My Anthem

Friday, July 22, 2016

"Keeping the Rage" on 1MDB: PART 5

Luckily we are in the INTERNET age, and when the local media fail to expose the Government's corruption and other shenanigans, news agencies like CNN and AlJazeera do us tremendous service. And while the local top guns act dumb and clueless, always living in denial on the long-running 1MDB Scandal, following here's AlJazeera brining us the latest since yesterday. The Clueless One continues to make nice pronouncements that everything is OK, and his sycophantic underlings including the whole wooden cabinet just "mouth" statements that have many sentences but say nothing at all "to rebut" the exposues of wrong doing, especially on money-laundering, now under investigation by at least 11 foreign countries....YL, Desi




Malaysia

US goes after $1bn in assets from Malaysia's 1MDB

US officials allege fund was used as "personal bank account" to buy assets, including property, a jet and paintings.






Lynch said officials used the sovereign fund as a 'personal bank account' [Al Jazeera]

The US Justice Department has said it wants to seize more than $1bn in assets linked to Malaysia's 1MDB state investment fund.
The department said on Wednesday the assets were "associated with an international conspiracy to launder funds misappropriated" from 1MDB.
In court papers filed in California, federal prosecutors listed some 20 assets, including lavish real estate from Beverly Hills to a penthouse in New York's Time Warner Center.

Also included were artworks by the painters Monet and Van Gogh, as well as a Bombardier Global 5000 business jet.
In a press conference in Washington DC, US Attorney General Loretta Lynch said officials used the sovereign fund as a "personal bank account".
Lynch said the move was part of an efffort "to combat global corruption" and ensure that the US would not serve as a "safe haven to those who illegally use public funds for private gain".
The fund is owned by the Malaysian government, but none of the lawsuits named Prime Minister Najib Razak, who has consistently denied any wrongdoing.
However, the case named Riza Aziz, his stepson, as a "relevant individual" in the case.
The lawsuits also named Najib's friend, Malaysian financier Low Taek Jho, or Jho Low, and Abu Dhabi government officials Khadem al-Qubaisi and Mohamed Ahmed Badawy Al-Husseiny.

'Money-laundering scheme'

The complaint, filed in Los Angeles, alleges a complex money-laundering scheme that the Justice Department said was intended to enrich top-level officials of 1MDB.
The fund was created in 2009 by the Malaysian government with the goal of promoting economic development projects in the Asian nation.
Mahathir Mohamad on corruption and 'saving Malaysia' - UpFront
Instead, officials at the fund diverted more than $3.5bn over the next four years through a web of shell companies and bank accounts in Singapore, Switzerland, Luxembourg and the US, according to the complaint.
Federal officials said more than $1bn was laundered into the US for the personal benefit of 1MDB officials and their associates.
The funds were used to pay for luxury real estate in the US and Europe; gambling expenses in Las Vegas casinos; a London interior designer; more than $200m of artwork by artists including Van Gogh and Monet; and for the production of films, including the 2013 Oscar-nominated movie The Wolf of Wall Street.
The complaint said that among those who profited from the scheme was the prime minister's stepson Aziz, who co-founded Red Granite Pictures, a movie production studio whose films include The Wolf of Wall Street.
According to the complaint, 11 wire transfers totaling $64m were used to fund the studio's operations, including the production of the movie starring Leonardo DiCaprio.
A phone message at the movie studio on Wednesday morning was not immediately returned.
Malaysian government officials had no comment on Wednesday in response to queries about reports of the US justice department's action.
Source: Al Jazeera and agencies


******************************************************

Okay, some mitigating factors in The Star's this morning, as its Page 4 runs a story headed (headline for now read from Print copy, will try to C&P from its Online edition later, OK:):

Singapore seizes assets
worth RM249mil in probe


HERE COMETH AS PROMISED:~~~


Nation

Thursday, 21 July 2016 | MYT 1:20 PM

Singapore seizes assets worth RM717mil in 1MDB-related probe

- Reuters
- Reuters
SINGAPORE: Authorities have seized assets worth S$240mil (RM717.45mil) in an investigation of 1MDB-related fund flows for possible money laundering, in a probe which has found "deficiencies" at several major banks here.
"The fund flows being investigated include those connected with Good Star Limited (Seychelles), Aabar Investments PJS Limited (BVI), Aabar Investments PJS Limited (Seychelles), and Tanore Finance Corp. (BVI)," said a joint statement by the Monetary Authority of Singapore, the Attorney-General's Chambers and the Commercial Affairs Department.
The statement follows a lawsuit filed by U.S. prosecutors to seize more than US$1bil (RM4.05bil) in assets they said were tied to money stolen from the Malaysian state development fund.
The Monetary Authority of Singapore said it has completed its inspections of DBS, Standard Chartered and UBS, with preliminary findings showing instances of "control failings" in all three banks and "weaknesses in the processes for accepting clients and monitoring transactions.
"However, the MAS' inspections did not reveal pervasive control weaknesses or staff misconduct within these banks, unlike in the case of BSI Bank," the statement said.
In May, the MAS withdrew the status of Swiss BSI Bank as a merchant bank for serious breaches of anti money laundering requirements.
An onsite inspection of another Swiss bank Falcon PBS in April 2016 found substantial breaches of anti-money laundering regulations. Management oversight and inadequate risk management were found at Raffles Money Change, a moneychanger and remittance agent.
Of the assets seized, about half belonged to Malaysian financier Low Taek Jho, known as Jho Low, and his immediate family, the joint statement said.
The investigations are ongoing and Singapore has requested information from other countries as part of its probe.
"Appropriate actions will be brought against those who have broken Singapore's laws," the statement said. – Reuters
Tags / Keywords: 1MDB , Singapore , DBS , UBS , Standard Charted , MAS

Related Stories





Meanwhile, go and read your PM's consistent pronouncement that EVERYTHING is OK pages 2 and 4...), going by The Star's print copy -- hey I paid RM1.20 for it OK! need to MONITOR as Desi is by nature a newsman at HEart!--, and Biz Page 3. I won' dignity my blogspace with their "disindormation or misinformation".

Wednesday, July 20, 2016

"Keeping the Rage" on 1MDB: PART 4

Dear Esteemed Readers, my folksy patient audience from far flubnng corners of the w.w.w., Desi apologises if some/several parts of the IMDB overlap and may tax your forebearance. It's OK, if you think you have read it before, just hop, skip and jump lah -- goOd exercise:) -- an unavoidable occurrence since I have to source the updates from VARIOUS SOURCES,TO WHOM I OWE TREMENDOUS GRATITUDE.

 

 

 

From our constant SARAWAK REPORT cometh:~~~

 

Special Purpose Con Job?

14 Jul 2016

Information now emerging from the Auditor General’s Report, led DAP Finance Spokesperson Tony Pua to state yesterday that he suspects that much of the money paid in 2014 to the bogus Aabar Limited BVI company was in fact circulated back through 1MDB’s Brazen Sky bank account in Singapore in an attempt to con Parliament and the auditors that cash had been “redeemed” from the so-called Special Purpose Vehicle (SPV), which had allegedly invested US$2.3 billion in the Cayman Islands.
“it occurred to me that the 1MDB Financial Statements for the year ending 31 March 2014 were signed off by the auditors, Deloitte coincidentally on 4 November 2014, when 1MDB GIL also made a payment of US$222 million to Aabar (BVI).” says Pua.
At that point in time, there was increasing concern over 1MDB’s US$2.318 billion investment in an obscure investment fund based in Cayman Islands.  The Board of Directors minutes have shown that the Management were repeatedly instructed to redeem the investment and repatriate the proceeds back to Malaysia throughout 2014. The company was under immense pressure because the authenticity of the investment was being publicly questioned…. 
The accounts were finally signed off by Deloitte when 1MDB was able to “show” the auditors that US$1.22 billion have been redeemed.  The money was however, not repatriated to Malaysia.”
It is a shocking suggestion, because it would mean that two Swiss banks, BSI and UBS, would have been involved in helping shift these suspicious transactions through their Singapore branches – in some cases turning round hundreds of millions of dollars in one day, according to the figures.  This is because BSI managed the Brazen Sky account and UBS managed the bogus Aabar Limited account.
Sarawak Report has now examined the Auditor General’s analysis of this alleged ‘redeeming’ and ‘repatriation’ of the SPV cash (see full excerpt beneath) and the figures in his report lend weight to Pua’s suspicions.
However, the AG complains he cannot reach a solid conclusion on the matter, because of the incomplete and limited information provided to him by the company.
“JAN [Audit Dept] was unable to verify 1MDB GIL’s subsequent payments or how the funds redeemed from the (SPC portfolio) funds were used because important documents such as bank statements and payment vouchers were not handed by 1MDB for JAN’s verification despite five requests being made between May and October 2015. Documents such as bank statements should be readily available to bank clients.” [8.12]
Such criminal obstruction of its own ought to demand severe action against managers, whom the Public Accounts Committee have called for the police to investigate.
What emerges from Chapter 8 on the Cayman SPV and supposed repatriation of the cash is yet again a litany of appalling bad practice at 1MDB, changing stories and missing money. The Auditor General officially confirms what critics have long suspected, which is that 1MDB serially lied to parliament and the public and utterly failed in its duty:
“The issues that were uncovered depict a company which had made unwise business decisions, took high risks and was not in line with 1MDB’s status as a Government-owned strategic development company to help develop the country.”[8.29] the Auditor General angrily concludes.

‘Round-Tripping’?

The figures from Chapter 8, make very interesting reading when compared to the bank transfer documents we publicised earlier in the week, which showed payments from 1MDB Energy and 1MDB Global to the Singapore UBS account of Aabar Limited during the relevant period in 2014.
The AG’s figures show the cash transfers that were allegedly made from the Cayman Island SPV to 1MDB’s Brazen Sky account at BSI Bank in Singapore Sept-December 2014 as the ‘cash’ was allegedly ‘redeemed’ through a number of transactions.
First look at the money that the Auditor General records as having arrived into Brazen Sky from anonymous portfolios linked to the fund during late 2014 (bearing in mind he complains he was not given any of the bank statements of the company to prove its financial status or the origin of the cash):
“Difficulties in obtaining important documents such as the Brazen Sky bank statements and 1MDB GIL statements resulted in JAN not being able to verify the transfer of funds or payment of Aabar’s termination of option and interest payments” [AG Rpt 8.26.g]
Screen Shot 2016-07-13 at 23.19.37

The money allegedly arriving in Brazen Sky from the SPV in the Caymans, according to figures provided to the Auditors Deloittes and later the Auditor General
The money allegedly arriving in Brazen Sky from the SPV in the Caymans, according to figures provided to the Auditors Deloittes and later the Auditor General
Second, look at Sarawak Report’s table of money flows obtained from the bank transfers to the UBS Aabar Limited account from 1MDB Energy And Global, published earlier this week.
Sarawak Report's summary of the information provided by the 9 transfer documents submitted to the auditor
Sarawak Report’s summary of the information provided by the 9 transfer documents submitted to the auditor
Finally, combine the two tables to see how virtually identical over-all sums were sent to the fake Aabar by 1MDB Energy and later 1MDB Global to those which arrived back a few days later in the Brazen Sky Singapore account – and were then forwarded straight on/back to 1MDB Global.
One two occasions the same multi-million sums left 1MDB Global to fake Aabar and then arrived back there (via Brazen Sky) on the very same day: US$255,500,000 on October 23rd and then US$222,222,000 on November 4th.  Tony Pua would seem to have a point!
Round-Tripping?
Round-Tripping?
As Pua points out it was on November 4th, after the key figure of US$1.22 billion was flushed through Brazen Sky, that the auditors Deloittes finally agreed to sign off the belated accounts for that year on the basis that this money had been ‘redeemed’ from the Cayman Islands.
Except, the AG points out that instead of being repatriated to Malaysia to pay 1MDB’s pressing debts as had been demanded again and again of management by the Board, this money was sent on to 1MDB Global’s BSI bank account in Lugano instead.
Or should we say it was SENT BACK to 1MDB Global’s BSI bank account in Lugano from where it had come in the first place?

The PetroSaudi black hole

What the evidence surely shows is that there was no money in the Caymans to be sent back in the first place and this was nothing more than a desperate cover-up and an audit con-job that went to extraordinary lengths.
Indeed, once the money had been ‘redeemed’ to Lugano 1MDB management made sure to write it off straight away, claiming the money had been immediately spent on terminating options and paying off loans.
What everyone who has followed 1MDB knows is that the original US$1.83 billion PetroSaudi investment, which was to go through no less than four different ‘investment strategies’ in as many years, to the Auditor General’s major disapproval, was actually stolen right from the start.
Jho Low’s Good Star Limited snaffled US$700 million on Day One, then a further US$330 million later in 2011. US$260 million was siphoned into the buy out of UBG in 2010 and the remainder went to PetroSaudi itself in return for its services in “acting as a front”.  The formerly two-bit company bought itself a drill ship and purchased a lucrative drilling concession in Venezuela on the proceeds of its “joint venture”.
So, when 1MDB claimed in 2012 that it had ‘cashed in’ its share of the PetroSaudi venture  for a fancy profit of US$2.3 billion they were defying the laws of mathematics and common sense. Who would have paid such money for an empty shell?
Hence began the series of twisted and turning shadowy tales about the supposed Special Purpose Vehicles, conveniently hidden in the Caymans with off-shore bank accounts, allegedly ‘investing’ in ‘portfolios’ that it was claimed could be translated back into solid cash.
No one believed Shahrol Halmi at the time and they will believe him even less now that they have seen how the money circulated round 1MDB in late 2014, with the help of the friendly off-shore fake Aabar and compliant Swiss bankers in Singapore.
The Auditor General was outrageously denied the full information he was owed to explain exactly what happened here, but what all the evidence suggests is that 1MDB started pumping money it had borrowed for its Energy and Global subsidiaries through the fake Aabar, so that it could then be sent on to Brazen Sky posing as cashed in profits from the separate Cayman Island portfolios.
No wonder that during this very November 2014 the management had started drafting resolutions to explain why 1MDB Global might need to pay money to Aabar – the remaining US$1.5 billion from their 2013 Tun Razak Exchange loan was about the only significant remaining ready cash available in the group.  Hence the agreement to ‘extend the Aabar guarantee’ to this loan as well, in order to find an excuse to pay for the privilege. Aabar’s parent company IPIC have confirmed they knew nothing of the deal – the money went to the fake Aabar of course.
So, while the AG was not given the statements to prove this is what happened, his remarks could not have delivered a clearer official verdict of utter condemnation that nothing that was done was done correctly or honestly by 1MDB (see below).  No wonder the Public Accounts Committee notified the police.

