Was 1MDB's Billion Dollar Payment To Aabar BVI A Mere Scam?

The Public Accounts Committee (PAC) confirmed that 1MDB had made a payment of about USD1.367 billion (RM4.24 billion), without the approval of 1MDB's board of directors.

Cover image via 1MDB

Last week, the Public Accounts Committee (PAC) confirmed that 1MDB made over USD1.367 (RM4.24) billion of payments to 'Aabar Investment PJS Ltd' (Aabar BVI), a rather dubious company with very little background information

Image via 1MDB

The Public Accounts Committee (PAC) said in its 106-page parliamentary report on 1MDB on 7 April that 1Malaysia Development Bhd (1MDB) had not proven that Aabar BVI, which has a name closely resembling Aabar Investments PJS, is a subsidiary of Abu Dhabi's International Petroleum Investment Co. (IPIC).

The report also revealed that the PAC's probe found that 1MDB had made a payment of about USD1.367 billion (RM4.24 billion), without the approval of 1MDB's board of directors, to Aabar BVI as security deposits in 2012.

Sarawak Report, however, claims that 1MDB has paid USD3.51 billion to Aabar (BVI) for “security deposits” and “option termination” apparently for the USD3.5 billion bond guarantee provided by IPIC.

Things took an interesting turn when IPIC issued a statement to deny links to Aabar BVI, just four days after the PAC unveiled its report

Abu Dhabi’s state-owned International Petroleum Investment Company (IPIC) and its subsidiary Aabar Investments PJS (Aabar) have denied any links to Aabar Investments PJS Limited (Aabar BVI) to whom 1Malaysia Development Bhd (1MDB) paid RM4.24 billion in 2012.

“Both IPIC and Aabar confirm that Aabar BVI was not an entity within either corporate group."

Furthermore, both IPIC and Aabar confirm that neither has received any payment from Aabar BVI, nor has IPIC or Aabar assumed any liabilities on behalf of Aabar BVI,” the two companies said in a statement to the London Stock Exchange on 11 April.

Responding to the statement, 1MDB said that it was "surprised" that IPIC took three years to say that it doesn't own Aabar BVI

Image via 1MDB

1MDB claims that as per its records, Aabar Investments PJS Ltd (Aabar BVI) is jointly-owned by International Petroleum Investment Company (IPIC) and Aabar Investments PJS (Aabar).

It said as per 1MDB's company records there were documentary evidence of the ownership of Aabar BVI and of each payment made, pursuant to various legal agreements that were negotiated with Khadem Al Qubaisi in his capacity as managing director of IPIC and chairperson of Aabar and/or with Mohamed Badawy Al Husseiny, in his capacity as chief executive officer of Aabar.

"It is, therefore, a surprising claim that neither IPIC nor Aabar have knowledge of, nor have benefited from, payments made by 1MDB to Aabar BVI," said 1MDB in a statement.

Meanwhile, 1MDB President and Group Executive Director, Arul Kanda, has conceded that the state fund could be a victim of fraud

Image via Getty Images

"Given the recent denial by IPIC and the announcement by the Office of the Attorney-General of Switzerland, indicating that 1MDB could be a victim of fraud, 1MDB is exploring all avenues open to us. Further announcements will be made in due course," he said in a statement yesterday, 13 April.

According to NST, Arul Kanda also reiterated 1MDB's statement that the payments made to Aabar BVI in 2012 and 2013 were done following interactions between 1MDB and IPIC managing director Khadem Al Qubaisi and Aabar chief executive officer Mohamed Badawy Al Husseiny during RTM's Special Dialogue programme last night, 13 April.

Who are the two main figures tied to this dubious company?

1. Khadem al-Qubaisi

Khadem al-Qubaisi is an Emirati businessman and the former Managing Director (MD) of International Petroleum Investment Company (IPIC). He was replaced as the MD of IPIC by United Arab Emirates President Khalifa Zayed in April 2015 following a reshuffle.

Four months later, in September 2015, Sarawak Report published an exclusive report linking his dismissal to corruption allegations stemming from IPIC's transactions with 1MDB.

Just last week, banking sources told Reuters that the United Arab Emirates' central bank has ordered a freeze on the assets of Khadem although the reason for the freeze remains unclear.

2. Mohamed al-Husseiny

Mohamed al Husseiny, was the Chief Executive Officer (CEO) of Aabar, a subsidiary of International Petroleum Investment Company (IPIC), from 2010.

However, he was replaced in August 2015. No reason has been given for his sudden departure, according to Gulf Business.

Sarawak Report said that Mohamed was "generally regarded to have been Khadem's right-hand man". Like Khadem, United Arab Emirates' central bank has ordered a freeze on the assets of Mohamed.

How are these people linked to the state-fund 1MDB?

Both Khadem and Mohamed are alleged to have set up Aabar BVI in March 2012, two months before it received USD576.94 million from 1MDB as a security deposit.

In total, the company is said to have received at least USD3.5 billion from the Malaysian sovereign wealth fund.

Aabar BVI was then liquidated in June last year, as pressure on Najib and 1MDB began picking up steam.

Since then, the UAE has frozen both men’s accounts, and issued travel bans amid an alleged probe into their business dealings.

Meanwhile, Tony Pua, one of the biggest critics of the 1MDB debacle, has urged PDRM to arrest those involved in the 1MDB-Aabar 'scam'

"This is a shocking announcement (IPIC denying links to Aabar BVI) because it has finally confirmed what critics of 1MDB has suspected all along, that 1MDB has been making billions of dollar of payments to a fictitious Aabar BVI, pretending that it was payments to the real Aabar of Abu Dhabi," Pua said in a statement.

"It is clear now that 1MDB was never able to provide the proof of ownership of Aabar BVI, because Aabar BVI is clearly a fake entity created to siphon the USD3.51 billion or more from 1MDB," Pua said.

On a related note, 1MDB's critics are demanding for more clarity and answers following PAC's report:

Despite all the criticism levelled at the state investment firm, Prime Minster Datuk Seri Najib Razak thinks that 1MDB will be a lasting 'legacy':

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