes which surely a multi-billion ringgit public-interest company cannot afford to neglect.

In fact, given that there is a parallel on-going AG review, Deloitte should be invited to commence their audit earlier so as to provide the auditors with a longer lead-time to complete the report.

Regardless, the fact remains that the Company’s Act 1965 states very clearly that a companies’ audited report must be lodged with the Commission within 6 months after the financial year end.

Any breach of the Act is serious enough to dictate imprisonment for 5 years or a RM30,000 fine “if any director of a company fails to comply or to take all reasonable steps to secure compliance by the company… has by his own wilful act been the cause of any default by the company thereunder, he shall be guilty of an offence against this Act.”

Let me reiterate our demand for the Prime Minister to direct 1MDB to allow Deloitte to carry out their audit exercise immediately to protect the reputation of the Finance Ministry and to uphold good corporate governance and financial integrity in 1MDB.

Arul Kanda on the other hand, should stop giving excuses and give his assurance to Malaysians that the statutory financial audit for the scandal-ridden 1MDB for the 31 March 2015 financial year-end will be completed by 30 September 2015 as required by the law.

Tony Pua

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Time is Running Out - Deloitte Audit Delays Arouses Suspicion

Dato’ Seri Najib Razak must explain why 1Malaysia Development Bhd (1MDB) has not instructed Deloitte Malaysia to commence their audit for the financial year ending 31 March 2015.

As disclosed by Public Accounts Committee Chairman, Datuk Nur Jazlan yesterday, Deloitte Malaysia has not been allowed to commence the statutory audit of 1MDB’s financial statement for the year ending 31 March 2015.

The discovery that the audit has yet to commence is highly surprising given that normally the audit work for the company the size of 1MDB would have started as early as 3 to 4 months before the financial year end.

However, 1MDB is already more than 2 months past the 31 March financial year end for this year and yet no work has been started at all by the auditors on the holding company. No dates have also been set by the company or by its sole shareholder, Ministry of Finance for the audit to begin.

Given the size and complexity of the company, it is once again assured that 1MDB will be late for the submission of its financial statements to the Companies Commission. Clause 169(1) of the Companies Act states very clearly that a companies’ audited report must be lodged with the Commission within 6 months after the financial year end.

In fact, under Clause 171(1), the Act dictates imprisonment for 5 years or RM30,000 “if any director of a company fails to comply or to take all reasonable steps to secure compliance by the company… has by his own wilful act been the cause of any default by the company thereunder, he shall be guilty of an offence against this Act.”

Hence the Ministry of Finance and directors of the company are wilfully flouting the law by refusing to allow Deloitte to commence the audit of the company, which will result in the failure by the company to submit its accounts by the 30 September 2015 due date.

We call upon the Companies Commission not to grant any extension to 1MDB as it did in the past to submit its annual returns because the delays are purely because of 1MDB’s explicit decision delay the audit exercise. In addition, if 1MDB did indeed fail to submit their accounts by the due date, the Directors of the company must face the full weight of the law. There should be no bias or favours granted to the Directors of 1MDB under such circumstances.

We would also call upon the Prime Minister to immediate demand that 1MDB allow Deloitte to carry out their audit exercise immediately to protect the reputation of the Finance Ministry and to uphold good corporate governance and financial integrity in 1MDB.

Surely given the number of times Dato’ Seri Najib Razak has used the good name of Deloitte to justify the financial state of 1MDB as at 31 March 2014, he would welcome the audit to be carried out to prove that 1MDB continues to remain not only a going concern, but a strong company with huge potential as at the financial year end 31 March 2015.


Tony Pua

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The Sheer Irony of Najib's "Wild" Accusations - Come Out and Show Yourself !

Dato’ Seri Najib Razak should stop being a hypocrite when he asked to be judged on facts over the 1MDB scandal but blatantly blocks all attempts to obtain facts via parliamentary questions.

Prime Minister Datuk Seri Najib Razak wrote on his blog that he too wants answers "quickly" on the 1Malaysia Development Berhad (1MDB) controversy but added that any action taken by Putrajaya must be based on facts and not mere allegations.

"Is the government supposed to base its actions and prosecutions on wild allegations and tabloid exposes? Now that would be silly," Najib said.

Yes, it would be silly indeed if the Government’s “actions and prosecutions” are based on “wild allegations and tabloid exposes”. However, what is more silly is the fact that Dato’ Seri Najib Razak, who is also the Finance Minister, blocks all attempts to secure facts via the most proper channels.

In fact, there is no better and higher platform for facts to be obtained and revealed than the Parliament, and yet, most of the MPs attempts to secure answers to simple questions are met with a brick wall.

I had asked the Finance Minster on 9 Jun 2015 on:

"sebab Menteri enggan memberikan pecahan fi Goldman Sachs dan diskaun bon kepada pelabur untuk terbitan bon-bon bernilai US$3 bilion, US$1.75 bilion dan US$1.75 bilion untuk 1MDB Global Investment, 1MDB Energy dan 1MDB Energy (Langat) yang diminta pada sesi lalu"

The question refers to a question I had asked in the last sitting. However, because the Minister had refused to provide the details of the breakdown to my question, I had asked for the reason why he had refused to do so.

The reason I have asked for the above information was to obtain the necessary facts to evaluate if 1MDB has overpaid Goldman Sachs for the 3 bond issue exercises where the latter received more than 10% in “certain commissions, fees and expenses” which was abnormally high. However, 1MDB claimed that the above had included “discounts” to the bond investors and hence I had asked for the breakdown in the figures.

However, almost expectedly, Dato’ Seri Najib Razak once again demonstrated absolute contempt for the Parliament by refusing to answer give the requested breakdown or the reasons why the breakdown cannot be provided. Instead, he practically repeated the same answer as he did the last sitting.

"…rundingan dan penentuan hasil (yield) yang dibuat adalah mengikut proses standard pasaran di antara penerbit dan pelabur semasa rundingan bagi penjualan dan pembelian fixed income security. Goldman Sachs bertindak sebagai “principal” dan bukan dalam kapasiti agensi bagi transaksi ini.

Keseluruhan hasil yang diperolehi oleh Goldman Sachs daripada harga terbitan bon, fi dan kupon adalah berpatutan dengan saiz terbitan, tempoh, ketidakcairan (liquidity) dan risiko kredit (credit risk).

The only difference was this time, he said the answer is based on answers provided by the 1MDB management (“berdasarkan maklumat yang dikemukakan oleh pihak pengurusan 1MDB”).

Instead of providing the impartial facts for the public to judge, the Minister of Finance asked 1MDB to give their own evaluation as to whether the fees they paid were fair (berpatutan). Dato’ Seri Najib Razak may as well have asked a murder suspect to judge himself in the court of law whether the latter is guilty.

Hence Malaysians have no choice but to judge the Prime Minister as a big hypocrite who pretends that he wants to judged on facts but at the same time denies these same facts to the public. Given such unforthcoming, shifty, secretive and dodgy behaviour, Dato’ Seri Najib Razak cannot blame anyone but himself for Malaysians presuming him guilty of wrongdoings over the massive RM42 billion 1MDB scandal.

Tony Pua

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Ladies and Gentlemen, our Minister of Finance...

Do we have a nincompoop as a Minister of Finance?

I am shocked and horrified by the reply from Dato’ Seri Najib Razak to my question in Parliament on 28 May 2015.

I had asked the Finance Minister to explain:

"…sebab Menteri meluluskan pinjaman sebanyak US$1.9 bilion daripada 1MDB kepada anak syarikat Petrosaudi International Limited hanya dengan jaminan Petrosaudi International yang tidak mempunyai modal berbayar (paid-up capital) melebihi US$150,000 sahaja."

"Adakah pinjaman ini diluluskan pada ketika itu oleh lembaga pengarah?"

The brief reply provided is as follows:

"Berdasarkan maklumat yang dikemukakan oleh pihak pengurusan 1MDB kepada Kementerian Kewangan, pinjaman tersebut diluluskan bagi mengurangkan risiko berbanding dengan pegangan ekuiti di dalam syarikat usaha sama tersebut.

Untuk makluman Ahli Yang Berhormat, semua keputusan dan urusniaga 1MDB adalah dibuat oleh pihak pengurusan dan Lembaga Pengarah 1MDB."

The question really needs to be asked – do we have a nincompoop running our Ministry of Finance?

Firstly, my question was addressed to the Minister of Finance. For the third time this Parliamentary sitting, he refused to answer the question directly. I had asked for the Minister’s reply, but instead I got 1MDB’s reply. This is once again a clear cut abdication of Ministerial responsibility for fear that the 1MDB’s reply may be untruthful.

Secondly, the above disclaimer by Dato’ Seri Najib Razak is even more ridiculous given that he was the person who diectly approved the US$1.9 billion of loans to the Petrosaudi International Limited’s (PSI) subsidiary. In fact the actual total lent to PSI is even higher at US$2.03 billion via the subscription of Murabaha Notes, and not the US$1.9 billion I quoted in the question.

Essentially, I had asked the Finance Minister why he approved the loans, but he needed 1MDB to give the reason why he approved the loans. Am I to conclude that we have a nincompoop for a Finance Minister who doesn’t even know why he approved US$2.03 billion to be lent to some foreign company and had to ask 1MDB to give the response?

Thirdly, the reason provided by the Minister (based on the information given by the 1MDB management) defies all business logic. He said that the approval of the loan was to reduce the risk exposure as opposed to holding an equity stake in the joint venture with PSI.

How in the world would the risk be any lower when 1MDB would have absolutely no control over how the US$2.03 billion would be spent by PSI, as compared to having joint management control via an equity stake in the 1MDB Petrosaudi joint venture? Worse, how can Dato’ Seri Najib Razak accept the “collateral” of a corporate guarantee from PSI for the US$2.03 billion loan when the paid up capital of PSI was less than US$150,000? Bank Negara Malaysia would have demand the sacking of any CEO of any Bank in Malaysia who exposes the country’s financial system to such credit risks.

The response also doesn’t explain why Dato’ Seri Najib Razak approved multiple increases in loans to PSI. 1MDB had originally invested US$1 billion in the joint venture company in 2009. The equity stake was converted to a US$1.2 billion loan via the subscription of Murabaha Notes in June 2010. However, 1MDB went on to lend even more money via additional subscriptions totalling US$830 million of Murabaha Notes throughout the 2011 financial year, adding up to US$2.03 billion.

Hence, if indeed the joint venture was so risky that it demands the conversion of equity to US$1.2 billion, then why did the Prime Minister continue to approve additional US$830 million of lending to PSI?

If the reply provided by the Dato’ Seri Najib Razak is indeed a truthful and accurate reply, then Malaysians have no choice but to conclude that we don’t only have a reckless Finance Minister lending such large sums of money, we have the stupidest and most unqualified Finance Minister in the history of Malaysia. What a nincompoop.

Tony Pua

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Pakatan Rakyat's End Will Not, and Ever, Delude Our Principles

Pakatan Rakyat Selangor is in unchartered waters post-PAS Muktamar.

The PAS General Assembly (“Muktamar”) has decided to sever all ties (“putus hubungan”) and stop all political cooperation “kerjasama politik” with DAP. As a result, Pakatan Rakyat in Selangor has undoubtedly entered unchartered waters. The only thing certain under such circumstances is that nothing can or will be the same again.

It is inconceivable for anyone to think or believe that Pakatan Rakyat can continue to exist in its current state given the above unequivocal motion. The Pakatan Rakyat government comprises of three political parties which subscribed to a common policy platform. However, when the common policy platform is breached, compounded by the decision of one party to stop cooperation with another within the coalition, then the coalition naturally collapses.

How does the Government function, when the state executive councillors (Exco) of PAS refuses to cooperate with the Exco from DAP when carrying out their respective duties? Can one even imagine how surreal the state Exco meeting will be, with the PAS Exco ignoring the DAP Excos or pretending that they don’t exist?

The problems do not just exist within the Executive Council, but with all levels of the Selangor Government. Will PAS local councillors for example, pay no heed to all comments, suggestions and proposals by DAP local councillors when carrying out their responsibilities at the local government level?

What’s more, such refusal to cooperate will be egged on by PAS leaders such as Nasruddin Hassan Tantawi, the top vote-getter amongst the 18 newly elected central committee members. After all, he urged the Party faithfuls to fight DAP with his now-famous war cry, “We may be dressed in jubah (robes) and turbans, but you must remember that underneath this jubah, there are elbows and knees that can be used (against DAP).”

Hence it will never be “business as usual” again. The question which remains, and is still unanswered is what form of political realignment will take place to allow a new coalition government to remain in power in Selangor.

As my colleague, Johor state chairman and MP for Kluang, Liew Chin Tong has alluded to, there is now a vacuum in the anti-establishment, moderate and progressive Malay political space after PAS swerved hard to the far-right. He said,

"In the weeks and months to come, the search for new paths by the progressives and all other Malay moderate opinion leaders to fill the vacuum would see major political realignments in Malaysian politics."

The ability for this gap to be filled, whether by the DAP and/or PKR, or by the rise of new factions or parties, will determine the future of the new coalition for Selangor.

The failure of this gap to be filled, which will allow a tenable coalition which subscribes firmly to the “Common Policy Platform” endorsed by the Rakyat in the last general election, may lead to a collapse of the Selangor state government and for elections to be called.

As of today, no final decision have been made by DAP Selangor. In the coming days, we will engage and discuss with DAP Central Executive Committee and abide by any decision which is made at the national level. Unlike leaders of several other political parties we know of, Malaysians can be assured that DAP leaders in Selangor will not be hypocrites and betray our principles to remain in power at all cost.

Tony Pua

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Our Public Accounts Committee (PAC) Needs a Serious Reform

Reform the Public Accounts Committee (PAC) in line with the best global parliamentary practices.

I have just completed the 5th Westminister’s Workshop organised by the Commonwealth Parliamentary Association for Public Accounts Committees in Malta over the past week.

It was a highly fruitful session where PAC members from across the Commonwealth discussed best practices to ensure greater effectiveness, particularly towards the objective of making the Government more transparent and accountable when spending public funds.

There were several key take aways which I thought was highly relevant for Malaysia as I’ve discovered how Malaysia’s PAC lags behind many of our peers in terms of reforms and effectiveness.

For a start, 67% of the Commonwealth PACs were chaired by members of the Opposition, as opposed to members of the governing party. Some of these countries practise this rule as a convention, while others have that clearly stated in the Standing Order or the law.

The obvious reason for this practice is to ensure that there will be greater scrutiny of Government expenditure. An elected representative of the governing party will naturally and inevitably be saddled with the conflict of interest of not wanting to make the ruling coalition look bad. On the other hand, the PAC chaired by an Opposition member will offer the necessary check and balance for the committee where the majority remains with the ruling party.

Unfortunately for the Malaysian Parliament, the historical convention has been for the Barisan Nasional (BN) coalition to elect one of its own to chair the committee despite frequent pleas by the Opposition to adopt the global best practice. It appears that while the BN government is happy to cite global practices as a reason to adopt a policy like the Goods and Services Tax, when it comes to issues relating to democratic norms, it would prefer to turn a blind eye.

Fortunately in Selangor, we even passed a Bill to automatically appoint the Opposition leader as the PAC Chairman. But we were left stunned when the then Opposition Leader then resigned from his position, leaving the Opposition bench in a limbo. It is hence clear that BN would rather sacrifice any role to check and balance the Government, than to take part in any proceedings to ensure transparency and accountability in the governing administration.

Secondly, I have discovered that some three quarters of Commonwealth countries hold their Public Accounts Committee hearings in public today, in full presence of the media. Ironically, nearly all of the African Commonwealth contingent practised public hearings despite their often derided “less developed” status.

If the Parliament proceedings today can be open to the public, why should the hearings of a committee within the Parliament be conducted in closed doors. Exceptions are granted when sensitive national security matters are discussed but that is certainly not be the norm.

For example, why should the hearings relating to the 1BestariNet, the National Feedlot Corporation, the KLIA2 project or the on-going 1MDB inquiry not be made public because they do not touch on any national security matter. They could of course turn out to be highly embarrassing and detrimental to the reputation of particular Ministers, but that should not be the concern of the PAC.

In addition, the public scrutiny of the proceedings will ensure that the appointed members of the PAC will be more diligent in carrying out their duties.

Finally, as I’ve argued in my statement earlier this week, we should make the National Audit Department an independent office under the auspices of the Parliament and not a Department reporting to the Finance Minister. This will ensure and protect the independence of the Department regardless of which party is in Government, and who are the Ministers.

The UK National Audit Office for example, is fiercely protective of its independence, asserting that “we are not civil servants and do not report to any Minister”.

The Auditor-General of Malta on the other hand, is not only an “officer of the House of Representatives”. He is “appointed by the President acting in accordance with a resolution of the House of Representatives supported by the votes of not less than two-thirds of all the
members in the House”.

In line with the discussions of proposed reforms led by the Dewan Rakyat Speaker, I would like to call upon the House Committee which is meeting tomorrow on 8 June 2015 to also adopt the above reforms to the PAC. This is to ensure that we become a truly world class parliament, and not a rubber stamp, where Malaysian democratic rights are oppressed by the Executive which tramples on the sanctity and role of the Parliament.

Tony Pua

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Nothing to Hide? Don't Be Fooled.

As the Prime Minister chickened out of his own 1MDB “Nothing to Hide” forum, the Minister of Finance II Dato’ Seri Ahmad Husni Hanadzlah told tall tales on live television.

Dato’ Seri Najib Razak must be panicking and scampering around like Chicken Little who believed that “the sky is falling” on him. Not only did he have to make flimsy excuses to justify weaselling out of a “Nothing to Hide” Forum choreograph to make him look good, his Second Finance Minister was caught red-handed telling tall tales about 1MDB on live television.

In fact, Dato’ Seri Ahmad Husni Hanadzlah told at least 3 mighty tall tales on the RTM1 Dialogue “1MDB: Where Did the Money Go?” in a vain attempt to convince the audience that all is well at the wholly owned subsidiary of the Ministry of Finance.

Firstly, when the host raised the question I tweeted, with regards to the US$1.2 billion paid by 1MDB to Good Star Limited using the pretext of a loan to Petrosaudi International Limited, Dato’ Seri Ahmad Husni deflected it by claiming that the media only claimed US$700 million and the opposition is always lying.

He then tried to cover up even the US$700 million siphoned to Jho Low’s company, by claiming that 1MDB has gotten back all the money from Petrosaudi International and even made a tidy profit of US$488 million. Hence the issue of money being siphoned, and Jho Low’s involvement is immaterial or does not arise.

Dato’ Seri Ahmad Husni was obviously attempting to make light of a very grave matter. Otherwise, how could a Finance Minister not know that the allegations that Jho Low’s company siphoned US$1.2 billion has been published not only in blogs and major news portals, but also the leading financial papers like The Edge . While US$700 million was transferred to Good Star directly in 2009, another US$160 million and US$330 million was transferred in the 2010 and 2011 financial years respectively, totally US$1.2 billion.

What’s more, the so-called “profit” is a lie because the alleged US$1.1 billion (which includes the US$488 million profit) sitting in BSI Bank Singapore isn’t cash but in units of assets of indeterminate value.

Secondly, the Second Finance Minister made a complete fool of himself by claiming that it is a normal practice for Auditors to be changed or “rotated” every 3 years. While that might possibly explain why KPMG was replaced with Deloitte in 2013, it didn’t at all explain why Ernst & Young quit even before it signed its first accounts in 2010!

However more pertinently, the above argument by Dato’ Seri Husni is a complete piece of fiction because there is no such principle for auditor rotation every 3 years. No other Ministry of Finance owned or Government-linked companies ever rotated their Auditors with any regularity.

While the makcik and pakciks watching the live screening at home may be swayed by his bullshit, the Minister has single-handedly destroyed the credibility of his office in the local and international financial community. Bankers and investors alike must think that Malaysia has an idiot as a Finance Minister.

However, the tallest of the tall tales told by Dato’ Seri Husni must be when he claimed that Syarikat Prasarana Bhd, a completely unrelated Finance Ministry subsidiary, won a RM215 million bid to operate and maintain a Metro line in Saudi Arabia in May 2015 through the efforts of 1MDB. This was allegedly a result of 1MDB’s joint venture with Petrosaudi International in 2009. What the Minister didn’t say was that the joint venture was already disbanded in March 2010, long before Prasarana’s bid into secure the project.

The Second Finance Minister was caught with his pants down when The Sun Daily reported that Dato’ Shahril Mokhtar tweeted “As a former CEO of Prasarana I started d venture into Saudi Arabia and it has got nothing to do w Petro Saudi.” The tweet has since been deleted but the damage is already done – Dato’ Seri Ahmad Husni’s erstwhile relatively trustworthy reputation has been blown to smithereens.

The failure of the Second Finance Minister to explain truthfully to the Malaysian public, coupled with the Prime Minister’s disgraceful no show at the “Nothing To Hide” forum staged just for him, have proven that it is impossible to cover up the RM42 billion 1MDB scandal. Both Dato’ Seri Najib Razak and Dato’ Seri Ahmad Husni Hanadzlah have now got no other choice but to resign disgracefully from the Cabinet.

Tony Pua

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900% - TRX, Bandar Malaysia Revaluation Nothing Short of Daylight Robbery

Second Finance Minister Dato’ Seri Ahmad Husni Hanadzlah let slip another bombshell during his RTM1 live interview on the valuation of 1MDB’s Tun Razak Exchange and Bandar Malaysia.

I had eagerly followed Dato’ Seri Ahmad Husni Hanadzlah’s live television interview with RTM1 to hear the Second Finance Minister’s explanation on where did 1MDB’s money went.

While there were many other oft-repeated excuses to explain the “missing funds” and his refusal to entertain questions with regards to the enigmatic Jho Low were widely publicised in news reports, what stunned me was Dato’ Seri Ahmad Husni’s revised valuation of 1MDB’s real estate properties.

As he rattled off the list of highly valued assets in 1MDB’s possession, he explained that the 70-acre Tun Razak Exchange (TRX) and 495-acre Bandar Malaysia are now worth RM7 billion and RM11 billion respectively. He argued that their combined value of RM18 billion will go a long way to proving that 1MDB will comfortably pay off its monster debts over the longer term.

These revised valuations are shockers because even the previously revised valuations presented in the 31 March 2014 financial statements are only worth a fraction of the newly disclosed figures. The Tun Razak Exchange land belonging to KLIFD Sdn Bhd was already then revalued to RM2.7 billion. Similarly, the Sg Besi military airbase land sold to Bandar Malaysia Sdn Bhd was then revalued to RM4.29 billion. These numbers add up to barely RM7 billion.

The question hence is how did the valuations of these pieces of properties leap by 157% in just one year?

Worse, these properties were purchased from the Malaysian Government at only RM194 million and RM1.69 billion back in 2011 and 2012 respectively. In less than 5 years, 1MDB gets to “profit” nearly 900% despite having done almost nothing on these pieces of prime land over the last few years.

We want to know if the 2nd Minister of Finance was spewing gibberish and just plucked these new outlandish valuations out of thin air to present an optimistic picture of 1MDB. How were these new valuations arrived at? Or are there more sinister reasons why the values have been massively inflated?

I had written earlier on 31 May 2015, in response to Dato’ Seri Ahmad Husni’s earlier statement that the TRX and Bandar Malaysia will be made separate “independent” entities owned by the Ministry of Finance. I had expressed my concern that the Minister’s statement meant that the Federal Government will essentially acquire KLIFD and Bandar Malaysia from 1MDB at very high prices.

Based on March 2014 accounts, I had already warned that if the Government pays asset prices of RM7 billion and still relieve 1MDB of their associated loans of RM3.2 billion, then Malaysians will be forking out a total of RM10.2 billion just for these transactions alone.

However, based on the latest bombshell from the Second Finance Minister, the Government would now have to fork out a whopping RM18 billion, or as much as RM21.2 billion if KLIFD and Bandar Malaysia’s associated loans are taken into consideration.

Is this the real, devious and deceptive scheme the Ministry of Finance is planning to cover up the massive multi-billion ringgit losses and missing money in 1MDB while keeping the pretence that everything is above board? If so, it is certainly nothing short of daylight robbery of the tax-payers’ monies.

Dato’ Seri Ahmad Husni must provide a detailed explanation on the above and not evade it like he did the Jho Low poser. This isn’t some alleged tabloid speculation. These bits of information came from the Minister himself and it would be the ultimate act of irresponsibility for him to refuse response to the above questions.

Tony Pua

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Thanks for the Disclosure Arul, But Can You (Please) Answer the Question?

1MDB President Arul Kanda’s disclosure of where the RM42 billion of 1MDB debt not only disclosed nothing new, it raised more questions.

1MDB President Arul Kanda issued a statement late yesterday out of the blue to quash the allegations that there was money missing in 1MDB. He said,

"We provide a summary of what the RM42 billion has been used for, information that is fully disclosed in 1MDB's audited and publicly available accounts from March 31, 2010 to March 31, 2014. We trust this clarification will help to clear any confusion on this matter."

In the statement, Arul Kanda outlined that RM18 billion was for purchasing independent power producers, RM1.7 billion for purchasing land, RM5.8 billion for financial expenditure and RM16.4 billion for investments funds which constituted the RM41.9 billion of debt.

For the RM16.4 billion investment funds, the further breakdown was RM6.1 billion in Brazen Sky, RM4.2 billion in deposit with Abu Dhabi’s Aabar Investment and RM5.1 billion in 1MDB Global Investment Limited (GIL) funds.

None of the above figures are new as we have already derived as much from the March 2014 Financial Statements. As such, none of the above explains the criticisms which have been rained on 1MDB to date.

The questions I’ve been asking, both in and out of Parliament, over the past 2 to 3 years included what exactly were these RM6.1 billion of investment in Brazen Sky which was parked in Cayman Islands? Why is it that despite Arul Kanda announcing that all of Brazen Sky’s investments have been “redeemed”, there’s still no cash at all in the BSI Bank Singapore? This is despite Arul Kanda assuring us in February that the cash is sitting safely in the bank.

I’ve also repeatedly asked where is the RM5.1 bllion of funds invested by 1MDB Global Investment Limited and yet the Finance Minister, Dato’ Seri Najib Razak consistently and repeatedly refused to list the investments made by 1MDB GIL in Parliament. He even refused to disclose where the fund is managed or located!

What’s more, we were fully aware that 1MDB has RM5.1 billion “deposited” with Aabar Investment. However, our question was why did 1MDB agree to such onerous “loan-shark” terms to secure a US$3.5 billion guarantee from Abu Dhabi’s International Petroleum Investment Corporation (IPIC)? Why borrow and get to use only 60% of the funds?

Hence the revelation by Arul Kanda essentially revealed nothing that we don’t already know. The questions which we asked however, remained completely unanswered.

Worse, his disclosure raised even more questions for 1MDB.

He had detailed that the RM5.8 billion for financial expenditure included - RM4.5 billion for cost of finance and working capital, RM0.9 billion for foreign exchange cost and RM0.4 billion for taxes.

Is Arul Kanda trying to tell us that 1MDB took additional loans to pay interest to its loans and its taxes? Is he confirming that the returns from whatever assets purchased with the earlier loans couldn’t even cover interest and tax expenses such that 1MDB had to borrow an additional up to RM5.8 billion to pay for them?

Does that not imply that the whole 1MDB investment strategy is an absolute disaster and the management is at best, completely incompetent or at worst, involved in fraud and embezzlement?

We call upon Arul Kanda to stop being coy with the truth and start answering the questions in full. 1MDB cannot regain any trust or confidence from Malaysians by just giving half-baked answers and pretend to itself that it managed to quash all doubts and criticisms. It certainly does not “clear any confusion”, but instead it encourages even more suspicion and speculation as to why 1MDB is so unreasonably evasive.

Tony Pua

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A Plea: Unchain the Auditor-General from the Ministry of Finance

Dato’ Seri Najib Razak must act immediately to salvage and restore the damaged reputation to the Auditor-General’s Department.

Malaysians were perhaps understandably a little stunned, when former Prime Minister Tun Dr Mahathir Mohamad proclaimed that he trusted the Public Accounts Committee (PAC) more than he did the Auditor-General (AG). While he addressed the Foreign Correspondents Club of Malaysia, he said

"I would place my faith in the PAC more than the auditor-general. The auditor-general inspects books. They don’t do forensic auditing, they don’t try to poke and find out where was this money spent, how was this money spent, where did you lose this money."

"They only check on the books so they will not discover much because the people who are keeping the books may be very clever people."

After all, the reputation of the AGs Department has been relatively positive in the light of the many exposes which surfaced in the AG’s Reports. Malaysians could not have found out about the purchase of a set of screwdrivers for RM224, or RM4,000 computer laptops for RM42,000, or RM1,941 binoculars for RM56,350 if not for the fact that these discrepancies were highlighted by the AG.

Hence when the former Prime Minister expressed his lack of confidence in the AG’s office to uncover the chicanery in 1MDB, it has significantly dented the credibility and reputation of the AG’s Department.

Perhaps the lack of confidence arose because the Auditor-General’s Department is not an independent office as it is often perceived to be, but really just a department under the auspices of the Ministry of Finance.

Therefore while the AG has conducted his duties commendably when auditing the various government departments, there is a serious concern over the AG’s independence when auditing 1MDB. This is because the AG has to report to the Minister of Finance, Dato’ Seri Najib Razak, who is also the Prime Minister.

What’s more, it has been established in 1MDB’s case that the Prime Minister himself has provided written approvals for every substantial transaction carried out by 1MDB. This causes a clear conflict of interest for Dato’ Seri Najib Razak whose written approvals are under investigation. On the other hand, the investigation is being carried out by the Auditor-General, who is Minister’s subordinate in the Finance Ministry.

Thus, the only way to redeem the independence, credibility and reputation of the Auditor-General’s office is to unchain the office from the Ministry of Finance. Instead, the AG office should report directly to the Parliament like all other modern and progressive democracies.

In the United Kingdom for example, the National Audit Office (NAO) scrutinises public spending on behalf of Parliament. The Auditor-General himself is an Officer of the House of Commons. Both he and his staff at the NAO are totally independent of government. As clearly emphasized in NAO’s website, “we are not civil servants and do not report to any Minister”.

“We can be effective only if we retain our ability to comment objectively and independently on what government does, and we cannot therefore act as adviser on the specific decisions the government takes,” the website further elaborated.

In the light of the stinging criticism by Tun Dr Mahathir, it is therefore imperative for Dato’ Seri Najib Razak to restore the credibility of the AG office. He can do so by ensuring that that immediate steps are taken to make the Office a completely independent entity which does not report back to, or take instructions from the Finance or Prime Minister. Instead the AG’s Office should act on behalf of the Parliament and this measure will certainly help extinguish the fire fanned by his predecessor.

Tony Pua

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IPIC $1 Billion "Business Transaction" Questions Cabinet Authority

If the US$1 billion is not a “loan” from the Abu Dhabi investment arm, then what is it and how did the Cabinet Members give its endorsement to the plan?

Last Friday, Second Finance Minister, Dato’ Seri Ahmad Husni Hanadzlah stated that “1MDB has entered into a binding agreement with the International Petroleum Investment Company (IPIC) and its subsidiary Aabar Investments (Aabar)” where IPIC will make a “payment” of US$1 billion, on or before 4 June 2015.

“This US$1 billion payment will be used to repay a US$975 million (RM3.5 billion) loan, in advance of its due date, to a syndicate of international bank lenders,” according to the Second Finance Minister’s statement.

I had then asked what is the cost of this payment to the Malaysian government, and whether this is a loan or an advance to 1MDB.

Following that, the 1MDB President and Group Executive Director, Arul Kanda Kandasamy, denied that the US$1 billion is “a loan, debt or bailout”. He said,

"Further to the Ministry of Finance’s statement on 29 May, we have noted with concern claims from certain quarters suggesting that the USD1 billion payment from the International Petroleum Investment Company of Abu Dhabi is a loan, or involves 1MDB assuming further debt."

"That is absolutely not the case. This is a business transaction; not a loan, not any kind of debt and not a bailout."

So now we know, assuming Arul Kanda’s statement can still be trusted, that the US$1 billion payment to 1MDB is not a loan. However, we are still completely clueless why IPIC would be willing to make a payment of US$1 billion for an clearly indeterminate transaction.

All Malaysians have is Dato’ Seri Ahmad Husni’s earlier statement that “the agreement will also include further measures to comprehensively address the various financial asset and liability transactions between the parties, further details of which will be announced in due course.”

Dato’ Seri Ahmad Husni had earlier informed Malaysians that he will be tabling a restructuring report to the Cabinet. However, all the Ministers received was some vague proposal without providing the complete picture about IPIC paying US$1 billion upfront while waiting for some form of agreement to be arrived “in due couse” over what it will cost Malaysians. The above certainly doesn’t stand up to being a “complete report” which the Second Finance Minister promised.

The question must then be asked – how did the Cabinet unanimously and blindly agree to and support the decision to accept a very mysterious US$1 billion payment from a foreign government investment for transactions which were unknown or not finalised?

Why was there absolutely no question asked by any Cabinet member as disclosed by Tourism Minister, Dato’ Seri Nazri Aziz. Was it because they understood perfectly the proposed “restructuring plan” which was tabled and hence there was no necessity to question?

Or was it because they were intimidated by Dato’ Seri Najib Razak’s less than subtle threat asking ‘…if somehow, some of you feel uncomfortable with this, please hand in or write (your resignation), and I will understand.”

This was despite all the hoo-haa expressed by various Ministers prior to the Cabinet meeting that there need to be proper accountability, transparency and clear explanations. If they themselves don’t know or understand the proposal or issues, how can they expect the ordinary Malaysians to understand?

It is clear that these self-serving Cabinet Members were more interested to protect their ministerial positions than to protect the interest of billions of ringgit of Malaysian tax-payers funds and liabilities in 1MDB.

Tony Pua

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Why Does the Second Finance Minister Persist on Denying the Obvious?

What future is there left for 1Malaysia Development Bhd if it’s not “wound down”?

One cannot wonder if there is a bunch of clowns running 1Malaysia Development Bhd (1MDB) and the Ministry of Finance with the number of statements which are issued but are subsequently denied.

On Friday last week, the Second Finance Minister, Dato’ Seri Ahmad Husni Hanadzlah issued the statement on spinning off Tun Razak Exchange (TRX) and Bandar Malaysia as separate independent entities, off-loading all of its energy assets via Edra Global and will be disposing of its questionable “units” to Abu Dhabi’s International Petroleum Investment Corporation (IPIC).

Bernama, the Government’s official mouthpiece meaning it can’t be wrong, followed up a report that “1MDB will be wound down by next year and its operations transferred to three separate firms”.

However, despite the seeming clarity of the issue, Dato’ Seri Ahmad Husni Hanadzlah chose to deny the above report. When asked by The Malay Mail Online to verify a Bernama report yesterday that 1MDB could be “wound down”, the minister replied “not true”, without elaborating further.

This is where the financial community and the Malaysian public are bamboozled by the flip-flop piecemeal responses given by our Ministers and 1MDB resulting in the complete loss of confidence in the Najib administration.

Why does the Second Finance Minister persist on denying the obvious?

There are only 3 parts to the 1MDB assets – its prized real estate which it acquired on the cheap from the Federal Government, its energy assets which 1MDB overpaid for their acquisition and its RM13.4 billion of dodgy and opaque “level 3 assets” held overseas.

If 1MDB is disposing of all these 3 assets in one form or another, then the Ministry of Finance is effectively winding down the controversial and scandalous 1MDB as there would be nothing left in the company. Unless of course, Dato’ Seri Ahmad Husni knows better and the Government intends to revive 1MDB with more funds for new groundbreaking investments?

Instead, our advice to Dato’ Seri Ahmad Husni is to face up to the truth directly instead of attempting any further fancy twist and turns. Why should the Second Finance Minister take the blame for the biggest scandal in Malaysia’s history that is not directly of his making? Being frank is the best and only way to ensure that his reputation doesn’t collapse to become a half-past-six Minister.

As it stands, the Federal Government is likely to buy back the TRX and Bandar Malaysia at inflated prices of up to RM10.4 billion in order to make them “independent entities”. Edra Global is likely to be sold or listed at a valuation less than 1MDB’s cost of acquisition. At the same time, despite the US$1 billion payment expected from IPIC, Malaysians are still clueless on the nature of IPIC’s role and participation in this exercise and the cost to the tax-payers.

Therefore, Dato’ Seri Ahmad Husni should not only concede that 1MDB is winding down via massive bailout exercise. He should be upfront to pronounce the Najib 1MDB adventure as a complete failure and disaster and demonstrate his determination to go after the culprits who have cause the multi-billion ringgit of losses to the country.



Tony Pua

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