Remaining US$993 million

There was of course the alleged remainder of the SPV/Cayman money that the Board had called on 1MDB to return no less than 9 times for over a year:
The AG listed the occasions the Board had asked for the PetroSaudi/Cayman Islands money to be returned without success
The AG listed the occasions the Board had asked for the PetroSaudi/Cayman Islands money to be returned without success
The remaining money was US$993 and 1MDB had explained to the Board it would need to be used to pay off yet more options to the fake Aabar, for which purpose it was allegedly also paid to the Brazen Sky account.
Except, there turned out to be no money here either as the AG details in painful stages. First 1MDB had claimed they had sold the remaining SPV to fake Aabar again, because it was “as good as cash” although the market apparently was not keen on buying the SPV notes at that particular time.
Then the deal was reversed into an alleged cash sale, which turned out to be merely notes.   The Auditor established that there was no cash in the BSI account, which was plainly why 1MDB had had to borrow real cash from Deutsche Bank to pay its mounting obligations, based on the supposed collateral which turned out to be notes not cash.
When the truth because known in April 2015, Deutsche Bank pulled its loan and 1MDB had to pull its favours with the corrupt Aabar officials, who dragged IPIC into a bail out. The Auditor provides a useful further insight into the terms of that secretive ‘Term Sheet’, which finally expired on June 30th with 1MDB having failed to fulfil its obligations to IPIC, sparking legal action and a demand of US$6.5 billion, now facing the Malaysian taxpayer.
Many had asked what assets 1MDB had promised Aabar in return for its loan, as referred in that binding term sheet.  The answer, found the auditor, was that no one at 1MDB or Aabar actually seemed to know – even a year later. Because 1MDB had yet to demonstrate what were genuine assets and what were fake.
Read the Chapter 8 Translation
Chapter 2, Item 8 – Redeeming of investment portfolio from Segregated Portfolio Company (SPC)

8.1       The investment in the SPC was made through the Investment Management Agreement signed on Sept 12, 2012. Between the period of Sept 2012 and Sept 2013, the (initial) investment of RM6.8 billion (USD2.318 billion) saw a returns of RM662 million, which is dividends of RM445.93 million and capital distribution of RM216.07 million as stated in the financial statements for the year ending March 31, 2014.
8.2       In response to criticisms that was raised in Parliament and through the media regarding the investment portfolio in the SPC which was managed by fund managers in the Cayman Islands, the Board had on May 20, 2013 agreed that the investment be redeemed in stages to improve public perception towards the credibility of 1MDB’s investments. In relation to this, the Board had issued 9 instructions between May 2013 and Aug 2014 to the Management to prepare a plan, schedule and (ultimately) redeem the SPC portfolio funds either in stages or as a whole, according to this schedule:
Table 2.3 – Board’s instruction regarding redeeming of SPC investment
Board Meeting Number Date of Meeting Instruction
3/2013 20/05/2013 Prepare plan and schedule of for redeeming of funds in stages
5/2013 19/08/2013 Prepare plan and schedule of for redeeming of funds in stages
6/2013 11/11/2013 Liquidate investments in stages and return funds to Malaysia
1/2014 27/01/2014 Opportune moment to redeem investments in view of high value of USD
Special 27/02/2014 Management to take immediate action in redeeming funds and returning it to Malaysia
3/2014 22/04/2014 Redeem funds as soon as possible although there are no needs for cash in the near term. Funds could be used in local institutions.
4/2014 10/06/2014 Redeem at least 1/3 of the portfolio investments on Sept 30, 2014 or all on March 31, 2015.
5/2014 21/07/2014 Redeem 1/3 of the portfolio investment on Sept 30, 2014 and all March 31, 2015. Management is instructed to redeem funds on those dates
6/2014 18/08/2014 Redeem everything before or on Dec 31, 2014.
Source: Board of Director’s meeting minutes.
8.3       However, no action was taken by the 1MDB management although there were specific clauses in the Subscription Agreement which allows the client to liquidate the funds at any time with a 30-day notice. The readiness of the management to liquidate the portfolio funds in a month was also confirmed by Hazem (then 1MDB CEO) during the Board Meeting on June 10, 2014.
8.4       Following repeated instructions from the Board, eventually, a portion of the SPC portfolio funds amounting to USD870 million were redeemed in mid-October 2014 while another USD300 million was redeemed a few days later. This was informed to the Board on Oct 20, 2014.
8.5       On Nov 4, 2014, Hazem informed the Board during a meeting that a total of USD1.2 billion from the SPC Portfolio Funds were redeemed. It was used to pay the interest on a loan and Aabar Investment PJS’s termination of option in order to secure 49% equity in Powertek Investment Holdings Sdn Bhd and 1MDB Energy (Langat) Sdn Bhd. During the same meeting, the chair of the Board had informed Messr Deloitte (who was present during the meeting) that the balance of the SPC portfolio investment would be redeemed before the end of November 2014 and gave a guarantee that he would oversee the redeeming of the funds.
8.6       During the meeting on Dec 20, 2014 Azmi (1MDB CFO) had informed the Board that the latest USD1.392 billion was redeemed from the SPC portfolio and the balance of USD939.87 million will be redeemed by the end of December 2014. The Board was also informed that the entire SPEC portfolio funds were used as collateral for the USD975 million loan from Deutsche Bank. The Board opined that it was unfair to use the entire SPC portfolio fund, valued at USD2.318 billion, as collateral when the loan from Deutsche Bank amounts to only USD975 million. Lodin (Board chair) raised the issue of 1MDB management not informing the Board regarding the collateral and that he and Ismee had given a guarantee to the BNM governor that money redeemed from the SPC portfolio investment would be brought back to Malaysia.
8.7       This information contradicts Arul Kanda’s statement to the PAC on Dec 1, 2015, in which he said that USD1.22 billion from the SPC portfolio funds were not used as collateral because it was already redeemed. Only the balance of USD1.11 billion from the SPC portfolio funds along with dividends of USD120 million were used as collateral with Deutsche Bank for the USD975 million loan. However, checks by JAN found that (Arul Kanda’s) statement was inaccurate because between Nov 14 and Nov 24, 2014, an additional USD173.5 million was redeemed, bringing the total amount redeemed from the SPC portfolio investment to USD1.392 million. All funds that were redeemed were transferred into the account of 1MDB GIL and only the balance of USD939.87 million which were not redeemed could be considered as collateral for the loan from Deutsche Bank.
8.8       Further checks by JAN on the Facility Agreement found that the conditions of the loan did not include clauses which support the statements of both Azmi (Dec 20, 2014) and Arul Kan (Dec 1, 2015). The conditions for the loan are as follows:
Table 2.4 – Condition for the USD975 million loan from Deutsche Bank AG, Singapore Regarding the SPC Portfolio Fund Collateral
Clause Condition
20.2 (b) Brazen Sky shall ensure that the Brazen Sky net worth will not at any time be less than USD1,500,000,000.
22.2 (b) With effect from the date which is six momths from the utilisation date, the borrower and Brazen Sky shall ensure that, at all times thereafter, the amount standing to the credit of Brazen Sky Account is at least equal to the Brazen Sky Required Balance.
Note:
Brazen Sky Account – Bank Account in Hong Kong
Brazen Sky Required Balance – a cash amount of USD600 mil up to a maximum of USD1,170 mil; USD500 mil plus aggregate of each Accordion Increase Amount x 1.2 [?]
Source: Facility Agreement USD975 mil
8.9       The Board, during a meeting on Dec 20, 2014 was also informed that Deutsche Bank AG, Singapore had agreed to allow USD993, from the USD1.392 billion redeemed fromt he SPC funds, to be used for Aabar’s termination of option payments. The balance of USD399 million was used to pay the interest of the USD Note.
8.10     However, details of the USD993 million payment to Aabar for the termination of option and the payment of interest for the USD Note could not be verified by JAN. The board also sought details on the payment on Dec 20, 2014, but JAN’s checks showed that the matter not raised during the subsequent Board meeting. During the Feb 23, 2015 meeting, the Board had raised questions regarding the payment for Aabar’s termination of option which was only told to the Board after payment was made. This demonstrated that the payment for Aabar’s termination of option was made without the approval of the Board.
8.11     During a meeting between 1MDB and JAN on Sept 9, 2015, 1MDB had said that the physical payment to Aabar was made through the account of a 1MDB subsidiary – Brazen Sky Limited (Brazen Sky) through BSI Bank – on behalf of the terminating company because 1MDB did not own an account abroad. However, checks by JAN found that funds redeemed from the SPC portfolio amounting to USD1.392 billion which were transferred to Brazen Sky’s bank account between Sept 11 2014 to Nov 24 2014 were transferred to 1MDB Global INvestment Limited (1MDB GIL) between SEpt 12 2014 and Dec 8 2014 amounting to USD1.417 billion. An analysis on Brazen Sky’s transactions between Sept until December 2014 found that there were no payments for the purpose of the Aabar termination of option. Details of Brazen Sky’s transactions are as follows:
Chart 2.5 – Brazen Sky Limited Transactions for Period Between September and December 2014
­­ Transactions In (USD) Out (USD)
11/09/2014 Portfolio C2 110,000,000.02
12/09/2014 1MDB GIL 94,420,000.00
07/10/2014 Portfolio C2 146,518,719.52
Portfolio C1 228,481,280.48
1MDB GIL 375,000,000.00
14/10/2014 Portfolio B2 280,045,600.00
Portfolio C1 104,954,400.00
1MDB GIL 340,000,000.00
23/10/2014 Portfolio A2 27,099,840.00
Portfolio B1 198,247,200.00
Portfolio B2 30,152,960.00
1MDB GIL 255,500,000.00
31/10/2014 Portfolio A1 93,292,800.00
31/10/2014 Dividends 131,707,200.00*
04/11/2014 1MDB GIL 222,000,000.00
14/11/2014 Portfolio A2 125,000,000.00
1MDB GIL 125,000,000.00
24/11/2014 Portfolio A2 48,500,000.00
26/11/2014 1MDB 43,168,213.17*
08/12/2014 1MDB GIL 5,500,000.00
TOTAL 1,392,292,800.02 1,417,420,000
Source: Brazen Sky Limited Bank Statement, obtained from foreign authorities
Note (*): Not included in total amount
8.12     The transfer of funds redeemed from the SPC portfolio from Brazen Sky to 1MDB GIL was found to be in contravention of the instructions from the 1MDB Board, which has demanded that the funds be brought back to Malaysia. The Board’s approval was also not sought for this transaction. The reason for the transfer to 1MDB GIL by 1MDB’s management could not be ascertained because 1MDB GIL has its own investment assets with fund managers amounting to USD1.56 billion on March 31, 2014. 1MDB GIL had also obtained a USD Note loan amounting to USD3 billion. JAN was unable to verify 1MDB GIL’s subsequent payments or how the funds redeemed from the (SPC portfolio) funds were used because important documents such as bank statements and payment vouchers were not handed by 1MDB for JAN’s verification despite five requests being made between May and October 2015. Documents such as bank statements should be readily available to bank clients.
8.13     After redeeming USD1.392 billion from the SPC portfolio, the Board on Nov 13, 2014 urged (the management to) redeem the balance of USD939.87 million before the end of November 2014. The same instruction was given again on Nov 25, 2014.
8.14     On Jan 12, 2015, the Board voiced their disappointment with the 1MDB management who had previously given the impression that the SPC funds would be brought back (to Malaysia) but as of that day, it had not happened. The situation then became more complicated because 1MDB was facing serious cash-flow problems in its attempt to repay a RM2 billion Maybank loan and payment obligations for equity in the 3B Project [Note: Jimah power plant] at the time.
8.15     During the same meeting, Arul Kanda had informed the Board that the balance of the SPC portfolio funds amounting to USD939.87 million was redeemed and held in the form of cash since Dec 31, 2014. This was in line with what Azmi told the Board on Dec 20, 2014 – that the balance would be redeemed by end-2014.
8.16     However, checks by JAN found several statements which raises doubts on whether the balance of the SPC funds amounting to USD939.87 was in the form of cash or units. An analysis on the statements made between Jan 12, 2015 until Mar 3, 2015 showed that the redeeming of SPC funds in the cash amounting to USD939.87 had taken place. However, checks by JAN found that the sum of USD939.67 did not exist in Brazen Sky’s bank account during the period. The chronology of statements regarding the redeeming of SPC portfolio investment is as follows:
Table 2.6 – Chronology of statements regarding redeeming of the balance of SPC portfolio investment funds amounting to USD939.87 million
Statement Source
12/01/2015 Mr Arul updated the Board that the balance of USD939,874,085 had been redeemed and had been held as cash since Dec 31, 2014. Special Board Meeting
07/02/2015 Mr Arul: “The cash is in our accounts and in US dollars. I can assure you (about that) … I have seen the statements”. The Business Times, Singapore, Feb 7, 2015.
23/02/2015 Mr Arul informed the Board that, per the terms of the Deutsche Bank loan taken out in Sept 2014, there is a need for the USD975 million loan to be cash-collateralised at USD1.20 for every USD1.00 of the loan, by March 2, 2015. He therefore recommended, and that Board agreed, that the loan be repaid from the remaining USD939 million cash proceeds from the redemption of the investment portfolios held by Brazen Sky Limited, and the balance from the proposed Government of Malaysia loan. Board meeting No 1/2015
03/03/2015 Mr Arul updated the Board that further to the Board decision on Feb 23, 2015 he had instructed the CFO to utilise the proceeds of Brazen Sky Limited redemption to repay in full the USD975 million Deutsche Bank loan on March 2, 2015. However, the CFO informed him today that BSI apparently declined to apply the proceeds in that manner until they received a suitably worded indemnity from Deutsche Bank to release BSI from any liability in relation to application of the funds in that manner. Special Board meeting
Source: 1MDB board minutes and news articles
8.17     Arul Kanda’s statement to the Board on March 3, 2015 raises the question of why BSI had previously shown no objection towards the transfer of the monies from the SPC portfolio investment amounting to USD1.417 billion between Sept 12, 2014 until Dec 8, 2014. This appears to show that 1MDB’s management did not provide the correct or complete information regarding the SPC investment (money) to Arul Kanda. Arul Kanda had frequently attributed the information he was presenting during Board meetings to Azmi (CFO) and Terence (Executive Director, Finance). During PAC’s meeting on Dec 1, 2015, Arul Kanda also acknowledge that his understanding of the redeeming of SPC funds was learned in stages. Azmi and Terence, as the directors of Brazen Sky, should have provide details about the SPC portfolio investment to Arul Kanda.
8.18     During the Board meeting on March 24, 2015, Arul Kanda explained, based on information supplied by Azmi, that Aabar agreed to purchase the balance of the SPC portfolio investment fund amounting to USD939.87 million from Brazen Sky at the same value. Checks by JAN found that the agreement that was referred to was the Asset Sale Agreement signed on Jan 1, 2015 between Brazen Sky and Aabar Investments PJS Limited (Aabar Ltd). The agreement was made by 1MDB management to ensure that the receipt of funds redeemed from the balance of the SPC portfolio can done before March 31, 2015 in accordance to the wishes of the Board. The redeeming of the funds was done through an agreement because Brazen Sky was of the opinion that the SPC fund managers were unable to redeem the SPC funds through normal redeeming processes because of weak market sentiments at the time. However, it was found that the agreement was signed without prior knowledge of the Board and shareholders.
8.19     Checks by JAN also found that the sale of the balance of SPC portfolio investment to Aabar Ltd contradicts Clause 21.4 (a) in the USD975 million Facility Agreement by Deutsche Bank – “No obligor shall enter into a single transaction or a series of transactions to sell, lease, transfer or otherwise dispose of any asset.” This showed that the management had acted against the instructions of the Board which required the redeeming of SPC portfolio investment before the end of Dec 2014 and that the proceeds be brought back to Malaysia. The management’s justification for not carrying out the instruction in January 2014 can be disputed because the value of the USD at the time was high. 1MDB’s management should rightfully not be concerned about losses during the redeeming process because the value of the SPC portfolio investment was guaranteed by Aabar Investment PJS on the principle value.
8.20     Arul Kanda also told the Board on March 24, 2015 that Azmi had explained that the redeeming of the entire SPC portfolio investment had happened in early January 2015. However, a sum of USD939.87 which should be received from Aabar was still in the SPC portfolio fund structure. Since 1MDB’s management took into consideration of Aabar’s credit position and the good relations between the two companies, the agreement in which Aabar takes over the SPC portfolio investment was considered to be “as good as cash”. However, without the cash payment, 1MDB was unable to repay its debt of USD975 million to Deutsche Bank or prepare a cash collateral of USD1.17 billion for the loan.
8.21     Following this, the Board through a resolution dated March 25, 2014 agreed with a proposal by Azmi and Terence for Brazen Sky to terminate the Asset Sale Agreement, dated Jan 2, 2015, with Aabar Ltd and replace it with a Share Sale Agreement. According to the proposal, all equity in Brazen Sky is to be sold to Aabar Ltd at a consideration value of USD1.20 billion and the first payment of USD300 million must be made before April 30, 2015. The purpose of selling Brazen Sky was to fulfill the condition set by Deutsche Bank regarding the cash collateral of USD1.17 billion which must be prepared by Brazen Sky on behalf of the lender – 1MDB Energy Holdings Ltd. The shareholders agreed with the proposal via a resolution on March 25, 2015. However, this document was not presented to JAN because 1MDB’s management said that the deal was not yet finalised. All statements to the board on March 24, 2015 – beginning with the Asset Sale Agreement and proposed Share Sale Agreement – give the impression that information is being changed according to the situation, in which the balance of the SPC portfolio investment which was initially said to have been redeemed in cash, but is now reported to be in the form of units.
8.22     Thus, Aabar Ltd’s commitment to uphold their end can be questioned because Azmi had told the Board on April 23, 2015 that the balance of USD939.87 which should have been received by Aabar Ltd was still in the structure of the SPC portfolio investment because Aabar Ltd had yet to confirm when the payment should be made. Meanwhile, Arul Kanda told the Board on May 11, 2015 that the takeover of Brazen Sky by Aabar Ltd had yet to take place.
8.23     However, on May 25, 2015 the Board was informed that negotiations with Aabar were taking place, in which IPIC/Aabar were to takeover a portion of 1MDB Group’s assets alongside obligations for two USD Notes amounting to USD3.5 billion. The Board was also informed that the agreement and advance payment of USD1 billion will be finalised by the end of May 2015. This is the third time the redeeming of the balance of the SPC portfolio investment and negotiations with Aabar/Aabar Ltd was changing in shape.
8.24     On May 28, 2015 the Board approved through a resolution to have a Term Sheet for Settlement Arrangements (Binding Term Sheet) between 1MDB Group, Ministry of Finance Inc (MKD), International Petroleum Investment Company (IPIC) and Aabar Investments PJS Groups (Aabar). The Binding Term Sheet was signed by all four parties on May 28, 2015. Among the important terms in the Binding Term Sheet was that IPIC will pay 1MDB USD1 billion before or on June 4 2015 and takeover the obligation to pay interest and principle for the two USD Note – each amounting to USD1.75 billion. According to Arul Kanda’s explanation to the Board on June 14, 2015, the Binding Term Sheet did not state in detail which assets would be transferred to IPIC/Aabar because it is still under negotiation. Among the assets which have been identified amounts to USD4.892 billion, consisting of a deposit amounting to USD1.4 billion for the IPIC guarantee on the USD Note, 1MDB GIL investment fund amounting to USD1.56 billion, the SPC portfolio investment amounting to USD939.87 million and payment for the Aabar termination of option amounting to USD993 million. Three important issues have been set for the following dates:
  1. A definitive agreement must be implemented by July 31, 2015
  2. Transfer of assets at the minimum value of USD1 billion to IPIC/Aabar by Dec 31, 2015
  3. Transfer of the balance of asset that have been identified by June 30, 2016
 8.25     On June 5, 2015, 1MDB had received the advance of USD1 billion from IPIC under the Binding Term Sheet through its subsidiary Brazen Sky. Based on the shareholders resolution on May 28, 2015 and resolution by the Board dated June 2, 2015, the sum was to be used for the payment of USD50 million in fees to Yurus Private Equity I and the balance was for the Deutsche Bank loan amounting to USD975 million.
8.26     Issues regarding the redeeming of SPC Portfolio INvestment for the period between 2013 and 2015 are as follows:
  1. Payments for the Aabar termination of option were not put before the Board for prior approval
  1. Proceeds of funds redeemed from the SPC portfolio amounting to USD1.392 billion was not brought back to Malaysia as instructed by the 1MDB Board
  1. Proceeds redeemed from SPC portfolio amounting to USD1.417 billion were shifted to 1MDB GIL but the Board was told that it was used for the Aabar termination of option payment amounting to USD993 million
  1. Difficulties in obtaining important documents such as the Brazen Sky bank statements and 1MDB GIL resulted in JAN not being able to verify the transfer of funds, payment of Aabar’s termination of option and interest payments
  1. The Asset Sale Agreement signed on Jan 2, 2015 between Brazen Sky and Aabar Ltd for the sale of the balance of SPC portfolio investment amounting to USD939.87 milllion to Aabar Ltd was signed without the knowledge of the Board or shareholders.
  1. The value of the first redeeming process (USD1.392 billion) and the balance which will be taken over (USD939.87 million) amounts to USD2.33 billion, which is almost the same as the initial investment amount of USD2.318 billion on Sept 12, 2012. This shows that the SPC portfolio investment did not make significant gains.
  1. The change in statements on the balance of the SPC portfolio investment – first it was said that it was redeemed and kept in cash on Dec 31, 2014, subsequently it was stated that it was taken over by Aabar Ltd on Jan 2, 2015, but still regarded as “good as cash” although no money was received.
8.27     In summary, 1MDB’s initial investment through PetroSaudi in 2009 which involved a large sum did not bring foreign investment into Malaysia, which was not in line with the objective of establishing the company. […] 1MDB’s early investments through funds from the issuance of IMTN bonds amounting to RM5 billion saw a change in investment instruments four times. Beginning with the USD1 billion equity investment in 2009 through the JV with a subsidiary of PetroSaudi International Limited, followed by the investment in Murabahah Note (USD830 million/RM2.59 billion) in 2011 and 2012, until it was changed to into the SPC portfolio investment amounting to USD2.318 billion in Cayman Islands on Sept 2012. A portion of the SPC portfolio investments was redeemed in 2014 and used to finance various commitments and its investments. This investment resulted in a balance of USD939.87 million in the form of SPC portfolio investment units on March 31, 2015.
8.28     The decision to switch from one investment instrument to another within a short period of time while involving large sums showed that the investment decisions were not made in accordance with a proper management structure and does not appear to have a long term strategic investment plan.
8.29     Issues that were uncovered depicts a company which had made unwise business decisions, took high risks and was not in line with 1MDB’s status as a Government-owned strategic development company to help develop the country. It should be managed in accordance to best practices in order to safeguard the company and Government’s interest.

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Australia's Adelaide University Takes Action On Taib

13 Jul 2016

[Please note that Sarawak Report has started uploading a copy of the Auditor General’s report on 1MDB, which can be accessed from the front page of this site]
Back in 2011 Sarawak Report first broke the story in which we raised questions about the honours given by Austalia’s Adelaide University to its former pupil and benefactor Taib Mahmud.
At the time the University hierarchy chose to ignore our investigation and it refused to answer our questions.  However, persistence pays in the face of wrong-doing and over the following years students, public figures and NGOs have joined to campaign against the association with Borneo’s billionaire politician.
The old guard left the university management and the new management have now done the right thing and removed their honour from a kleptocrat, who tossed some money their way. BRAVO!
Link to our original story or read below:

Cash for Honours at Adelaide University?


For some weeks Sarawak Report has been attempting to question Adelaide University about the circumstances surrounding its decision to name a large chunk of its campus after the Sarawak Chief Minister.
The ‘Taib Mahmud, Chief Minister of Sarawak Court’ was designated in honour of the controversial East Malaysian politician in 2008.  It was described at the time as “a newly landscaped social space” in publicity material, which also provides a photograph of the billionaire politician, strolling through the area with the University’s Vice-Chancellor, Professor James McWha.
Our requests however, have failed to receive an acknowledgement.  There has been no reply to our emails or to questions made verbally to the University’s press department.  Equally snubbed have been a number of Malaysian graduate alumni of the University, who had previously raised their own concerns about the honouring of Taib Mahmud last December, complaining in a joint letter:
“It is a shame for us all that our university is honouring a kleptomaniac and a person who is also a human rights abuser”
The reason for this failure to elicit a civilised response would appear to be that while Taib Mahmud has showered the University with huge amounts of cash, Sarawak Report and the other alumni have not.

Taib’s ‘personal generosity’ bestowed ‘numerous ways’!


Taib graduated from Adelaide in law in 1961, but then received a further honorary doctorate in 1994, followed by repeated accolades and statements of support.  Announcements by the University have indicated some of his donations over the years, however owing to the current silence, it is hard to calculate the full amount.
Adelaide has acknowledged that Taib’s first donation was made in 1987, six years after he became Chief Minister and started to display a serious level of disposable income.  His North American property company, Sakti International, was founded by himself and close family members in the same year and is now worth well over 100 million Australain Dollars.   This first donation was used to refurbish the Law School, according to the University.
In 2001 it would appear that another $300,000 was donated by the Chief Minister, some of which was used to establish a new “Malaysian Room, complete with furniture and artifacts from Sarawak”.  The University describes the room as:
” a tribute to the generosity of the Chief Minister, who is also one of our most distinguished alumni and long-time benefactor”.

What price an honour?

In the absence of any official response, we can only surmise that a considerably larger sum was expended before the naming of the Taib Mahmud, Chief Minister of Sarawak Court in 2008.  Indeed at the time of the designation, the Vice Chancellor, Professor James McWha, thanked Taib for his “significant support and tireless work” and went on to say:
“The Chief Minister’s personal generosity has continued in numerous ways over the years”

Unfortunately, at no stage during these years of donations rewarded by status and accolades does the University appear to have questioned how a person in Taib’s position could legitimately have come by the means to extend such ‘personal generosity’.  As an elected holder of public office Taib’s salary is a matter of public record and (thanks to all his simultaneous positions) it adds up to a perfectly comfortable RM20,000 a month (approximately $10,000 Australian Dollars).  This means that the Malaysia Room alone cost more than double his annual salary.
Only slightly deeper enquiries by the University would have revealed even more concerning issues surrounding Taib’s wealth.  There is no shortage of information and evidence linking the Chief Minister to a vast web of timber corruption that has seen the entire Sarawak Rainforest razed to less that 5% of its original size during his 30 years in office.
In fact, the destruction by companies associated with the regime of Taib Mahmud has developed into a global threat.  Taib-related companies are operating with ruthless and wanton efficiency across the remainder of the Island of Borneo, in Irian Jaya, the Solomon Islands, the Congo Basin, Amazon and Siberia, as reported by numerous NGOs.  What’s more, somewhat closer to home, the Green Party in Tasmania has also been questioning why a Taib-related company has been subsidised to the tune of $8 million by the State to saw down trees for export back to Malaysia, which has now largely been stripped bare?

A crime with numerous victims


The impact of this orgy of destruction has been devastating to the wild life, rivers and eco-systems of what was until very recently the most bio-diverse and intact remaining jungle on the planet.  It has also left hundreds of thousands of native peoples, whose territories have been invaded, without sustenance and, likewise, on the brink of extinction.
Few of the people of Sarawak have received any benefited from the wealth generated by the destruction of their forests.  Instead it is the University of Adelaide that has profited, not from the ‘personal generosity’ of the Chief Minister, however, because it was not his wealth to give, but from the plunder of his people.

Our questions


It was for these reasons that Sarawak Report framed a limited number of questions that we hoped that the Vice-Chancellor would be prepared to answer.  We wished to know if the University holds any ethical guidelines when it comes to the acceptance of donations, and if so how Professor McWha could have concluded that Taib Mahmud was an acceptable partner for Adelaide?
We also requested information about the total extent of the donations which have been received from the University, on the basis that such sums could very well be identified as money laundered from the proceeds of corruption and therefore assets which should lawfully be returned to the people of Sarawak.
Indeed, since the University has made clear on numerous occasions that the donations have been the product of ‘personal generosity’ there can be no question that this is money that Taib Mahmud cannot legitimately account for on the basis of his limited official salary.

More in Australia


Of course, as NGOs have often pointed out, there are plenty of other Taib properties in Australia, adding to the mystery of the Chief Minister’s millions.  The 380 room Adelaide Hilton is one company registered under the names of his children and late wife and there are a string of other properties and enterprises belonging to the Mahmud family elsewhere.
Given  Australia’s own perfectly adequate wealth, would it not be more appropriate for Universities like Adelaide to find funding from legitimate and domestic sources, rather than profit from the exploitation of the poor people of Borneo and offering in return for this gift of much needed credibility to their corrupt Chief Minister?  Surely that credibility should have been denied?
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Special Purpose Con Job?

14 Jul 2016

Information now emerging from the Auditor General’s Report, led DAP Finance Spokesperson Tony Pua to state yesterday that he suspects that much of the money paid in 2014 to the bogus Aabar Limited BVI company was in fact circulated back through 1MDB’s Brazen Sky bank account in Singapore in an attempt to con Parliament and the auditors that cash had been “redeemed” from the so-called Special Purpose Vehicle (SPV), which had allegedly invested US$2.3 billion in the Cayman Islands.
“it occurred to me that the 1MDB Financial Statements for the year ending 31 March 2014 were signed off by the auditors, Deloitte coincidentally on 4 November 2014, when 1MDB GIL also made a payment of US$222 million to Aabar (BVI).” says Pua.
At that point in time, there was increasing concern over 1MDB’s US$2.318 billion investment in an obscure investment fund based in Cayman Islands.  The Board of Directors minutes have shown that the Management were repeatedly instructed to redeem the investment and repatriate the proceeds back to Malaysia throughout 2014. The company was under immense pressure because the authenticity of the investment was being publicly questioned…. 
The accounts were finally signed off by Deloitte when 1MDB was able to “show” the auditors that US$1.22 billion have been redeemed.  The money was however, not repatriated to Malaysia.”
It is a shocking suggestion, because it would mean that two Swiss banks, BSI and UBS, would have been involved in helping shift these suspicious transactions through their Singapore branches – in some cases turning round hundreds of millions of dollars in one day, according to the figures.  This is because BSI managed the Brazen Sky account and UBS managed the bogus Aabar Limited account.
Sarawak Report has now examined the Auditor General’s analysis of this alleged ‘redeeming’ and ‘repatriation’ of the SPV cash (see full excerpt beneath) and the figures in his report lend weight to Pua’s suspicions.
However, the AG complains he cannot reach a solid conclusion on the matter, because of the incomplete and limited information provided to him by the company.
“JAN [Audit Dept] was unable to verify 1MDB GIL’s subsequent payments or how the funds redeemed from the (SPC portfolio) funds were used because important documents such as bank statements and payment vouchers were not handed by 1MDB for JAN’s verification despite five requests being made between May and October 2015. Documents such as bank statements should be readily available to bank clients.” [8.12]
Such criminal obstruction of its own ought to demand severe action against managers, whom the Public Accounts Committee have called for the police to investigate.
What emerges from Chapter 8 on the Cayman SPV and supposed repatriation of the cash is yet again a litany of appalling bad practice at 1MDB, changing stories and missing money. The Auditor General officially confirms what critics have long suspected, which is that 1MDB serially lied to parliament and the public and utterly failed in its duty:
“The issues that were uncovered depict a company which had made unwise business decisions, took high risks and was not in line with 1MDB’s status as a Government-owned strategic development company to help develop the country.”[8.29] the Auditor General angrily concludes.

‘Round-Tripping’?

The figures from Chapter 8, make very interesting reading when compared to the bank transfer documents we publicised earlier in the week, which showed payments from 1MDB Energy and 1MDB Global to the Singapore UBS account of Aabar Limited during the relevant period in 2014.
The AG’s figures show the cash transfers that were allegedly made from the Cayman Island SPV to 1MDB’s Brazen Sky account at BSI Bank in Singapore Sept-December 2014 as the ‘cash’ was allegedly ‘redeemed’ through a number of transactions.
First look at the money that the Auditor General records as having arrived into Brazen Sky from anonymous portfolios linked to the fund during late 2014 (bearing in mind he complains he was not given any of the bank statements of the company to prove its financial status or the origin of the cash):
“Difficulties in obtaining important documents such as the Brazen Sky bank statements and 1MDB GIL statements resulted in JAN not being able to verify the transfer of funds or payment of Aabar’s termination of option and interest payments” [AG Rpt 8.26.g]
Screen Shot 2016-07-13 at 23.19.37

The money allegedly arriving in Brazen Sky from the SPV in the Caymans, according to figures provided to the Auditors Deloittes and later the Auditor General
The money allegedly arriving in Brazen Sky from the SPV in the Caymans, according to figures provided to the Auditors Deloittes and later the Auditor General
Second, look at Sarawak Report’s table of money flows obtained from the bank transfers to the UBS Aabar Limited account from 1MDB Energy And Global, published earlier this week.
Sarawak Report's summary of the information provided by the 9 transfer documents submitted to the auditor
Sarawak Report’s summary of the information provided by the 9 transfer documents submitted to the auditor
Finally, combine the two tables to see how virtually identical over-all sums were sent to the fake Aabar by 1MDB Energy and later 1MDB Global to those which arrived back a few days later in the Brazen Sky Singapore account – and were then forwarded straight on/back to 1MDB Global.
One two occasions the same multi-million sums left 1MDB Global to fake Aabar and then arrived back there (via Brazen Sky) on the very same day: US$255,500,000 on October 23rd and then US$222,222,000 on November 4th.  Tony Pua would seem to have a point!
Round-Tripping?
Round-Tripping?
As Pua points out it was on November 4th, after the key figure of US$1.22 billion was flushed through Brazen Sky, that the auditors Deloittes finally agreed to sign off the belated accounts for that year on the basis that this money had been ‘redeemed’ from the Cayman Islands.
Except, the AG points out that instead of being repatriated to Malaysia to pay 1MDB’s pressing debts as had been demanded again and again of management by the Board, this money was sent on to 1MDB Global’s BSI bank account in Lugano instead.
Or should we say it was SENT BACK to 1MDB Global’s BSI bank account in Lugano from where it had come in the first place?

The PetroSaudi black hole

What the evidence surely shows is that there was no money in the Caymans to be sent back in the first place and this was nothing more than a desperate cover-up and an audit con-job that went to extraordinary lengths.
Indeed, once the money had been ‘redeemed’ to Lugano 1MDB management made sure to write it off straight away, claiming the money had been immediately spent on terminating options and paying off loans.
What everyone who has followed 1MDB knows is that the original US$1.83 billion PetroSaudi investment, which was to go through no less than four different ‘investment strategies’ in as many years, to the Auditor General’s major disapproval, was actually stolen right from the start.
Jho Low’s Good Star Limited snaffled US$700 million on Day One, then a further US$330 million later in 2011. US$260 million was siphoned into the buy out of UBG in 2010 and the remainder went to PetroSaudi itself in return for its services in “acting as a front”.  The formerly two-bit company bought itself a drill ship and purchased a lucrative drilling concession in Venezuela on the proceeds of its “joint venture”.
So, when 1MDB claimed in 2012 that it had ‘cashed in’ its share of the PetroSaudi venture  for a fancy profit of US$2.3 billion they were defying the laws of mathematics and common sense. Who would have paid such money for an empty shell?
Hence began the series of twisted and turning shadowy tales about the supposed Special Purpose Vehicles, conveniently hidden in the Caymans with off-shore bank accounts, allegedly ‘investing’ in ‘portfolios’ that it was claimed could be translated back into solid cash.
No one believed Shahrol Halmi at the time and they will believe him even less now that they have seen how the money circulated round 1MDB in late 2014, with the help of the friendly off-shore fake Aabar and compliant Swiss bankers in Singapore.
The Auditor General was outrageously denied the full information he was owed to explain exactly what happened here, but what all the evidence suggests is that 1MDB started pumping money it had borrowed for its Energy and Global subsidiaries through the fake Aabar, so that it could then be sent on to Brazen Sky posing as cashed in profits from the separate Cayman Island portfolios.
No wonder that during this very November 2014 the management had started drafting resolutions to explain why 1MDB Global might need to pay money to Aabar – the remaining US$1.5 billion from their 2013 Tun Razak Exchange loan was about the only significant remaining ready cash available in the group.  Hence the agreement to ‘extend the Aabar guarantee’ to this loan as well, in order to find an excuse to pay for the privilege. Aabar’s parent company IPIC have confirmed they knew nothing of the deal – the money went to the fake Aabar of course.
So, while the AG was not given the statements to prove this is what happened, his remarks could not have delivered a clearer official verdict of utter condemnation that nothing that was done was done correctly or honestly by 1MDB (see below).  No wonder the Public Accounts Committee notified the police.

Remaining US$993 million

There was of course the alleged remainder of the SPV/Cayman money that the Board had called on 1MDB to return no less than 9 times for over a year:
The AG listed the occasions the Board had asked for the PetroSaudi/Cayman Islands money to be returned without success
The AG listed the occasions the Board had asked for the PetroSaudi/Cayman Islands money to be returned without success
The remaining money was US$993 and 1MDB had explained to the Board it would need to be used to pay off yet more options to the fake Aabar, for which purpose it was allegedly also paid to the Brazen Sky account.
Except, there turned out to be no money here either as the AG details in painful stages. First 1MDB had claimed they had sold the remaining SPV to fake Aabar again, because it was “as good as cash” although the market apparently was not keen on buying the SPV notes at that particular time.
Then the deal was reversed into an alleged cash sale, which turned out to be merely notes.   The Auditor established that there was no cash in the BSI account, which was plainly why 1MDB had had to borrow real cash from Deutsche Bank to pay its mounting obligations, based on the supposed collateral which turned out to be notes not cash.
When the truth because known in April 2015, Deutsche Bank pulled its loan and 1MDB had to pull its favours with the corrupt Aabar officials, who dragged IPIC into a bail out. The Auditor provides a useful further insight into the terms of that secretive ‘Term Sheet’, which finally expired on June 30th with 1MDB having failed to fulfil its obligations to IPIC, sparking legal action and a demand of US$6.5 billion, now facing the Malaysian taxpayer.
Many had asked what assets 1MDB had promised Aabar in return for its loan, as referred in that binding term sheet.  The answer, found the auditor, was that no one at 1MDB or Aabar actually seemed to know – even a year later. Because 1MDB had yet to demonstrate what were genuine assets and what were fake.
Read the Chapter 8 Translation
Chapter 2, Item 8 – Redeeming of investment portfolio from Segregated Portfolio Company (SPC)

8.1       The investment in the SPC was made through the Investment Management Agreement signed on Sept 12, 2012. Between the period of Sept 2012 and Sept 2013, the (initial) investment of RM6.8 billion (USD2.318 billion) saw a returns of RM662 million, which is dividends of RM445.93 million and capital distribution of RM216.07 million as stated in the financial statements for the year ending March 31, 2014.
8.2       In response to criticisms that was raised in Parliament and through the media regarding the investment portfolio in the SPC which was managed by fund managers in the Cayman Islands, the Board had on May 20, 2013 agreed that the investment be redeemed in stages to improve public perception towards the credibility of 1MDB’s investments. In relation to this, the Board had issued 9 instructions between May 2013 and Aug 2014 to the Management to prepare a plan, schedule and (ultimately) redeem the SPC portfolio funds either in stages or as a whole, according to this schedule:
Table 2.3 – Board’s instruction regarding redeeming of SPC investment
Board Meeting Number Date of Meeting Instruction
3/2013 20/05/2013 Prepare plan and schedule of for redeeming of funds in stages
5/2013 19/08/2013 Prepare plan and schedule of for redeeming of funds in stages
6/2013 11/11/2013 Liquidate investments in stages and return funds to Malaysia
1/2014 27/01/2014 Opportune moment to redeem investments in view of high value of USD
Special 27/02/2014 Management to take immediate action in redeeming funds and returning it to Malaysia
3/2014 22/04/2014 Redeem funds as soon as possible although there are no needs for cash in the near term. Funds could be used in local institutions.
4/2014 10/06/2014 Redeem at least 1/3 of the portfolio investments on Sept 30, 2014 or all on March 31, 2015.
5/2014 21/07/2014 Redeem 1/3 of the portfolio investment on Sept 30, 2014 and all March 31, 2015. Management is instructed to redeem funds on those dates
6/2014 18/08/2014 Redeem everything before or on Dec 31, 2014.
Source: Board of Director’s meeting minutes.
8.3       However, no action was taken by the 1MDB management although there were specific clauses in the Subscription Agreement which allows the client to liquidate the funds at any time with a 30-day notice. The readiness of the management to liquidate the portfolio funds in a month was also confirmed by Hazem (then 1MDB CEO) during the Board Meeting on June 10, 2014.
8.4       Following repeated instructions from the Board, eventually, a portion of the SPC portfolio funds amounting to USD870 million were redeemed in mid-October 2014 while another USD300 million was redeemed a few days later. This was informed to the Board on Oct 20, 2014.
8.5       On Nov 4, 2014, Hazem informed the Board during a meeting that a total of USD1.2 billion from the SPC Portfolio Funds were redeemed. It was used to pay the interest on a loan and Aabar Investment PJS’s termination of option in order to secure 49% equity in Powertek Investment Holdings Sdn Bhd and 1MDB Energy (Langat) Sdn Bhd. During the same meeting, the chair of the Board had informed Messr Deloitte (who was present during the meeting) that the balance of the SPC portfolio investment would be redeemed before the end of November 2014 and gave a guarantee that he would oversee the redeeming of the funds.
8.6       During the meeting on Dec 20, 2014 Azmi (1MDB CFO) had informed the Board that the latest USD1.392 billion was redeemed from the SPC portfolio and the balance of USD939.87 million will be redeemed by the end of December 2014. The Board was also informed that the entire SPEC portfolio funds were used as collateral for the USD975 million loan from Deutsche Bank. The Board opined that it was unfair to use the entire SPC portfolio fund, valued at USD2.318 billion, as collateral when the loan from Deutsche Bank amounts to only USD975 million. Lodin (Board chair) raised the issue of 1MDB management not informing the Board regarding the collateral and that he and Ismee had given a guarantee to the BNM governor that money redeemed from the SPC portfolio investment would be brought back to Malaysia.
8.7       This information contradicts Arul Kanda’s statement to the PAC on Dec 1, 2015, in which he said that USD1.22 billion from the SPC portfolio funds were not used as collateral because it was already redeemed. Only the balance of USD1.11 billion from the SPC portfolio funds along with dividends of USD120 million were used as collateral with Deutsche Bank for the USD975 million loan. However, checks by JAN found that (Arul Kanda’s) statement was inaccurate because between Nov 14 and Nov 24, 2014, an additional USD173.5 million was redeemed, bringing the total amount redeemed from the SPC portfolio investment to USD1.392 million. All funds that were redeemed were transferred into the account of 1MDB GIL and only the balance of USD939.87 million which were not redeemed could be considered as collateral for the loan from Deutsche Bank.
8.8       Further checks by JAN on the Facility Agreement found that the conditions of the loan did not include clauses which support the statements of both Azmi (Dec 20, 2014) and Arul Kan (Dec 1, 2015). The conditions for the loan are as follows:
Table 2.4 – Condition for the USD975 million loan from Deutsche Bank AG, Singapore Regarding the SPC Portfolio Fund Collateral
Clause Condition
20.2 (b) Brazen Sky shall ensure that the Brazen Sky net worth will not at any time be less than USD1,500,000,000.
22.2 (b) With effect from the date which is six momths from the utilisation date, the borrower and Brazen Sky shall ensure that, at all times thereafter, the amount standing to the credit of Brazen Sky Account is at least equal to the Brazen Sky Required Balance.
Note:
Brazen Sky Account – Bank Account in Hong Kong
Brazen Sky Required Balance – a cash amount of USD600 mil up to a maximum of USD1,170 mil; USD500 mil plus aggregate of each Accordion Increase Amount x 1.2 [?]
Source: Facility Agreement USD975 mil
8.9       The Board, during a meeting on Dec 20, 2014 was also informed that Deutsche Bank AG, Singapore had agreed to allow USD993, from the USD1.392 billion redeemed fromt he SPC funds, to be used for Aabar’s termination of option payments. The balance of USD399 million was used to pay the interest of the USD Note.
8.10     However, details of the USD993 million payment to Aabar for the termination of option and the payment of interest for the USD Note could not be verified by JAN. The board also sought details on the payment on Dec 20, 2014, but JAN’s checks showed that the matter not raised during the subsequent Board meeting. During the Feb 23, 2015 meeting, the Board had raised questions regarding the payment for Aabar’s termination of option which was only told to the Board after payment was made. This demonstrated that the payment for Aabar’s termination of option was made without the approval of the Board.
8.11     During a meeting between 1MDB and JAN on Sept 9, 2015, 1MDB had said that the physical payment to Aabar was made through the account of a 1MDB subsidiary – Brazen Sky Limited (Brazen Sky) through BSI Bank – on behalf of the terminating company because 1MDB did not own an account abroad. However, checks by JAN found that funds redeemed from the SPC portfolio amounting to USD1.392 billion which were transferred to Brazen Sky’s bank account between Sept 11 2014 to Nov 24 2014 were transferred to 1MDB Global INvestment Limited (1MDB GIL) between SEpt 12 2014 and Dec 8 2014 amounting to USD1.417 billion. An analysis on Brazen Sky’s transactions between Sept until December 2014 found that there were no payments for the purpose of the Aabar termination of option. Details of Brazen Sky’s transactions are as follows:
Chart 2.5 – Brazen Sky Limited Transactions for Period Between September and December 2014
­­ Transactions In (USD) Out (USD)
11/09/2014 Portfolio C2 110,000,000.02
12/09/2014 1MDB GIL 94,420,000.00
07/10/2014 Portfolio C2 146,518,719.52
Portfolio C1 228,481,280.48
1MDB GIL 375,000,000.00
14/10/2014 Portfolio B2 280,045,600.00
Portfolio C1 104,954,400.00
1MDB GIL 340,000,000.00
23/10/2014 Portfolio A2 27,099,840.00
Portfolio B1 198,247,200.00
Portfolio B2 30,152,960.00
1MDB GIL 255,500,000.00
31/10/2014 Portfolio A1 93,292,800.00
31/10/2014 Dividends 131,707,200.00*
04/11/2014 1MDB GIL 222,000,000.00
14/11/2014 Portfolio A2 125,000,000.00
1MDB GIL 125,000,000.00
24/11/2014 Portfolio A2 48,500,000.00
26/11/2014 1MDB 43,168,213.17*
08/12/2014 1MDB GIL 5,500,000.00
TOTAL 1,392,292,800.02 1,417,420,000
Source: Brazen Sky Limited Bank Statement, obtained from foreign authorities
Note (*): Not included in total amount
8.12     The transfer of funds redeemed from the SPC portfolio from Brazen Sky to 1MDB GIL was found to be in contravention of the instructions from the 1MDB Board, which has demanded that the funds be brought back to Malaysia. The Board’s approval was also not sought for this transaction. The reason for the transfer to 1MDB GIL by 1MDB’s management could not be ascertained because 1MDB GIL has its own investment assets with fund managers amounting to USD1.56 billion on March 31, 2014. 1MDB GIL had also obtained a USD Note loan amounting to USD3 billion. JAN was unable to verify 1MDB GIL’s subsequent payments or how the funds redeemed from the (SPC portfolio) funds were used because important documents such as bank statements and payment vouchers were not handed by 1MDB for JAN’s verification despite five requests being made between May and October 2015. Documents such as bank statements should be readily available to bank clients.
8.13     After redeeming USD1.392 billion from the SPC portfolio, the Board on Nov 13, 2014 urged (the management to) redeem the balance of USD939.87 million before the end of November 2014. The same instruction was given again on Nov 25, 2014.
8.14     On Jan 12, 2015, the Board voiced their disappointment with the 1MDB management who had previously given the impression that the SPC funds would be brought back (to Malaysia) but as of that day, it had not happened. The situation then became more complicated because 1MDB was facing serious cash-flow problems in its attempt to repay a RM2 billion Maybank loan and payment obligations for equity in the 3B Project [Note: Jimah power plant] at the time.
8.15     During the same meeting, Arul Kanda had informed the Board that the balance of the SPC portfolio funds amounting to USD939.87 million was redeemed and held in the form of cash since Dec 31, 2014. This was in line with what Azmi told the Board on Dec 20, 2014 – that the balance would be redeemed by end-2014.
8.16     However, checks by JAN found several statements which raises doubts on whether the balance of the SPC funds amounting to USD939.87 was in the form of cash or units. An analysis on the statements made between Jan 12, 2015 until Mar 3, 2015 showed that the redeeming of SPC funds in the cash amounting to USD939.87 had taken place. However, checks by JAN found that the sum of USD939.67 did not exist in Brazen Sky’s bank account during the period. The chronology of statements regarding the redeeming of SPC portfolio investment is as follows:
Table 2.6 – Chronology of statements regarding redeeming of the balance of SPC portfolio investment funds amounting to USD939.87 million
Statement Source
12/01/2015 Mr Arul updated the Board that the balance of USD939,874,085 had been redeemed and had been held as cash since Dec 31, 2014. Special Board Meeting
07/02/2015 Mr Arul: “The cash is in our accounts and in US dollars. I can assure you (about that) … I have seen the statements”. The Business Times, Singapore, Feb 7, 2015.
23/02/2015 Mr Arul informed the Board that, per the terms of the Deutsche Bank loan taken out in Sept 2014, there is a need for the USD975 million loan to be cash-collateralised at USD1.20 for every USD1.00 of the loan, by March 2, 2015. He therefore recommended, and that Board agreed, that the loan be repaid from the remaining USD939 million cash proceeds from the redemption of the investment portfolios held by Brazen Sky Limited, and the balance from the proposed Government of Malaysia loan. Board meeting No 1/2015
03/03/2015 Mr Arul updated the Board that further to the Board decision on Feb 23, 2015 he had instructed the CFO to utilise the proceeds of Brazen Sky Limited redemption to repay in full the USD975 million Deutsche Bank loan on March 2, 2015. However, the CFO informed him today that BSI apparently declined to apply the proceeds in that manner until they received a suitably worded indemnity from Deutsche Bank to release BSI from any liability in relation to application of the funds in that manner. Special Board meeting
Source: 1MDB board minutes and news articles
8.17     Arul Kanda’s statement to the Board on March 3, 2015 raises the question of why BSI had previously shown no objection towards the transfer of the monies from the SPC portfolio investment amounting to USD1.417 billion between Sept 12, 2014 until Dec 8, 2014. This appears to show that 1MDB’s management did not provide the correct or complete information regarding the SPC investment (money) to Arul Kanda. Arul Kanda had frequently attributed the information he was presenting during Board meetings to Azmi (CFO) and Terence (Executive Director, Finance). During PAC’s meeting on Dec 1, 2015, Arul Kanda also acknowledge that his understanding of the redeeming of SPC funds was learned in stages. Azmi and Terence, as the directors of Brazen Sky, should have provide details about the SPC portfolio investment to Arul Kanda.
8.18     During the Board meeting on March 24, 2015, Arul Kanda explained, based on information supplied by Azmi, that Aabar agreed to purchase the balance of the SPC portfolio investment fund amounting to USD939.87 million from Brazen Sky at the same value. Checks by JAN found that the agreement that was referred to was the Asset Sale Agreement signed on Jan 1, 2015 between Brazen Sky and Aabar Investments PJS Limited (Aabar Ltd). The agreement was made by 1MDB management to ensure that the receipt of funds redeemed from the balance of the SPC portfolio can done before March 31, 2015 in accordance to the wishes of the Board. The redeeming of the funds was done through an agreement because Brazen Sky was of the opinion that the SPC fund managers were unable to redeem the SPC funds through normal redeeming processes because of weak market sentiments at the time. However, it was found that the agreement was signed without prior knowledge of the Board and shareholders.
8.19     Checks by JAN also found that the sale of the balance of SPC portfolio investment to Aabar Ltd contradicts Clause 21.4 (a) in the USD975 million Facility Agreement by Deutsche Bank – “No obligor shall enter into a single transaction or a series of transactions to sell, lease, transfer or otherwise dispose of any asset.” This showed that the management had acted against the instructions of the Board which required the redeeming of SPC portfolio investment before the end of Dec 2014 and that the proceeds be brought back to Malaysia. The management’s justification for not carrying out the instruction in January 2014 can be disputed because the value of the USD at the time was high. 1MDB’s management should rightfully not be concerned about losses during the redeeming process because the value of the SPC portfolio investment was guaranteed by Aabar Investment PJS on the principle value.
8.20     Arul Kanda also told the Board on March 24, 2015 that Azmi had explained that the redeeming of the entire SPC portfolio investment had happened in early January 2015. However, a sum of USD939.87 which should be received from Aabar was still in the SPC portfolio fund structure. Since 1MDB’s management took into consideration of Aabar’s credit position and the good relations between the two companies, the agreement in which Aabar takes over the SPC portfolio investment was considered to be “as good as cash”. However, without the cash payment, 1MDB was unable to repay its debt of USD975 million to Deutsche Bank or prepare a cash collateral of USD1.17 billion for the loan.
8.21     Following this, the Board through a resolution dated March 25, 2014 agreed with a proposal by Azmi and Terence for Brazen Sky to terminate the Asset Sale Agreement, dated Jan 2, 2015, with Aabar Ltd and replace it with a Share Sale Agreement. According to the proposal, all equity in Brazen Sky is to be sold to Aabar Ltd at a consideration value of USD1.20 billion and the first payment of USD300 million must be made before April 30, 2015. The purpose of selling Brazen Sky was to fulfill the condition set by Deutsche Bank regarding the cash collateral of USD1.17 billion which must be prepared by Brazen Sky on behalf of the lender – 1MDB Energy Holdings Ltd. The shareholders agreed with the proposal via a resolution on March 25, 2015. However, this document was not presented to JAN because 1MDB’s management said that the deal was not yet finalised. All statements to the board on March 24, 2015 – beginning with the Asset Sale Agreement and proposed Share Sale Agreement – give the impression that information is being changed according to the situation, in which the balance of the SPC portfolio investment which was initially said to have been redeemed in cash, but is now reported to be in the form of units.
8.22     Thus, Aabar Ltd’s commitment to uphold their end can be questioned because Azmi had told the Board on April 23, 2015 that the balance of USD939.87 which should have been received by Aabar Ltd was still in the structure of the SPC portfolio investment because Aabar Ltd had yet to confirm when the payment should be made. Meanwhile, Arul Kanda told the Board on May 11, 2015 that the takeover of Brazen Sky by Aabar Ltd had yet to take place.
8.23     However, on May 25, 2015 the Board was informed that negotiations with Aabar were taking place, in which IPIC/Aabar were to takeover a portion of 1MDB Group’s assets alongside obligations for two USD Notes amounting to USD3.5 billion. The Board was also informed that the agreement and advance payment of USD1 billion will be finalised by the end of May 2015. This is the third time the redeeming of the balance of the SPC portfolio investment and negotiations with Aabar/Aabar Ltd was changing in shape.
8.24     On May 28, 2015 the Board approved through a resolution to have a Term Sheet for Settlement Arrangements (Binding Term Sheet) between 1MDB Group, Ministry of Finance Inc (MKD), International Petroleum Investment Company (IPIC) and Aabar Investments PJS Groups (Aabar). The Binding Term Sheet was signed by all four parties on May 28, 2015. Among the important terms in the Binding Term Sheet was that IPIC will pay 1MDB USD1 billion before or on June 4 2015 and takeover the obligation to pay interest and principle for the two USD Note – each amounting to USD1.75 billion. According to Arul Kanda’s explanation to the Board on June 14, 2015, the Binding Term Sheet did not state in detail which assets would be transferred to IPIC/Aabar because it is still under negotiation. Among the assets which have been identified amounts to USD4.892 billion, consisting of a deposit amounting to USD1.4 billion for the IPIC guarantee on the USD Note, 1MDB GIL investment fund amounting to USD1.56 billion, the SPC portfolio investment amounting to USD939.87 million and payment for the Aabar termination of option amounting to USD993 million. Three important issues have been set for the following dates:
  1. A definitive agreement must be implemented by July 31, 2015
  2. Transfer of assets at the minimum value of USD1 billion to IPIC/Aabar by Dec 31, 2015
  3. Transfer of the balance of asset that have been identified by June 30, 2016
 8.25     On June 5, 2015, 1MDB had received the advance of USD1 billion from IPIC under the Binding Term Sheet through its subsidiary Brazen Sky. Based on the shareholders resolution on May 28, 2015 and resolution by the Board dated June 2, 2015, the sum was to be used for the payment of USD50 million in fees to Yurus Private Equity I and the balance was for the Deutsche Bank loan amounting to USD975 million.
8.26     Issues regarding the redeeming of SPC Portfolio INvestment for the period between 2013 and 2015 are as follows:
  1. Payments for the Aabar termination of option were not put before the Board for prior approval
  1. Proceeds of funds redeemed from the SPC portfolio amounting to USD1.392 billion was not brought back to Malaysia as instructed by the 1MDB Board
  1. Proceeds redeemed from SPC portfolio amounting to USD1.417 billion were shifted to 1MDB GIL but the Board was told that it was used for the Aabar termination of option payment amounting to USD993 million
  1. Difficulties in obtaining important documents such as the Brazen Sky bank statements and 1MDB GIL resulted in JAN not being able to verify the transfer of funds, payment of Aabar’s termination of option and interest payments
  1. The Asset Sale Agreement signed on Jan 2, 2015 between Brazen Sky and Aabar Ltd for the sale of the balance of SPC portfolio investment amounting to USD939.87 milllion to Aabar Ltd was signed without the knowledge of the Board or shareholders.
  1. The value of the first redeeming process (USD1.392 billion) and the balance which will be taken over (USD939.87 million) amounts to USD2.33 billion, which is almost the same as the initial investment amount of USD2.318 billion on Sept 12, 2012. This shows that the SPC portfolio investment did not make significant gains.
  1. The change in statements on the balance of the SPC portfolio investment – first it was said that it was redeemed and kept in cash on Dec 31, 2014, subsequently it was stated that it was taken over by Aabar Ltd on Jan 2, 2015, but still regarded as “good as cash” although no money was received.
8.27     In summary, 1MDB’s initial investment through PetroSaudi in 2009 which involved a large sum did not bring foreign investment into Malaysia, which was not in line with the objective of establishing the company. […] 1MDB’s early investments through funds from the issuance of IMTN bonds amounting to RM5 billion saw a change in investment instruments four times. Beginning with the USD1 billion equity investment in 2009 through the JV with a subsidiary of PetroSaudi International Limited, followed by the investment in Murabahah Note (USD830 million/RM2.59 billion) in 2011 and 2012, until it was changed to into the SPC portfolio investment amounting to USD2.318 billion in Cayman Islands on Sept 2012. A portion of the SPC portfolio investments was redeemed in 2014 and used to finance various commitments and its investments. This investment resulted in a balance of USD939.87 million in the form of SPC portfolio investment units on March 31, 2015.
8.28     The decision to switch from one investment instrument to another within a short period of time while involving large sums showed that the investment decisions were not made in accordance with a proper management structure and does not appear to have a long term strategic investment plan.
8.29     Issues that were uncovered depicts a company which had made unwise business decisions, took high risks and was not in line with 1MDB’s status as a Government-owned strategic development company to help develop the country. It should be managed in accordance to best practices in order to safeguard the company and Government’s interest.

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Australia's Adelaide University Takes Action On Taib

13 Jul 2016

[Please note that Sarawak Report has started uploading a copy of the Auditor General’s report on 1MDB, which can be accessed from the front page of this site]
Back in 2011 Sarawak Report first broke the story in which we raised questions about the honours given by Austalia’s Adelaide University to its former pupil and benefactor Taib Mahmud.
At the time the University hierarchy chose to ignore our investigation and it refused to answer our questions.  However, persistence pays in the face of wrong-doing and over the following years students, public figures and NGOs have joined to campaign against the association with Borneo’s billionaire politician.
The old guard left the university management and the new management have now done the right thing and removed their honour from a kleptocrat, who tossed some money their way. BRAVO!
Link to our original story or read below:

Cash for Honours at Adelaide University?


For some weeks Sarawak Report has been attempting to question Adelaide University about the circumstances surrounding its decision to name a large chunk of its campus after the Sarawak Chief Minister.
The ‘Taib Mahmud, Chief Minister of Sarawak Court’ was designated in honour of the controversial East Malaysian politician in 2008.  It was described at the time as “a newly landscaped social space” in publicity material, which also provides a photograph of the billionaire politician, strolling through the area with the University’s Vice-Chancellor, Professor James McWha.
Our requests however, have failed to receive an acknowledgement.  There has been no reply to our emails or to questions made verbally to the University’s press department.  Equally snubbed have been a number of Malaysian graduate alumni of the University, who had previously raised their own concerns about the honouring of Taib Mahmud last December, complaining in a joint letter:
“It is a shame for us all that our university is honouring a kleptomaniac and a person who is also a human rights abuser”
The reason for this failure to elicit a civilised response would appear to be that while Taib Mahmud has showered the University with huge amounts of cash, Sarawak Report and the other alumni have not.

Taib’s ‘personal generosity’ bestowed ‘numerous ways’!


Taib graduated from Adelaide in law in 1961, but then received a further honorary doctorate in 1994, followed by repeated accolades and statements of support.  Announcements by the University have indicated some of his donations over the years, however owing to the current silence, it is hard to calculate the full amount.
Adelaide has acknowledged that Taib’s first donation was made in 1987, six years after he became Chief Minister and started to display a serious level of disposable income.  His North American property company, Sakti International, was founded by himself and close family members in the same year and is now worth well over 100 million Australain Dollars.   This first donation was used to refurbish the Law School, according to the University.
In 2001 it would appear that another $300,000 was donated by the Chief Minister, some of which was used to establish a new “Malaysian Room, complete with furniture and artifacts from Sarawak”.  The University describes the room as:
” a tribute to the generosity of the Chief Minister, who is also one of our most distinguished alumni and long-time benefactor”.

What price an honour?

In the absence of any official response, we can only surmise that a considerably larger sum was expended before the naming of the Taib Mahmud, Chief Minister of Sarawak Court in 2008.  Indeed at the time of the designation, the Vice Chancellor, Professor James McWha, thanked Taib for his “significant support and tireless work” and went on to say:
“The Chief Minister’s personal generosity has continued in numerous ways over the years”

Unfortunately, at no stage during these years of donations rewarded by status and accolades does the University appear to have questioned how a person in Taib’s position could legitimately have come by the means to extend such ‘personal generosity’.  As an elected holder of public office Taib’s salary is a matter of public record and (thanks to all his simultaneous positions) it adds up to a perfectly comfortable RM20,000 a month (approximately $10,000 Australian Dollars).  This means that the Malaysia Room alone cost more than double his annual salary.
Only slightly deeper enquiries by the University would have revealed even more concerning issues surrounding Taib’s wealth.  There is no shortage of information and evidence linking the Chief Minister to a vast web of timber corruption that has seen the entire Sarawak Rainforest razed to less that 5% of its original size during his 30 years in office.
In fact, the destruction by companies associated with the regime of Taib Mahmud has developed into a global threat.  Taib-related companies are operating with ruthless and wanton efficiency across the remainder of the Island of Borneo, in Irian Jaya, the Solomon Islands, the Congo Basin, Amazon and Siberia, as reported by numerous NGOs.  What’s more, somewhat closer to home, the Green Party in Tasmania has also been questioning why a Taib-related company has been subsidised to the tune of $8 million by the State to saw down trees for export back to Malaysia, which has now largely been stripped bare?

A crime with numerous victims


The impact of this orgy of destruction has been devastating to the wild life, rivers and eco-systems of what was until very recently the most bio-diverse and intact remaining jungle on the planet.  It has also left hundreds of thousands of native peoples, whose territories have been invaded, without sustenance and, likewise, on the brink of extinction.
Few of the people of Sarawak have received any benefited from the wealth generated by the destruction of their forests.  Instead it is the University of Adelaide that has profited, not from the ‘personal generosity’ of the Chief Minister, however, because it was not his wealth to give, but from the plunder of his people.

Our questions


It was for these reasons that Sarawak Report framed a limited number of questions that we hoped that the Vice-Chancellor would be prepared to answer.  We wished to know if the University holds any ethical guidelines when it comes to the acceptance of donations, and if so how Professor McWha could have concluded that Taib Mahmud was an acceptable partner for Adelaide?
We also requested information about the total extent of the donations which have been received from the University, on the basis that such sums could very well be identified as money laundered from the proceeds of corruption and therefore assets which should lawfully be returned to the people of Sarawak.
Indeed, since the University has made clear on numerous occasions that the donations have been the product of ‘personal generosity’ there can be no question that this is money that Taib Mahmud cannot legitimately account for on the basis of his limited official salary.

More in Australia


Of course, as NGOs have often pointed out, there are plenty of other Taib properties in Australia, adding to the mystery of the Chief Minister’s millions.  The 380 room Adelaide Hilton is one company registered under the names of his children and late wife and there are a string of other properties and enterprises belonging to the Mahmud family elsewhere.
Given  Australia’s own perfectly adequate wealth, would it not be more appropriate for Universities like Adelaide to find funding from legitimate and domestic sources, rather than profit from the exploitation of the poor people of Borneo and offering in return for this gift of much needed credibility to their corrupt Chief Minister?  Surely that credibility should have been denied?
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Special Purpose Con Job?

14 Jul 2016

Information now emerging from the Auditor General’s Report, led DAP Finance Spokesperson Tony Pua to state yesterday that he suspects that much of the money paid in 2014 to the bogus Aabar Limited BVI company was in fact circulated back through 1MDB’s Brazen Sky bank account in Singapore in an attempt to con Parliament and the auditors that cash had been “redeemed” from the so-called Special Purpose Vehicle (SPV), which had allegedly invested US$2.3 billion in the Cayman Islands.
“it occurred to me that the 1MDB Financial Statements for the year ending 31 March 2014 were signed off by the auditors, Deloitte coincidentally on 4 November 2014, when 1MDB GIL also made a payment of US$222 million to Aabar (BVI).” says Pua.
At that point in time, there was increasing concern over 1MDB’s US$2.318 billion investment in an obscure investment fund based in Cayman Islands.  The Board of Directors minutes have shown that the Management were repeatedly instructed to redeem the investment and repatriate the proceeds back to Malaysia throughout 2014. The company was under immense pressure because the authenticity of the investment was being publicly questioned…. 
The accounts were finally signed off by Deloitte when 1MDB was able to “show” the auditors that US$1.22 billion have been redeemed.  The money was however, not repatriated to Malaysia.”
It is a shocking suggestion, because it would mean that two Swiss banks, BSI and UBS, would have been involved in helping shift these suspicious transactions through their Singapore branches – in some cases turning round hundreds of millions of dollars in one day, according to the figures.  This is because BSI managed the Brazen Sky account and UBS managed the bogus Aabar Limited account.
Sarawak Report has now examined the Auditor General’s analysis of this alleged ‘redeeming’ and ‘repatriation’ of the SPV cash (see full excerpt beneath) and the figures in his report lend weight to Pua’s suspicions.
However, the AG complains he cannot reach a solid conclusion on the matter, because of the incomplete and limited information provided to him by the company.
“JAN [Audit Dept] was unable to verify 1MDB GIL’s subsequent payments or how the funds redeemed from the (SPC portfolio) funds were used because important documents such as bank statements and payment vouchers were not handed by 1MDB for JAN’s verification despite five requests being made between May and October 2015. Documents such as bank statements should be readily available to bank clients.” [8.12]
Such criminal obstruction of its own ought to demand severe action against managers, whom the Public Accounts Committee have called for the police to investigate.
What emerges from Chapter 8 on the Cayman SPV and supposed repatriation of the cash is yet again a litany of appalling bad practice at 1MDB, changing stories and missing money. The Auditor General officially confirms what critics have long suspected, which is that 1MDB serially lied to parliament and the public and utterly failed in its duty:
“The issues that were uncovered depict a company which had made unwise business decisions, took high risks and was not in line with 1MDB’s status as a Government-owned strategic development company to help develop the country.”[8.29] the Auditor General angrily concludes.

‘Round-Tripping’?

The figures from Chapter 8, make very interesting reading when compared to the bank transfer documents we publicised earlier in the week, which showed payments from 1MDB Energy and 1MDB Global to the Singapore UBS account of Aabar Limited during the relevant period in 2014.
The AG’s figures show the cash transfers that were allegedly made from the Cayman Island SPV to 1MDB’s Brazen Sky account at BSI Bank in Singapore Sept-December 2014 as the ‘cash’ was allegedly ‘redeemed’ through a number of transactions.
First look at the money that the Auditor General records as having arrived into Brazen Sky from anonymous portfolios linked to the fund during late 2014 (bearing in mind he complains he was not given any of the bank statements of the company to prove its financial status or the origin of the cash):
“Difficulties in obtaining important documents such as the Brazen Sky bank statements and 1MDB GIL statements resulted in JAN not being able to verify the transfer of funds or payment of Aabar’s termination of option and interest payments” [AG Rpt 8.26.g]
Screen Shot 2016-07-13 at 23.19.37

The money allegedly arriving in Brazen Sky from the SPV in the Caymans, according to figures provided to the Auditors Deloittes and later the Auditor General
The money allegedly arriving in Brazen Sky from the SPV in the Caymans, according to figures provided to the Auditors Deloittes and later the Auditor General
Second, look at Sarawak Report’s table of money flows obtained from the bank transfers to the UBS Aabar Limited account from 1MDB Energy And Global, published earlier this week.
Sarawak Report's summary of the information provided by the 9 transfer documents submitted to the auditor
Sarawak Report’s summary of the information provided by the 9 transfer documents submitted to the auditor
Finally, combine the two tables to see how virtually identical over-all sums were sent to the fake Aabar by 1MDB Energy and later 1MDB Global to those which arrived back a few days later in the Brazen Sky Singapore account – and were then forwarded straight on/back to 1MDB Global.
One two occasions the same multi-million sums left 1MDB Global to fake Aabar and then arrived back there (via Brazen Sky) on the very same day: US$255,500,000 on October 23rd and then US$222,222,000 on November 4th.  Tony Pua would seem to have a point!
Round-Tripping?
Round-Tripping?
As Pua points out it was on November 4th, after the key figure of US$1.22 billion was flushed through Brazen Sky, that the auditors Deloittes finally agreed to sign off the belated accounts for that year on the basis that this money had been ‘redeemed’ from the Cayman Islands.
Except, the AG points out that instead of being repatriated to Malaysia to pay 1MDB’s pressing debts as had been demanded again and again of management by the Board, this money was sent on to 1MDB Global’s BSI bank account in Lugano instead.
Or should we say it was SENT BACK to 1MDB Global’s BSI bank account in Lugano from where it had come in the first place?

