Tuesday, October 06, 2015

1MDB's March 2015 Financial Statement would have revealed that US$2.318 billion of investment parked in Cayman Islands in 2012 was fraudulent and never "redeemed"

The recent exposés by The Wall Street Journal, particularly over the US$993 million of payments to Abu Dhabi’s International Petroleum Investment Corporation (IPIC), have allowed a few more pieces of jigsaw puzzles in the 1MDB mystery to be put in place.

Two weeks ago, I wrote that 1MDB executed a fraudulent round-tripping exercise to cover up part of the US$2.138 billion which was invested in a fund located in the Cayman Islands.

The March 2014 financial statements audited by Deloitte Malaysia have stated that US$1.22 billion was redeemed from this controversial investment in November 2014, and the proceeds have been “substantially utilised” to buy back the options granted IPIC or its subsidiary, Aabar Investment PJS.  The US$993 million was presumably derived from this sum received by 1MDB.

However, the auditors were never informed of another loan amounting to US$975 million which 1MDB obtained from a consortium of banks led by Deutsche Bank in October 2014.  This loan was used for the very same purpose to buy back the options from IPIC.

Hence unless 1MDB actually paid a ridiculous US$2 billion to IPIC to terminate the option, we now know that the payment to terminate the options came from Deutsche Bank and not from the partial redemption of the Cayman Islands fund.  The US$1.22 billion stated in the 2014 audited accounts was never redeemed, as the cash proceeds were never received or repatriated by 1MDB.

Subsequently on 13 January 2015, 1MDB President Arul Kanda also happily announced that the balance of the funds in Cayman Islands amounting to US$1.103 billion was also successfully redeemed.  Arul even told The Singapore Business Times on 7 February 2015 that “The cash is in our accounts and in US dollars. I can assure you... I have seen the statements.”

However, this was discovered to be a monstrous lie when further exposés by The Sarawak Report proved that the US$1.103 billion of proceeds alleged parked in BSI Bank in Singapore is basically paper assets with indeterminate value.  The Finance Minister, Dato’ Seri Najib Razak was then forced to admit, in response to my parliamentary question that the sum purportedly redeemed from Caymans above, was not cash.

Until today, neither the Finance Minister or Arul Kanda have been able to explain what these paper assets, which have been described as “units”, really are.  The 1MDB President has also failed to explain how he could confuse these “units” of indeterminate value with cold hard cash amounting to US$1.103 billion deposited with BSI Bank.

The US$2.318 billion parked in the Cayman Islands fund had originated from its disposal of its controversial investment with Petrosaudi International Limited in 2012.  Arul Kanda had even boasted that the sum included a US$488 million profit from the Petrosaudi investment.

However, now when we put both the recent “redemptions” of US$1.22 billion and US$1.103 billion together, we can safely conclude that nothing was ever redeemed from so called funds in Cayman Islands.

These monies which were sourced entirely from borrowings, substantially guaranteed by the Federal Government are now confirmed “missing”.  The previous attempts to cover up for the missing funds via cleverly disguised financial manoeuvres are now fully exposed.

The above partially explains why Deloitte Malaysia was never allowed to commence its audit on 1MDB for the financial year ending March 2015.  As a result, 1Malaysia Development Bhd (1MDB) has failed to lodge its financial statements with the Companies Commission by 30 September 2015 as required by law.

According to media reports, 1MDB have been given a very generous 6 months’ extension to perform the necessary submissions.  The above extension is obviously to allow 1MDB to buy time to figure out how to cover up for the billions of ringgit fraudulently missing in 1MDB via the disposal of whatever assets left in the company.

However, given the scale of the scandal and the size of the sums defrauded from 1MDB, 1MDB will in all likelihood also miss the new deadline of 31 March 2016.  In fact, I will not be surprised at all if 1MDB plans never to lodge another financial statement again with the Companies Commission.

No comments: