The 1MDB Audit Report Has Finally Been Declassified After 2 Years. Here Are The Highlights
Auditor-General Tan Sri Madinah Mohamad announced that the 1Malaysia Development Berhad (1MDB) audit report has been declassified yesterday, 15 May
In 2016, Members of Parliament (MPs) in the Public Accounts Committee (PAC) were only allowed to study the report but not release any of its details as it was protected by the Official Secrets Act.
The final PAC report on 1MDB was then presented to the Dewan Rakyat without the audit report, raising questions from opposition MPs at the time.
1. According to the declassified report, most of the billions raised by 1MDB for land development were actually channelled back to itself
Only a small portion of the money was used for the Tun Razak Exchange (TRX) and Bandar Malaysia projects.
The Edge Markets (TEM) reported that a mere 6% of the RM3.98 billion went to the projects, while the remainder went back to the group. Another USD3 billion (approximately RM11.89 billion) raised was not used for the TRX project as well.
Furthermore, 1MDB used RM288 million of the government's RM1.117 billion meant for the Bandar Malaysia project to repay the group's debt interest commitment.
A contractor who was tasked with the Bandar Malaysia project was also owed RM396.42 million up to September 2015.
2. On the other hand, money sent into one 1MDB subsidiary was immediately sent out to another 1MDB subsidiary
In 2014, the "redemption of fund units" into Brazen Sky Ltd, a 1MDB subsidiary, were immediately transferred to 1MDB Global Investments Ltd (1MDB GIL), another 1MDB subsidiary.
The redemption allegedly originated from 1MDB's investment in the Cayman Islands with Bridge Partners International Investment Ltd.
A "fund units" redemption is the return of an investor's capital under the promise of a fixed income, through the sale of mutual fund units.
USD1.392 billion (approximately RM5.52 billion) was credited into Brazen Sky's accounts while USD1.417 billion (approximately RM5.62 billion) was transferred to 1MDB GIL. The transfer could not be justified as 1MDB GIL already had its own fund to manage, which totalled USD1.56 billion (approximately RM6.2 billion).
According to Malaysiakini, the findings in the audit report confirms information in the US Department of Justice (DOJ) court filings.
Malaysiakini quoted the DOJ as reporting that the "redemption of the fund units" actually came from 1MDB's USD975 million (approximately RM3.86 billion) loan from Deutsche Bank. The DOJ also stated that the money was recycled by going through the same processes and ending back in Brazen Sky's accounts.
3. The audit report also revealed 1MDB's problems with corporate governance
Assuming there were no new loans after October 2015, the audit report estimated that a total of RM42.26 billion is required to repay 1MDB's principal and interest that will be due between November 2015 and May 2039.
The group will also need a minimum of RM1.52 billion each year between November 2015 to May 2024 to repay its loans.
On top of that, the report stated that important investment decisions were made without appropriate discussions nor in-depth analysis. For instance, investment decisions within the group's first joint-venture project with PetroSaudi Holdings (Cayman) Ltd were made within eight days without a proper assessment process.
The Star reported that the 1MDB management had also presented incomplete and inaccurate information to the board of 1MDB prior to making an important decision. They also acted without approval from the board.
In light of the probe into 1MDB, FMT reported that Swiss prosecutors are ready to renew talks with Malaysia
The Office of the Swiss Attorney-General Michael Lauber expressed interest in engaging with Malaysian authorities on the 1MDB probe.
Lauber has been critical of former Prime Minister Datuk Seri Najib Razak's administration for its lack of cooperation with Swiss prosecutors in the investigation.
Singapore is also ready to assist in the 1MDB investigation, according to a report by The Star.
"Singapore has also taken swift action against financial institutions and individuals who have broken laws within our jurisdiction in connection with 1MDB-related fund flows," the Commercial Affairs Department and the Monetary Authority of Singapore said in a joint statement.
The audit report also covered many other problems of 1MDB. Malay Mail columnist Erna Mahyuni took the time to sum it up in a Twitter thread:
In February, 1MDB's chairman Tan Sri Dr Mohd Irwan Serigar Abdullah said the company will be shut down after clearing all of its debts: