Thursday, June 04, 2015

RM42 billion "lesap" accounted for

In a one two publicity move, an explanatory statement and TV appearance was used to explain the RM42 billion borrowing of 1MDB that allegedly "lesap". Or it was not allegation but merely question?

Arul Kanda released a short press statement together with two charts to account for the RM42 billion borrowing. The statement below:

Media statement by Arul Kanda, 1MDB President and Group Executive Director

Issued on 3 June 2015
For immediate publication

RM42 Billion All Accounted For.

“In recent weeks, there has been much speculation about the use of RM 42 billion of debt raised by 1MDB, and more specifically that RM 27 billion of debt proceeds are alleged to be "lost" or "missing".

We provide a summary of what the RM42 billion debt has been used for, information that is fully disclosed in 1MDB's audited and publicly available accounts from 31 March 2010 to 31 March 2014.

We trust this clarification will help to clear any confusion on this matter.”

It was followed at night by a TV appearance by Minister of Finance 2, Dato Husni Hanadzlah on RTM 2 at 9:00 PM.

Those in touch with the issue and some understanding of corporate finance should have some picture of 1MDB side of the story.

He used the 45 minutes program to explain issues and deny allegations raised by the pro-opposition online media and social media. More important Husni stressed that 1MDB has to address the RM42 billion debt. If not, it is the government that has to bear the debt burden and that could stiffle the budget for RMK 11.

Explained also was the urgency of Arul Kanda to meet the fund provider and Banker for solution to the cashflow problem to meet 1MDB financial commitment.

Denied that PM had bullied cabinet into resignation for not giving supporting on the principle of collective agreement to Dato Najib on the 1MDB issue [read Mkini MB here].

However, there was a reluctance by Husni to answer the twice asked question of Taek Jho Loh. Malaysiakini highlighted his reply as Jho Loh does not need to be glamourised [read here the BM version].

One member of our WA group described Jho Loh as a financial intermediary that earn commission or fee from deals. He has no official role thus legally difficult to implicate him. There is the likelihood his commission or fee is paid from the Middle East side.

However, Jho Loh may have assisted in the dealmaking but the deal still need to be tabled to the Board of Directors for approval, get endorsement from the Board of Advisory and as Rafizi pointed out, M&A require Najib to give final approval. How to pin him?

Unless EO and ISA is put back in place, only then could Jho Loh be held on the basis of economic security.

The two responses serve to supplement this blog's cautious explanation made April 29th, more than a month earlier [read here].

The audited account had accounted for everything and to say it is untrue tantamount to another Enron II scandal in the making that could see the demise of one or two more big four accounting firms.

The Edge issue dated May 25-May 31 attempted to debunk that line of argument.

Earlier there have been preemptive attempts to dispute the ability of the Auditor General (AG) team to uncover anything. Maybe right and maybe wrong, Husni argued that AG annual report are seldom used by opposition to criticise government.

Dato Hishamuddin Hussein Onn was also in the same line of argument when he asked that Price Waterhouse - Coopers be appointed to do forensic investigation. Politically, it raises a question but operationally. among the big 4, it is only PWC that had not done work for 1MDB.

Tun Dr Mahathir's had expressed the opinion that PAC is better suited to investigate. [This blog took a contrary position here.] Tun is still adamant to criticise but he is right to say that the cabinet failed to manage the "1MDB test" [Mkini here].

Tony Pua remain critical as he described the explanation by Arul Kanda as half-baked and does not clear confusion. It is only expected of a DAP leader. There should be no complain for it is their job to  never admit they are wrong and others they attacked are right. [read MI here]

Now that the solution and explanation to the RM42 billion debt are given, one can expect the attack will take cue from BNM latest statement:
Ref. No.: 06/15/01 ​​

For immediate release

Statement on 1MDB
As the nation’s Central Bank, Bank Negara Malaysia is entrusted to promote the stability and integrity of the financial system and the sustainability of our economy. Widespread news reports and commentaries regarding 1MDB have raised questions on whether the Central Bank has continued to uphold the trust that has been placed on the Bank.

The purpose of this statement is to provide clarity on the role of the Central Bank with respect to any resident entity, including 1MDB, that makes investments abroad or obtains offshore borrowings under Section 214 of the Financial Services Act 2013 and under the Exchange Control Act 1953 that was in force prior to 2013. All investments that exceed RM50 million per calendar year and any offshore borrowings that exceed RM100 million by resident entities require the Central Bank’s approval.  In relation to this, all submissions that were made by 1MDB have had to comply with the same approval criteria that is applied to submissions by other business entities. If the criteria is not met, the submission will be rejected.  No leniency or special exceptions were accorded to 1MDB. 

In accordance with the legislation administered by the Bank, the following developments will trigger formal investigations:
• When monies for which approvals are given are not used for the purpose indicated in the submission;
• When  incorrect or false information are provided in the submission; and
• Failure to comply with the conditions in the approval.

As part of an investigation process, the Bank will issue a legal directive requiring information pursuant to the relevant Acts that the Central Bank administers. This will require the Board and Management of the entity to provide the information within a specified time frame. Under the Financial Services Act 2013, the penalty for failure to meet this request can result in a fine of up to RM50 million or up to 10 years in prison or both.

In relation to cross border movements of funds, the Bank also relies on financial intelligence authorities in the foreign jurisdictions to bring to our attention irregular or suspicious transactions made in their jurisdiction.  Such arrangements for information sharing must conform to international protocols.  The arrangements require that the information be kept confidential and any breach will lead to the termination of such arrangements. These arrangements also provide for the Bank to share the information with relevant domestic investigation authorities after securing the permission of the foreign authorities.

The scope provided under the Central Bank’s legislation does not provide powers for the Central Bank to investigate in areas such as fraud, tax evasion, corruption, cheating and criminal breach of trust. These will need to be pursued by other law enforcement agencies. 

With respect to 1MDB, a formal enquiry has commenced to examine any contravention of the Central Bank’s rules and legislation. This has involved the issuance of a legal directive requiring information from the entity. The Central Bank is also taking statements from individuals involved in the governance process and obtaining information from other relevant domestic and foreign parties. In addition, Bank Negara Malaysia has forwarded information received from foreign authorities to the relevant investigation agencies after obtaining the permission from the foreign authorities.

The Central Bank wishes to emphasise that further disclosure of details of the investigation may undermine the outcome of the investigation. The Central Bank is doing everything within the powers provided under its legislation, including collaborating with other agencies, to contribute towards a swift resolution of the matter.
If any indiscretion done, it will look bad on government.

The rosy side of it is that Central Bank is willing to investigate and there is no attempt by the executive branch of government to stop or cover-up. That should augers well for government.

Doubt Penang state government dare to do this. New environmental controversy on Jinko looming. Observe as Guan Eng turn adversarial and evasive.


A Voice said...

Just a friendly reminder:

Plainly state your opinion, even if it differs. No hostilities, insults and bad languages be allowed release.

Anonymous said...

..nothing unusual on 1MDB.. it is just like any other business venture.. sad to see that some party turn it into some kind of monsters.. personally based on my own past practical experience... though not as huge as this.. i believe this venture can become cash cow to the investor within 5 has all the right physical ingredient.. of course the bigger the venture the longer the gestation period..

Anonymous said...

It is more in plain sight JMD-Jebat Must Die has dissected Husni's interview as more attempt in trying to cover a lie with more lies.

Husni is being primed for the sacrificial chamber I guess, whether willingly or otherwise he's taking the bullet for the big guy. Don't need to elaborate because I am not the one to be doing the explanation.

The rakyat read here and there and elsewhere and put things together and they made up their own mind. In this case, the bugis ship is really going down going by the sentiment. Sauh-bugis is taking on water.....

Anonymous said...

I think it is great that 1MDB is finally able to come up with a diagram on where the RM42b loan went to. A good start. The only question is why they took so long? After all these are based on last year's account (31 March 2014!).

Next 1MDB should do is explain why did they buy "going to be expired" IPP for RM18b? Next explanation is the RM15.4b investment funds. What on earth is that? Can we get the money back? They should also explain why Malaysia borrowed money to pay for RM5.8b financial expenditure? Finally, they should explain how do they plan to pay the loan and the annual interests. Are they solvent? Do their investments (now) generate enough cash flow yearly to finance their humongous debts?

Frankly the way I see it the only good investments that 1MBD did is the cheap TRX and Bandar Malaysia lands and that is at the expense of Malaysian people!!

There are so many things that are wrong with 1MDB business model that you wonder whether the people managing it are plain stupid. Since they are not, then the only explanation is they are crooks. For nothing Malaysia is suddenly saddled with RM42b debts (and counting).

Anonymous said...

just because PWC is out of the equation, it doesnt make the audit less credible. the result can be more credible though, but maybe it's a question of the level of acceptance. not really sure how things are going involving other external auditors ( which can reduce the finding's credibility) but hopefully, the answer are credible enough for our value.

Anonymous said...

Poor Brick

You may have to swallow your self-righteous pride when full investigations are completed. Bank negara is NOW on board the detective train.

Bank Negara begins its own probe into 1MDB -

We wish you all the best in your feverish attempts to defend Najib's 1MDB.

P.S. Body language experts will confirm that Husni is highly nervous forever looking at his "numbers" and coughing throughout the whole session. Shuhaimi and Sayed are totally UNCONVINCED. They request for more dialogue sessions.

Kesian ...

Anonimes said...

Looks like every single sen is accounted for on the chart provided by Arul. So Husni said that malaysia will be in trouble if 1mdb fails to pay its debt. I thought the position of 1mdb is "more asset than liabilities, whats to worry?". Now this comes out? And still 1mdb has no amount of revenue enough to pay its obligation. So what next? What if there are no willing buyer willing seller? What next? And those investment funds, i dont think they are FDs? So what are they and what are they worth now? I think Husni just shot hmself in the foot. And i dont get the constant attack on DAP leaders being this and that. This is a national issue and what Tony said is actually right. Dont shoot the messenger based on the past. Even Husni admitted that things are going to get messy if the sinkhole 1mdb fails to pay up. So what is your position? You write quite a lot on the issue and claim to have insiders. How can a company, having to strip itself of hard assets to get cash be good?

A Voice said...


Agree on the valuation of IPP. SO far only getting simplistic political answer. Most session are political and PR in nature so person cant give much.


When it is wrong, it is wrong. No pride at stake.

We are not defending 1MDB in total but on specifics. Still have doubt on Jho Loh.

Had doubt also over Petrosaudi but now that all Petrosaudi derived asset and money is taken over by Abu Dhabi, what else is to say about money disappeared as first alleged by a certain blogger coz posting taken off.

On Husni body language, I knew it for the start. Need to sharpen his PR capability. Too long under shadow of Rafidah.

8.14 PM

That is lot of ifs in your question to answer in a commentary box. In good times if there is such a need.

I do not shoot the messenger to make 1MDB credible but telling you that messengers like Tony Pua and Sarawak Report are not credible.

Stick to credible sources!!!

Anonymous said...

The matter has dragged on for far too long. The public doesn't want to let this go.

Only salvation for UMNO is for Najib to resign.

Don't worry, with his Bugis warrior blood, he can fight for this country from outside. We all fight for this country and we don't need leadership posts to do that.

My Say