By dawn this evening, it will be the 1st day of Ramadhan. Tonight the Terawih prayers will begin.
Tomorrow Muslims will begin a whole month of fasting from dawn to dusk. It is the opportune time to seek forgiveness and pursue spiritual bliss.
To pick from where Bigdogdotcom left off [read here], it is also time to "Tone down a bit lah" on 1MDB. To quote him:
Time. Is the single most important component and commodity in unravelling and making good the entire mess within Federal Government strategic investment corporation 1 Malaysia Development Berhad (1MDB).1MDB is a complex issue thus it had no traction with the public, more so among UMNO members and government supporters.
That was till Tun Dr Mahathir begin his criticism and call for Dato Najib's resignation.
The earlier champions of 1MDB issue were Sarawak Report, The Edge, Tony Pua, Rafizi and Dato Abdul Kadir Jasin but it was only getting the attention of the urbane and corporate people.
If it had not turned political, PAC would not have given a damn. It is strange and ethically wrong but that was how Dato Nurjazlan see it [read MI here, hopefully it is not a spin].
The earliest to play up this issue must be Dato Seri Anwar Ibrahim and Outsyed the Box. It is believed that Outsyed met the first CEO of 1MDB, the arrogant Dato Shahrol in 2009 but had no more engagement with them since.
Allegations and replies
Outsyed was the first to insinuate Riza Aziz financed his movie using 1MDB money [posting taken off]. It was also in the so-called investigative piecce written by Sarawak Report on a latter date.
Although Tun M would not have made allegations based on Sarawak Report, he raised it in his earlier blog posting together with an Apanama-debunked allegation of Datin Seri Rosmah's owning RM23 million diamond ring.
There was an accusation by Tun Dr Mahathir in his blog that RM42 billion, later became RM27 billion, and in one of the talk, it became berbillion-billion of 1MDB money had disappeared, or could mean swindeled or siphoned, or probably unaccounted for.
Arul had explained and detailed the accounted for items in the 2014 Deloitte audited accounts [read our past posting here and here]. But Tun M refused to believe it. He prefer to believe the unqualified PAC than Accountant General [read here].
In the pursuit of justice and public accountability, the onus and responsibility now lies with him to divulge and share the documents and proof. The public believed he would not made such accusation unless he has the proof.
Yesterday, Arul issued two statements in succession with regard to Tun M's successive postings, here and here. Some 13 new factual errors was highlighted.
Media statement issued by 1Malaysia Development Berhad on 16 June 2015
For immediate publication
Facts in relation to blog posting entitled “the 1MDB Story” by Tun Dr. Mahathir Mohamad
1. Tun Mahathir claims that there was “the attempt to hijack the Terengganu Investment Authority (TIA) money” and that “Terengganu accordingly withdrew as it cannot let its oil wells be put at risk”.
- There was no attempt to hijack TIA money.
- In 2009, various discussions were held between the Federal Government and the state government of Terengganu on how each party would provide its share of funding for the TIA. A number of options were discussed in this regard.
- Eventually, the Federal Government’s contribution consisted of it guaranteeing a RM5 billion sukuk issuance by the TIA. This happened on 29 May 2009, prior to the TIA being federalised.
- Subsequently, the state government of Terengganu decided to withdraw from the TIA which led to the entity being federalised in July 2009.
- Contrary to Tun Mahathir’s claim, a Cabinet paper on this matter was prepared and approved by Cabinet, in line with standard practice and as required for all government guarantees.
- Furthermore, the government guarantee is not “off budget” as claimed. It is a clear and acknowledged liability of the federal government, which is ultimately the 100% shareholder of 1MDB.
- The entire premise of this statement is incorrect as the sukuk was arranged by AmBank, not Goldman Sachs.
- AmBank fully underwrote the sukuk issuance (i.e. it took the risk to provide RM5 billion to 1MDB) and, therefore, earned any commission it received for doing so.
- It is a fact, verifiable by a check on the relevant Bank Negara Malaysia webpage, that on 29 May 2009 (the date the RM5 billion sukuk was issued), yields for Government bonds were 2.82% (3 years maturity), 3.56% (5 years maturity) and 4.27% (10 years maturity). It is clear that for every additional year of maturity, the yield is higher.
- The RM5 billion sukuk issued by 1MDB has a 30-year maturity, i.e. it would mature at a date three times later than the 10-year government bond, which was the longest maturity period for a bond at that time. There were no 30-year government bonds in issuance for comparison purposes.
- The 1MDB sukuk was issued at a discounted price of approximately 88, i.e. a discount to face value of 100, which is common for a fixed income instrument. The discount represents the additional yield benefit to sukuk investors. This discount, when added to the coupon of 5.75%, results in a yield of approximately 6.15% - not 7% as incorrectly claimed by Tun Mahathir.
- Based on the logic outlined above, 1MDB achieved 30-year financing for its sukuk at a yield of 6.15%. By contrast, 10-year government bonds had a yield 4.27%. Given the difference in the maturity period, this was a good outcome by any yardstick in the fixed income markets.
- The figures being quoted by Tun Mahathir are incorrect. To be clear; the interest cost on RM42 billion of debt by 1MDB as of 31.03.2014 was RM2.4 billion, i.e. a significant 20% less than what Tun Mahathir claims.
- 1MDB did indeed borrow RM2 billion as arranged by a subsidiary of Tanjong PLC. These proceeds were used to repay a RM2 billion loan provided by a syndicate of domestic lenders. It was not used to pay interest, as claimed by Tun Mahathir.
- As for the rationale behind why Tanjong PLC arranged the financing for 1MDB, we make reference to note 41 (iii) (h) on page 170 of 1MDB’s financial statements dated 31 March 2014.
- The note states “On 7 August 2014, PIH (i.e. Powertek Investment Holdings), a subsidiary of the Company (i.e. 1MDB), entered into a Subscription Agreement with Tanjong under which Tanjong agreed to subscribe for equity in PIH, of up to RM2.0 billion on the occurrence of certain events… which proceeds shall be used solely for the repayment or prepayment by PIH of any amount owing under the RM5.5 billion loan facility arranged by Maybank Investment Bank Berhad and RHB Investment Bank Berhad… ”
From the above, it is a clear fact that Tanjong had an obligation to subscribe to RM2.0 billion of equity in PIH, the proceeds of which would be used for repayment of the loan facility.
- Regretfully, as previously explained, 1MDB is bound by confidentiality agreements and cannot elaborate further on why the RM2.0 billion equity investment was subsequently agreed by the parties to become an RM2.0 billion loan but we trust that the facts shared above provides some clarity on this matter.
- It is important to note that 1MDB purchased 13 different power plants with a generating capacity of approximately 5,500 Megawatts (MW).
- Of the above purchase, contrary to Tun Mahathir’s suggestion, only 2 plants had a near term “expiry of licence” i.e. a 440 MW Powertek plant in January 2016 and the KLPP (Genting) plant in February 2016.
- The “licence” of the KLPP plant was subsequently extended for 10 years, thereby proving it was a good asset purchased by 1MDB.
- Furthermore, 1MDB is awaiting a decision from the Energy Commission for extension of the Powertek 440 MW plant.
- It is important to note that 1MDB is ultimately 100% owned by the Government of Malaysia.
- Accordingly, any transfer of land to 1MDB and any subsequent benefit in land value increase is ultimately 100% for the Government of Malaysia.
- In reference to the figures quoted by Tun Mahathir, he is again incorrect. The fact is that 1MDB paid RM230 million, not RM320 million, to acquire this parcel of land.
- 1MDB is the master developer and has an obligation to fund infrastructure and strategic assets on the land. The cost of this infrastructure that 1MDB is contractually obligated to deliver in TRX is at least RM1,500 psf. This is a direct benefit to any land buyer and forms part of the purchase price paid.
- The financial statements of 1MDB clearly provide the basis for asset valuations. Furthermore, independent valuations have been conducted by professional valuers. This is a requirement by the auditors of 1MDB who have signed off on the accounts with no qualifications.
Media statement issued by 1Malaysia Development Berhad on 16 June 2015
For immediate publication
Facts in relation to blog posting entitled “More Investments by 1MDB” by Tun Dr. Mahathir Mohamad
1. Tun Mahathir claims that “PetroSaudi did not pay a single cent” in a joint venture with 1MDB.
- PetroSaudi, via a subsidiary company, owned assets, comprising rights to oil fields in Turkmenistan and Argentina, worth approximately USD2.7 billion. These assets were sold by PetroSaudi to another subsidiary, “JV Co”, which at the time of the asset sale, was a company formed by and initially 100% owned by PetroSaudi for the purposes of a proposed joint venture with 1MDB.
- In return for the USD2.7 billion asset transfer, JV Co had to pay PetroSaudi USD700 million. This indebtedness resulted from the asset transfer. Accordingly, there was no loan made or “to settle”.
- On 29 September 2009, 1MDB executed a joint-venture agreement with PetroSaudi. Upon completion of an independent valuation, 1MDB contributed USD1 billion of cash in return for 40% ownership of JV Co, and PetroSaudi was left with a 60% stake in the JV Co. In effect; 1MDB’s contribution was in cash, whereas PetroSaudi’s contribution was in independently valued assets worth USD2.7 billion.
- It was part of the joint-venture agreement that, of the USD1 billion from 1MDB, USD700 million would be used to pay PetroSaudi for the initial asset transfer to JV Co (see above) whereas USD300 million would remain in JV Co. Upon satisfaction with the independent valuation, as per the joint-venture agreement, 1MDB made a payment of USD700 million to a subsidiary of PetroSaudi, and obtained legal title to 40% share of JV Co, a company with independently valued assets worth USD2.7 billion at the time.
- Accordingly, PetroSaudi had full rights to the USD 700 million paid by 1MDB and these funds were for PetroSaudi to use, at its discretion.
- The joint venture with PetroSaudi was terminated in March 2010, with PetroSaudi assuming 100% ownership of JV Co. 1MDB converted its USD1 billion of equity in JV Co to murabaha notes issued by JV Co, under the terms of a Murabaha Financing Agreement. PetroSaudi, as 100% owner of JV Co, fully guaranteed JV Co’s obligations under the murabaha notes.
- 1MDB then made further investments of USD500 million and USD330 million in additional murabaha notes issued by JV Co.
- In total, 1MDB invested USD1.83 billion cash in murabaha notes issued by JV Co, a company that, by then, was 100% owned by PetroSaudi following the termination of the joint venture in March 2010.
- In June 2012, the entire USD1.83 billion amount invested by 1MDB in murabaha notes was repaid, by way of conversion into shares of Petrosaudi Oil Services Limited, for a value of USD2.22 billion.
- In September 2012, 1MDB sold its shares in PetroSaudi Oil Services Limited for USD2.318 billion and received fund units in a Cayman registered fund. The Cayman registered fund is managed by Bridge Partners, a Hong Kong-based fund manager. These fund units were owned by 1MDB via its 100% subsidiary, Brazen Sky, and held through BSI Bank Singapore as custodian.
- Accordingly, 1MDB invested a total of USD1.83 billion with PetroSaudi (initially as equity, then as murabaha notes), and ultimately owned USD2.318 billion of fund units i.e. a gain over time of USD488 million.
- The facts detailed above can be verified by reference to the notes to the audited financial statements of 1MDB dated 31.03.2010, 31.03.2012 and 31.03.2014.
- 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.
- Tun Mahathir repeats in his blog posting the original MOF answer to Parliament, but has chosen to ignore the amended answer by MOF and the clarification issued by Arul Kanda on 10 June 2015.
- 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. Furthermore, as clarified by the MOF, appropriate steps have already been implemented to prevent this happening again in the future.
- We must accordingly question why must Tun Mahathir keep repeating his earlier statement, when clarification has been provided and responsibility has been accepted.
- As for Tun Mahathir’s reference to Bank Negara Malaysia, it is a fact that Bank Negara Malaysia is presently conducting an investigation on 1MDB. It is only appropriate to await the outcome of this investigation instead of casting doubt and sharing half-truths in the public domain.
- From the answer to question (2) above, it should be clear that from September 2012, 1MDB owned, via its subsidiary Brazen Sky, fund units in a Cayman Registered Fund, with a valuation of USD2.318 billion as of31.03.2015. These fund units were held through BSI Bank Singapore, as custodian. This has been the case since 2012.
- The existence of USD2.318 billion in fund units has never been questioned, and this value was included in the audited financial statements dated31.03.2014, which must provide a true and fair value of the assets of the company.
- In fact, the first tranche of USD1.22 billion fund units was redeemed in cash in 2014 and the cash proceeds were used to pay for termination of options relating to the energy business, granted to Aabar, working capital and interest payments - as outlined in the company’s publicly available financial accounts.
- As for the remaining USD1.1 billion of fund units, these have also been redeemed, as previously announced by 1MDB. All “documentary proof” on this redemption will be provided to auditors of 1MDB and the lawful authorities.
- Despite repeated public clarifications, Tun Mahathir chooses to ask the same question again and again. One must question the motive behind why he keeps saying that the “USD1billion is missing” when it is obvious that the funds have been accounted for and audited.
- Furthermore, Tun Mahathir has been quoted on the record as stating “RM42 billion is missing”. He now states that “USD1 billion is missing”. This continuous change in figures is perplexing, and raises questions as to the motivation behind these ever-changing claims.
- “Documentary proof” for all the assets of 1MDB, including the fund units and other financial assets of 1MDB, has been presented to the auditors of 1MDB. It is based on this that 1MDB’s accounts have been signed off by the auditors, without qualification.
- In addition, “documentary proof” has now been presented to the Auditor-General and Bank Negara Malaysia, the lawful authorities, who we would expect to carefully scrutinise these documents.
- We are fortunate in Malaysia to have rule of law which states a party is “innocent until proven guilty”. Due process requires that the lawful authorities first undertake investigations, establish the facts and take action accordingly.
Wrongful fact only makes an allegation defective
In the first sodomy case of Dato Seri Anwar Ibrahim, the sentence was thrown out in a judicial review by three Federal Court judges on the ground that the case fact are wrong thus making the charge defective.
The allegations on 1MDB have been made in the court of public opinion in which the majority of the public is unable to understand the complexity and legality behind high finance deals.
So the public's understanding is based on the belief in a person than fact of the allegations. Will the public as judges in the court of public opinion able to appreciate that allegations are defective when facts are wrong?
Let their conscience be their guide in this holy month of Ramadhan.
Taking a quote from a past posting here, below:
On the subject of 1MDB, this blogger admit to being defensive against slander made against 1MDB for wrongful fact, manipulation of fact and argument, and fabricating of documents. But never it was to say all are OK with 1MDB.This blogger have heard of the many stories and rumours on 1MDB, Petrosaudi, Jho Loh and TIA from many credible people.
There are issues of governance, bad decision making, maybe mismanagement, and presence of some questionable Mickey Mouse doing insider trading and flipping commission. And that need to be proven.
Mismanagement and bad decision could arise out of stupidity but stupidity is not a crime. Wrongful accusation can be. RPK used to be charged for criminal defamation.
The suspicion is there but unfortunately, most of the stories are disjointed, lack sensibility and as bizarre as the RM42 billion disappearance. Let alone there was no documents to back allegations.
In another quote from another posting here, we wrote:
In the meanwhile, Tun M is rewriting his excuses to whack at 1MDB. He is consolidating while on offensive retreat. (What is that?) He could be repeating himself because he realised his "adviser" was too presumptous and made many factual errors. He need to take cognizance of developments on 1MDB.That may have upset an "adviser", just do not know who trolled us.
At least, an able critic of Dato Najib acknowledged the new revelation by Arul in his criticism by not being lengthy [read JMD here]. He still cast his doubt. Respectably, his major contention is governance, which we agree.
Again, allegation has to be specific and factual.
This is not a case of someone fleecing 5-10% commission or bribe of an IT or construction deal or a Ketua Bahagian trying to blackmail RM16 million for a developer.
To bring down an elected government, the allegations must be right and not cooked up for political expediency. If it is time for Najib to go, then he has to submit to the will of Allah.
For quite sometime, we were in the know that there was reluctance by the Najib camp to answer Tun M and reveal all these.
We asked them of few major factual errors spotted but they were silent. Not being pro-Najib, we expressed our disagreement with that attitude. Why should they not answer and present the truth or at least the fact?
That way public discussion on the issue is not misguided by lies and slanders, wrongful fact and manipulation. Their answer was they did not want to shame Tun M.
Rightly or wrongly, we end this posting.
Hopefully, it is read by Tun M because we beg his forgiveness in the spirit of Ramadhan. Our conscience cannot agree with him on this.
Maaf zahir batin.