11 Answers That Will Help You Understand The Big 1MDB And Jho Low Conspiracy
1. What is the 1Malaysia Development Berhad (1MDB)?
A brainchild of Prime Minister Datuk Seri Najib Tun Razak, 1MDB is Malaysia’s second sovereign wealth fund after Khazanah Nasional Bhd.
The organisation is set up to drive economic development in Malaysia by promoting global partnerships, drawing foreign direct investment and participating in sectors that help drive socio-economic growth. Although 1MDB is a government-owned company, it has an independent management team that combines government’s support with private sector expertise and capital to unlock potential value.
1MDB is currently involved several high-profile projects such as the Tun Razak Exchange, Tun Razak Exchange’s sister project Bandar Malaysia and the acquisition of three Independent Power Producers.1mdb.my
2. 1MDB is in RM42 billion of debt, that's almost 170 times of the RM250 million cowgate scandal. How did that happen?
-In 2014, the company took a RM2 billion loan from Powertek Investment Holdings Sdn Bhd to finance a RM6.17 billion bridging loan taken in 2012, but missed the 31 December 2014 deadline for settlement and received an extension of up to 30 January 2015.
- There are also claims that 1MDB overpaid top businessman, Ananda Krishnan with an RM8.5 billion on the acquisition of his power assets in 2012. Latest news report that Krishna will loan the company RM2 billion to help settle a debt obligation to Malayan Banking Bhd and RHB Bank Bhd due soon.
- Controversies also highlighted the over-priced cash purchase of Tanjung and Genting Sanyen independent power producers (IPP).
- Another issue was 1MDB’s action to build two power plants in Malaysia, which were not even required yet to meet energy demands.
- Also, the whereabouts of the investment yields from Cayman Islands in 2012 amounting to RM1.63 billion (from an investment of RM6.25 billion) has been questioned as this amount could have used to clear off a portion of the debts. imoney.my
3. Why are people so frustrated with 1MDB?
Public outcry with 1MDB has been going on for years yet continues to go unheard even after police reports were made.
On December 2014, Batu Kawan Umno division deputy chief Datuk Seri Khairuddin Abu Hassan epitomises it when he lodged a police report calling for detailed and comprehensive investigation.
He said, "Public outcry has gone on for too long. There have been many queries from the public, the opposition and even three former finance ministers. Reports in the business newspaper The Edge had also pointed out these issues. But 1MDB just kept mum. It denied nothing and just kept quiet. Just imagine the RM41.9 billion debt recorded by the company. It is a public issue. If anything goes wrong with the board, it will affect the government and in turn, affect the people.”
4. What are the criticisms opposition, MPs from the ruling party, and even Tun Dr Mahathir?
Prime Minister Najib has been on the receiving end of criticisms as fears that 1MDB is hurling the country into financial turmoil.
Pakatan Rakyat has been scrutinising how 1MDB has amassed a massive RM42 billion debt in mere five years, the dubious land deals, and how its transactions that are kept in secrecy
Tun M is one of the loudest critics, saying that as Malaysia's government revenue is not much, the 1MDB funds are not surplus government funds but national debts.
Other criticisms question the motive of:
- the sudden resignation of CEO Mohd Hazem Abdul Rahman
- the need for "strategic review" in the midst of completing a massive US$3 billion public offering for its energy division
- replacing its auditors three times from Ernst and Young, to KPMG, and now Deloitte. KPMG was replaced after refusing to sign off on 1MDB's financials.
5. What was so interesting in Sarawak Report's recent investigation into Jho Low's involvement with 1MDB that it went viral?
Sarawak Report together with the London's Sunday Times published an in-depth investigation into the trail of the missing billions at the heart of the 1MDB financial scandal.
They published documents and emails relating to transactions by 1MDB, including its joint venture with oil company PetroSaudi International from 2009.
According to the email thread, Sarawak Report established that:
1. Tycoon Jho Low was involved in setting up the deal between 1MDB and PetroSaudi from the very beginning.
2. The USD$700 million "loan" that was supposedly repaid to PetroSaudi as part of the joint venture agreement was directed into a Swiss Bank account that is controlled by Jho Low. This money was then partly used to buy out Taib Mahmud's UBG Bank in Sarawak.
3. The Prime Minister was implicated in the controversy as Low hinted in the email that he was representing the "YAB PM" to further Saudi-Malaysia bilateral ties in the joint venture.
The documents ultimately suggest that PetroSaudi agreed to act as a front for Low to siphon billions from 1MDB.
6. Who is Jho Low and why is he in the middle of this conspiracy?
Originally from Penang, 32-year-old Low Taek Jho started making headlines in 2010 when he was first seen as a mysterious financier partying luxuriously with the likes of Paris Hilton.
Jho Low is an entrepreneur, billionaire, more recently, a philanthropist. He is the CEO of Jynwel Capital, an international private equity investment and advisory firm. The company has been making several major acquisition including Reebok and Helmsley Park Lane Hotel in New York. He is notoriously powerful with direct access to Malaysian politicians, royal families in the Middle East, and Hollywood celebrities.
Low was involved in setting up the Terengganu Investment Authority (TIA) in 2009, the state's sovereign fund manager and the forerunner of 1MDB. However, he has repeatedly denied any involvement with 1MDB itself, saying that he had not received any compensation for his consultations with the company.
Critics say he is no more than a well-connected middleman collecting fees for deals, while his friends defend him as one who brings much-needed investment to Malaysia.
7. Why was the New York Times so interested in Jho Low to the point of publishing a detailed exposé on him?
The New York Times published a five-part investigation on the influx of foreign wealth fueling New York's high-end real estate boom.
The report reveals that wealthy foreigners, many of whom are implicated in conspiracies, had been anonymously buying elite property in the city for millions and millions of dollars by using shell companies. One of the foreign owners named was Jho Low.
Part two of the investigation zooms into Low. The New York Times found that Low had bought and sold at least three properties totalling to an approximate USD $72.03 million. This left people speculating where Low is getting his millions from. ‘Why is it that this individual is bringing in millions of dollars into America, and how was it acquired?’”
According to sources, Low does not have an official role in 1MDB but regularly consults the company. His father's close friend is the director while two of his friends have joined the staff.
8. How is Najib involved?
For starters, 1MDB was Najib's idea. As the Finance Minister, he is also the chairman of the board of advisers of 1MDB. Besides that, 1MDB is owned by the Finance Ministry, which makes Najib directly responsible for the success and failure of the company even though he is not involved in its day-to-day operations.
However, it is Najib's relationship with Jho Low that is raising eyebrows. Najib's son Riza Aziz runs a Hollywood company that produced The Wolf of Wall Street with his school friend, Low's help. Last year, Aziz bought a RM110 million penthouse in New York with transactions that involved Low.
9. Why are there talks of Muhyiddin Yassin becoming Prime Minister?
With the pressure gaining on Najib to take responsibility for the scandal, there have been parties, including those from Umno, who are trying to oust the Prime Minister. However, it won't be an easy feat.
As Deputy Prime Minister, Muhyiddin Yassin is next line to take over Putrajaya. Finance Twitter says with Dr M pulling strings, Muhyiddin Yassin may get to be Prime Minister for a short while before calling for a snap election and hand over the premiership to Minister of Defence, Hishamuddin Hussein.
Home Minister Zahid Hamidi, who is vice president of Umno, may also move up to become the party's leader.
10. How has this 1MDB financial scandal been affecting me?
1MDB’s controversies have drawn concerns from various parties, especially on the overall financial stature of the country and the ongoing effect it will have on the Ringgit as only RM20 billion of the debt is backed by the Government.
Some economists are debating whether this debt contributes to the weakening Ringgit, apart from the fall in global oil prices. A falling Bursa Malaysia and concerns about the rise in the cost of living just worsens the perception that 1MDB is yet another cause of woe. However, the actual relationship between both isn’t very clear.
Also, civil servants may need to heed the controversies surrounding 1MDB as one of its subsidiaries has not been able to service a RM4 billion loan taken from Kumpulan Wang Amanah Pencen (KWAP) which pays government pensions.
Putrajaya is being forced to service this debt through whatever means it needs to take.
11. What's next?
The heat on 1MDB, Najib, and Jho Low will continue to grow especially with media pressure.
Whistleblower site Sarawak Report says they have more documents on 1MDB's dubious operations and Jho Low's involvement in it.
Meanwhile, Jho Low has threatened to sue The Edge and The Malaysian Insider for defamation if they do not retract their articles about him. However, the Edge Media Group who owns both publications says they stand by all the articles that they have published about Low and 1MDB, and will continue to do so as and when it is merited.