The PetroSaudi black hole

What the evidence surely shows is that there was no money in the Caymans to be sent back in the first place and this was nothing more than a desperate cover-up and an audit con-job that went to extraordinary lengths.
Indeed, once the money had been ‘redeemed’ to Lugano 1MDB management made sure to write it off straight away, claiming the money had been immediately spent on terminating options and paying off loans.
What everyone who has followed 1MDB knows is that the original US$1.83 billion PetroSaudi investment, which was to go through no less than four different ‘investment strategies’ in as many years, to the Auditor General’s major disapproval, was actually stolen right from the start.
Jho Low’s Good Star Limited snaffled US$700 million on Day One, then a further US$330 million later in 2011. US$260 million was siphoned into the buy out of UBG in 2010 and the remainder went to PetroSaudi itself in return for its services in “acting as a front”.  The formerly two-bit company bought itself a drill ship and purchased a lucrative drilling concession in Venezuela on the proceeds of its “joint venture”.
So, when 1MDB claimed in 2012 that it had ‘cashed in’ its share of the PetroSaudi venture  for a fancy profit of US$2.3 billion they were defying the laws of mathematics and common sense. Who would have paid such money for an empty shell?
Hence began the series of twisted and turning shadowy tales about the supposed Special Purpose Vehicles, conveniently hidden in the Caymans with off-shore bank accounts, allegedly ‘investing’ in ‘portfolios’ that it was claimed could be translated back into solid cash.
No one believed Shahrol Halmi at the time and they will believe him even less now that they have seen how the money circulated round 1MDB in late 2014, with the help of the friendly off-shore fake Aabar and compliant Swiss bankers in Singapore.
The Auditor General was outrageously denied the full information he was owed to explain exactly what happened here, but what all the evidence suggests is that 1MDB started pumping money it had borrowed for its Energy and Global subsidiaries through the fake Aabar, so that it could then be sent on to Brazen Sky posing as cashed in profits from the separate Cayman Island portfolios.
No wonder that during this very November 2014 the management had started drafting resolutions to explain why 1MDB Global might need to pay money to Aabar – the remaining US$1.5 billion from their 2013 Tun Razak Exchange loan was about the only significant remaining ready cash available in the group.  Hence the agreement to ‘extend the Aabar guarantee’ to this loan as well, in order to find an excuse to pay for the privilege. Aabar’s parent company IPIC have confirmed they knew nothing of the deal – the money went to the fake Aabar of course.
So, while the AG was not given the statements to prove this is what happened, his remarks could not have delivered a clearer official verdict of utter condemnation that nothing that was done was done correctly or honestly by 1MDB (see below).  No wonder the Public Accounts Committee notified the police.

Remaining US$993 million

There was of course the alleged remainder of the SPV/Cayman money that the Board had called on 1MDB to return no less than 9 times for over a year:
The AG listed the occasions the Board had asked for the PetroSaudi/Cayman Islands money to be returned without success
The AG listed the occasions the Board had asked for the PetroSaudi/Cayman Islands money to be returned without success
The remaining money was US$993 and 1MDB had explained to the Board it would need to be used to pay off yet more options to the fake Aabar, for which purpose it was allegedly also paid to the Brazen Sky account.
Except, there turned out to be no money here either as the AG details in painful stages. First 1MDB had claimed they had sold the remaining SPV to fake Aabar again, because it was “as good as cash” although the market apparently was not keen on buying the SPV notes at that particular time.
Then the deal was reversed into an alleged cash sale, which turned out to be merely notes.   The Auditor established that there was no cash in the BSI account, which was plainly why 1MDB had had to borrow real cash from Deutsche Bank to pay its mounting obligations, based on the supposed collateral which turned out to be notes not cash.
When the truth because known in April 2015, Deutsche Bank pulled its loan and 1MDB had to pull its favours with the corrupt Aabar officials, who dragged IPIC into a bail out. The Auditor provides a useful further insight into the terms of that secretive ‘Term Sheet’, which finally expired on June 30th with 1MDB having failed to fulfil its obligations to IPIC, sparking legal action and a demand of US$6.5 billion, now facing the Malaysian taxpayer.
Many had asked what assets 1MDB had promised Aabar in return for its loan, as referred in that binding term sheet.  The answer, found the auditor, was that no one at 1MDB or Aabar actually seemed to know – even a year later. Because 1MDB had yet to demonstrate what were genuine assets and what were fake.
Read the Chapter 8 Translation
Chapter 2, Item 8 – Redeeming of investment portfolio from Segregated Portfolio Company (SPC)

8.1       The investment in the SPC was made through the Investment Management Agreement signed on Sept 12, 2012. Between the period of Sept 2012 and Sept 2013, the (initial) investment of RM6.8 billion (USD2.318 billion) saw a returns of RM662 million, which is dividends of RM445.93 million and capital distribution of RM216.07 million as stated in the financial statements for the year ending March 31, 2014.
8.2       In response to criticisms that was raised in Parliament and through the media regarding the investment portfolio in the SPC which was managed by fund managers in the Cayman Islands, the Board had on May 20, 2013 agreed that the investment be redeemed in stages to improve public perception towards the credibility of 1MDB’s investments. In relation to this, the Board had issued 9 instructions between May 2013 and Aug 2014 to the Management to prepare a plan, schedule and (ultimately) redeem the SPC portfolio funds either in stages or as a whole, according to this schedule:
Table 2.3 – Board’s instruction regarding redeeming of SPC investment
Board Meeting Number Date of Meeting Instruction
3/2013 20/05/2013 Prepare plan and schedule of for redeeming of funds in stages
5/2013 19/08/2013 Prepare plan and schedule of for redeeming of funds in stages
6/2013 11/11/2013 Liquidate investments in stages and return funds to Malaysia
1/2014 27/01/2014 Opportune moment to redeem investments in view of high value of USD
Special 27/02/2014 Management to take immediate action in redeeming funds and returning it to Malaysia
3/2014 22/04/2014 Redeem funds as soon as possible although there are no needs for cash in the near term. Funds could be used in local institutions.
4/2014 10/06/2014 Redeem at least 1/3 of the portfolio investments on Sept 30, 2014 or all on March 31, 2015.
5/2014 21/07/2014 Redeem 1/3 of the portfolio investment on Sept 30, 2014 and all March 31, 2015. Management is instructed to redeem funds on those dates
6/2014 18/08/2014 Redeem everything before or on Dec 31, 2014.
Source: Board of Director’s meeting minutes.
8.3       However, no action was taken by the 1MDB management although there were specific clauses in the Subscription Agreement which allows the client to liquidate the funds at any time with a 30-day notice. The readiness of the management to liquidate the portfolio funds in a month was also confirmed by Hazem (then 1MDB CEO) during the Board Meeting on June 10, 2014.
8.4       Following repeated instructions from the Board, eventually, a portion of the SPC portfolio funds amounting to USD870 million were redeemed in mid-October 2014 while another USD300 million was redeemed a few days later. This was informed to the Board on Oct 20, 2014.
8.5       On Nov 4, 2014, Hazem informed the Board during a meeting that a total of USD1.2 billion from the SPC Portfolio Funds were redeemed. It was used to pay the interest on a loan and Aabar Investment PJS’s termination of option in order to secure 49% equity in Powertek Investment Holdings Sdn Bhd and 1MDB Energy (Langat) Sdn Bhd. During the same meeting, the chair of the Board had informed Messr Deloitte (who was present during the meeting) that the balance of the SPC portfolio investment would be redeemed before the end of November 2014 and gave a guarantee that he would oversee the redeeming of the funds.
8.6       During the meeting on Dec 20, 2014 Azmi (1MDB CFO) had informed the Board that the latest USD1.392 billion was redeemed from the SPC portfolio and the balance of USD939.87 million will be redeemed by the end of December 2014. The Board was also informed that the entire SPEC portfolio funds were used as collateral for the USD975 million loan from Deutsche Bank. The Board opined that it was unfair to use the entire SPC portfolio fund, valued at USD2.318 billion, as collateral when the loan from Deutsche Bank amounts to only USD975 million. Lodin (Board chair) raised the issue of 1MDB management not informing the Board regarding the collateral and that he and Ismee had given a guarantee to the BNM governor that money redeemed from the SPC portfolio investment would be brought back to Malaysia.
8.7       This information contradicts Arul Kanda’s statement to the PAC on Dec 1, 2015, in which he said that USD1.22 billion from the SPC portfolio funds were not used as collateral because it was already redeemed. Only the balance of USD1.11 billion from the SPC portfolio funds along with dividends of USD120 million were used as collateral with Deutsche Bank for the USD975 million loan. However, checks by JAN found that (Arul Kanda’s) statement was inaccurate because between Nov 14 and Nov 24, 2014, an additional USD173.5 million was redeemed, bringing the total amount redeemed from the SPC portfolio investment to USD1.392 million. All funds that were redeemed were transferred into the account of 1MDB GIL and only the balance of USD939.87 million which were not redeemed could be considered as collateral for the loan from Deutsche Bank.
8.8       Further checks by JAN on the Facility Agreement found that the conditions of the loan did not include clauses which support the statements of both Azmi (Dec 20, 2014) and Arul Kan (Dec 1, 2015). The conditions for the loan are as follows:
Table 2.4 – Condition for the USD975 million loan from Deutsche Bank AG, Singapore Regarding the SPC Portfolio Fund Collateral
Clause Condition
20.2 (b) Brazen Sky shall ensure that the Brazen Sky net worth will not at any time be less than USD1,500,000,000.
22.2 (b) With effect from the date which is six momths from the utilisation date, the borrower and Brazen Sky shall ensure that, at all times thereafter, the amount standing to the credit of Brazen Sky Account is at least equal to the Brazen Sky Required Balance.
Note:
Brazen Sky Account – Bank Account in Hong Kong
Brazen Sky Required Balance – a cash amount of USD600 mil up to a maximum of USD1,170 mil; USD500 mil plus aggregate of each Accordion Increase Amount x 1.2 [?]
Source: Facility Agreement USD975 mil
8.9       The Board, during a meeting on Dec 20, 2014 was also informed that Deutsche Bank AG, Singapore had agreed to allow USD993, from the USD1.392 billion redeemed fromt he SPC funds, to be used for Aabar’s termination of option payments. The balance of USD399 million was used to pay the interest of the USD Note.
8.10     However, details of the USD993 million payment to Aabar for the termination of option and the payment of interest for the USD Note could not be verified by JAN. The board also sought details on the payment on Dec 20, 2014, but JAN’s checks showed that the matter not raised during the subsequent Board meeting. During the Feb 23, 2015 meeting, the Board had raised questions regarding the payment for Aabar’s termination of option which was only told to the Board after payment was made. This demonstrated that the payment for Aabar’s termination of option was made without the approval of the Board.
8.11     During a meeting between 1MDB and JAN on Sept 9, 2015, 1MDB had said that the physical payment to Aabar was made through the account of a 1MDB subsidiary – Brazen Sky Limited (Brazen Sky) through BSI Bank – on behalf of the terminating company because 1MDB did not own an account abroad. However, checks by JAN found that funds redeemed from the SPC portfolio amounting to USD1.392 billion which were transferred to Brazen Sky’s bank account between Sept 11 2014 to Nov 24 2014 were transferred to 1MDB Global INvestment Limited (1MDB GIL) between SEpt 12 2014 and Dec 8 2014 amounting to USD1.417 billion. An analysis on Brazen Sky’s transactions between Sept until December 2014 found that there were no payments for the purpose of the Aabar termination of option. Details of Brazen Sky’s transactions are as follows:
Chart 2.5 – Brazen Sky Limited Transactions for Period Between September and December 2014
­­ Transactions In (USD) Out (USD)
11/09/2014 Portfolio C2 110,000,000.02
12/09/2014 1MDB GIL 94,420,000.00
07/10/2014 Portfolio C2 146,518,719.52
Portfolio C1 228,481,280.48
1MDB GIL 375,000,000.00
14/10/2014 Portfolio B2 280,045,600.00
Portfolio C1 104,954,400.00
1MDB GIL 340,000,000.00
23/10/2014 Portfolio A2 27,099,840.00
Portfolio B1 198,247,200.00
Portfolio B2 30,152,960.00
1MDB GIL 255,500,000.00
31/10/2014 Portfolio A1 93,292,800.00
31/10/2014 Dividends 131,707,200.00*
04/11/2014 1MDB GIL 222,000,000.00
14/11/2014 Portfolio A2 125,000,000.00
1MDB GIL 125,000,000.00
24/11/2014 Portfolio A2 48,500,000.00
26/11/2014 1MDB 43,168,213.17*
08/12/2014 1MDB GIL 5,500,000.00
TOTAL 1,392,292,800.02 1,417,420,000
Source: Brazen Sky Limited Bank Statement, obtained from foreign authorities
Note (*): Not included in total amount
8.12     The transfer of funds redeemed from the SPC portfolio from Brazen Sky to 1MDB GIL was found to be in contravention of the instructions from the 1MDB Board, which has demanded that the funds be brought back to Malaysia. The Board’s approval was also not sought for this transaction. The reason for the transfer to 1MDB GIL by 1MDB’s management could not be ascertained because 1MDB GIL has its own investment assets with fund managers amounting to USD1.56 billion on March 31, 2014. 1MDB GIL had also obtained a USD Note loan amounting to USD3 billion. JAN was unable to verify 1MDB GIL’s subsequent payments or how the funds redeemed from the (SPC portfolio) funds were used because important documents such as bank statements and payment vouchers were not handed by 1MDB for JAN’s verification despite five requests being made between May and October 2015. Documents such as bank statements should be readily available to bank clients.
8.13     After redeeming USD1.392 billion from the SPC portfolio, the Board on Nov 13, 2014 urged (the management to) redeem the balance of USD939.87 million before the end of November 2014. The same instruction was given again on Nov 25, 2014.
8.14     On Jan 12, 2015, the Board voiced their disappointment with the 1MDB management who had previously given the impression that the SPC funds would be brought back (to Malaysia) but as of that day, it had not happened. The situation then became more complicated because 1MDB was facing serious cash-flow problems in its attempt to repay a RM2 billion Maybank loan and payment obligations for equity in the 3B Project [Note: Jimah power plant] at the time.
8.15     During the same meeting, Arul Kanda had informed the Board that the balance of the SPC portfolio funds amounting to USD939.87 million was redeemed and held in the form of cash since Dec 31, 2014. This was in line with what Azmi told the Board on Dec 20, 2014 – that the balance would be redeemed by end-2014.
8.16     However, checks by JAN found several statements which raises doubts on whether the balance of the SPC funds amounting to USD939.87 was in the form of cash or units. An analysis on the statements made between Jan 12, 2015 until Mar 3, 2015 showed that the redeeming of SPC funds in the cash amounting to USD939.87 had taken place. However, checks by JAN found that the sum of USD939.67 did not exist in Brazen Sky’s bank account during the period. The chronology of statements regarding the redeeming of SPC portfolio investment is as follows:
Table 2.6 – Chronology of statements regarding redeeming of the balance of SPC portfolio investment funds amounting to USD939.87 million
Statement Source
12/01/2015 Mr Arul updated the Board that the balance of USD939,874,085 had been redeemed and had been held as cash since Dec 31, 2014. Special Board Meeting
07/02/2015 Mr Arul: “The cash is in our accounts and in US dollars. I can assure you (about that) … I have seen the statements”. The Business Times, Singapore, Feb 7, 2015.
23/02/2015 Mr Arul informed the Board that, per the terms of the Deutsche Bank loan taken out in Sept 2014, there is a need for the USD975 million loan to be cash-collateralised at USD1.20 for every USD1.00 of the loan, by March 2, 2015. He therefore recommended, and that Board agreed, that the loan be repaid from the remaining USD939 million cash proceeds from the redemption of the investment portfolios held by Brazen Sky Limited, and the balance from the proposed Government of Malaysia loan. Board meeting No 1/2015
03/03/2015 Mr Arul updated the Board that further to the Board decision on Feb 23, 2015 he had instructed the CFO to utilise the proceeds of Brazen Sky Limited redemption to repay in full the USD975 million Deutsche Bank loan on March 2, 2015. However, the CFO informed him today that BSI apparently declined to apply the proceeds in that manner until they received a suitably worded indemnity from Deutsche Bank to release BSI from any liability in relation to application of the funds in that manner. Special Board meeting
Source: 1MDB board minutes and news articles
8.17     Arul Kanda’s statement to the Board on March 3, 2015 raises the question of why BSI had previously shown no objection towards the transfer of the monies from the SPC portfolio investment amounting to USD1.417 billion between Sept 12, 2014 until Dec 8, 2014. This appears to show that 1MDB’s management did not provide the correct or complete information regarding the SPC investment (money) to Arul Kanda. Arul Kanda had frequently attributed the information he was presenting during Board meetings to Azmi (CFO) and Terence (Executive Director, Finance). During PAC’s meeting on Dec 1, 2015, Arul Kanda also acknowledge that his understanding of the redeeming of SPC funds was learned in stages. Azmi and Terence, as the directors of Brazen Sky, should have provide details about the SPC portfolio investment to Arul Kanda.
8.18     During the Board meeting on March 24, 2015, Arul Kanda explained, based on information supplied by Azmi, that Aabar agreed to purchase the balance of the SPC portfolio investment fund amounting to USD939.87 million from Brazen Sky at the same value. Checks by JAN found that the agreement that was referred to was the Asset Sale Agreement signed on Jan 1, 2015 between Brazen Sky and Aabar Investments PJS Limited (Aabar Ltd). The agreement was made by 1MDB management to ensure that the receipt of funds redeemed from the balance of the SPC portfolio can done before March 31, 2015 in accordance to the wishes of the Board. The redeeming of the funds was done through an agreement because Brazen Sky was of the opinion that the SPC fund managers were unable to redeem the SPC funds through normal redeeming processes because of weak market sentiments at the time. However, it was found that the agreement was signed without prior knowledge of the Board and shareholders.
8.19     Checks by JAN also found that the sale of the balance of SPC portfolio investment to Aabar Ltd contradicts Clause 21.4 (a) in the USD975 million Facility Agreement by Deutsche Bank – “No obligor shall enter into a single transaction or a series of transactions to sell, lease, transfer or otherwise dispose of any asset.” This showed that the management had acted against the instructions of the Board which required the redeeming of SPC portfolio investment before the end of Dec 2014 and that the proceeds be brought back to Malaysia. The management’s justification for not carrying out the instruction in January 2014 can be disputed because the value of the USD at the time was high. 1MDB’s management should rightfully not be concerned about losses during the redeeming process because the value of the SPC portfolio investment was guaranteed by Aabar Investment PJS on the principle value.
8.20     Arul Kanda also told the Board on March 24, 2015 that Azmi had explained that the redeeming of the entire SPC portfolio investment had happened in early January 2015. However, a sum of USD939.87 which should be received from Aabar was still in the SPC portfolio fund structure. Since 1MDB’s management took into consideration of Aabar’s credit position and the good relations between the two companies, the agreement in which Aabar takes over the SPC portfolio investment was considered to be “as good as cash”. However, without the cash payment, 1MDB was unable to repay its debt of USD975 million to Deutsche Bank or prepare a cash collateral of USD1.17 billion for the loan.
8.21     Following this, the Board through a resolution dated March 25, 2014 agreed with a proposal by Azmi and Terence for Brazen Sky to terminate the Asset Sale Agreement, dated Jan 2, 2015, with Aabar Ltd and replace it with a Share Sale Agreement. According to the proposal, all equity in Brazen Sky is to be sold to Aabar Ltd at a consideration value of USD1.20 billion and the first payment of USD300 million must be made before April 30, 2015. The purpose of selling Brazen Sky was to fulfill the condition set by Deutsche Bank regarding the cash collateral of USD1.17 billion which must be prepared by Brazen Sky on behalf of the lender – 1MDB Energy Holdings Ltd. The shareholders agreed with the proposal via a resolution on March 25, 2015. However, this document was not presented to JAN because 1MDB’s management said that the deal was not yet finalised. All statements to the board on March 24, 2015 – beginning with the Asset Sale Agreement and proposed Share Sale Agreement – give the impression that information is being changed according to the situation, in which the balance of the SPC portfolio investment which was initially said to have been redeemed in cash, but is now reported to be in the form of units.
8.22     Thus, Aabar Ltd’s commitment to uphold their end can be questioned because Azmi had told the Board on April 23, 2015 that the balance of USD939.87 which should have been received by Aabar Ltd was still in the structure of the SPC portfolio investment because Aabar Ltd had yet to confirm when the payment should be made. Meanwhile, Arul Kanda told the Board on May 11, 2015 that the takeover of Brazen Sky by Aabar Ltd had yet to take place.
8.23     However, on May 25, 2015 the Board was informed that negotiations with Aabar were taking place, in which IPIC/Aabar were to takeover a portion of 1MDB Group’s assets alongside obligations for two USD Notes amounting to USD3.5 billion. The Board was also informed that the agreement and advance payment of USD1 billion will be finalised by the end of May 2015. This is the third time the redeeming of the balance of the SPC portfolio investment and negotiations with Aabar/Aabar Ltd was changing in shape.
8.24     On May 28, 2015 the Board approved through a resolution to have a Term Sheet for Settlement Arrangements (Binding Term Sheet) between 1MDB Group, Ministry of Finance Inc (MKD), International Petroleum Investment Company (IPIC) and Aabar Investments PJS Groups (Aabar). The Binding Term Sheet was signed by all four parties on May 28, 2015. Among the important terms in the Binding Term Sheet was that IPIC will pay 1MDB USD1 billion before or on June 4 2015 and takeover the obligation to pay interest and principle for the two USD Note – each amounting to USD1.75 billion. According to Arul Kanda’s explanation to the Board on June 14, 2015, the Binding Term Sheet did not state in detail which assets would be transferred to IPIC/Aabar because it is still under negotiation. Among the assets which have been identified amounts to USD4.892 billion, consisting of a deposit amounting to USD1.4 billion for the IPIC guarantee on the USD Note, 1MDB GIL investment fund amounting to USD1.56 billion, the SPC portfolio investment amounting to USD939.87 million and payment for the Aabar termination of option amounting to USD993 million. Three important issues have been set for the following dates:
  1. A definitive agreement must be implemented by July 31, 2015
  2. Transfer of assets at the minimum value of USD1 billion to IPIC/Aabar by Dec 31, 2015
  3. Transfer of the balance of asset that have been identified by June 30, 2016
 8.25     On June 5, 2015, 1MDB had received the advance of USD1 billion from IPIC under the Binding Term Sheet through its subsidiary Brazen Sky. Based on the shareholders resolution on May 28, 2015 and resolution by the Board dated June 2, 2015, the sum was to be used for the payment of USD50 million in fees to Yurus Private Equity I and the balance was for the Deutsche Bank loan amounting to USD975 million.
8.26     Issues regarding the redeeming of SPC Portfolio INvestment for the period between 2013 and 2015 are as follows:
  1. Payments for the Aabar termination of option were not put before the Board for prior approval
  1. Proceeds of funds redeemed from the SPC portfolio amounting to USD1.392 billion was not brought back to Malaysia as instructed by the 1MDB Board
  1. Proceeds redeemed from SPC portfolio amounting to USD1.417 billion were shifted to 1MDB GIL but the Board was told that it was used for the Aabar termination of option payment amounting to USD993 million
  1. Difficulties in obtaining important documents such as the Brazen Sky bank statements and 1MDB GIL resulted in JAN not being able to verify the transfer of funds, payment of Aabar’s termination of option and interest payments
  1. The Asset Sale Agreement signed on Jan 2, 2015 between Brazen Sky and Aabar Ltd for the sale of the balance of SPC portfolio investment amounting to USD939.87 milllion to Aabar Ltd was signed without the knowledge of the Board or shareholders.
  1. The value of the first redeeming process (USD1.392 billion) and the balance which will be taken over (USD939.87 million) amounts to USD2.33 billion, which is almost the same as the initial investment amount of USD2.318 billion on Sept 12, 2012. This shows that the SPC portfolio investment did not make significant gains.
  1. The change in statements on the balance of the SPC portfolio investment – first it was said that it was redeemed and kept in cash on Dec 31, 2014, subsequently it was stated that it was taken over by Aabar Ltd on Jan 2, 2015, but still regarded as “good as cash” although no money was received.
8.27     In summary, 1MDB’s initial investment through PetroSaudi in 2009 which involved a large sum did not bring foreign investment into Malaysia, which was not in line with the objective of establishing the company. […] 1MDB’s early investments through funds from the issuance of IMTN bonds amounting to RM5 billion saw a change in investment instruments four times. Beginning with the USD1 billion equity investment in 2009 through the JV with a subsidiary of PetroSaudi International Limited, followed by the investment in Murabahah Note (USD830 million/RM2.59 billion) in 2011 and 2012, until it was changed to into the SPC portfolio investment amounting to USD2.318 billion in Cayman Islands on Sept 2012. A portion of the SPC portfolio investments was redeemed in 2014 and used to finance various commitments and its investments. This investment resulted in a balance of USD939.87 million in the form of SPC portfolio investment units on March 31, 2015.
8.28     The decision to switch from one investment instrument to another within a short period of time while involving large sums showed that the investment decisions were not made in accordance with a proper management structure and does not appear to have a long term strategic investment plan.
8.29     Issues that were uncovered depicts a company which had made unwise business decisions, took high risks and was not in line with 1MDB’s status as a Government-owned strategic development company to help develop the country. It should be managed in accordance to best practices in order to safeguard the company and Government’s interest.

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Australia's Adelaide University Takes Action On Taib

13 Jul 2016

[Please note that Sarawak Report has started uploading a copy of the Auditor General’s report on 1MDB, which can be accessed from the front page of this site]
Back in 2011 Sarawak Report first broke the story in which we raised questions about the honours given by Austalia’s Adelaide University to its former pupil and benefactor Taib Mahmud.
At the time the University hierarchy chose to ignore our investigation and it refused to answer our questions.  However, persistence pays in the face of wrong-doing and over the following years students, public figures and NGOs have joined to campaign against the association with Borneo’s billionaire politician.
The old guard left the university management and the new management have now done the right thing and removed their honour from a kleptocrat, who tossed some money their way. BRAVO!
Link to our original story or read below:

Cash for Honours at Adelaide University?


For some weeks Sarawak Report has been attempting to question Adelaide University about the circumstances surrounding its decision to name a large chunk of its campus after the Sarawak Chief Minister.
The ‘Taib Mahmud, Chief Minister of Sarawak Court’ was designated in honour of the controversial East Malaysian politician in 2008.  It was described at the time as “a newly landscaped social space” in publicity material, which also provides a photograph of the billionaire politician, strolling through the area with the University’s Vice-Chancellor, Professor James McWha.
Our requests however, have failed to receive an acknowledgement.  There has been no reply to our emails or to questions made verbally to the University’s press department.  Equally snubbed have been a number of Malaysian graduate alumni of the University, who had previously raised their own concerns about the honouring of Taib Mahmud last December, complaining in a joint letter:
“It is a shame for us all that our university is honouring a kleptomaniac and a person who is also a human rights abuser”
The reason for this failure to elicit a civilised response would appear to be that while Taib Mahmud has showered the University with huge amounts of cash, Sarawak Report and the other alumni have not.

Taib’s ‘personal generosity’ bestowed ‘numerous ways’!


Taib graduated from Adelaide in law in 1961, but then received a further honorary doctorate in 1994, followed by repeated accolades and statements of support.  Announcements by the University have indicated some of his donations over the years, however owing to the current silence, it is hard to calculate the full amount.
Adelaide has acknowledged that Taib’s first donation was made in 1987, six years after he became Chief Minister and started to display a serious level of disposable income.  His North American property company, Sakti International, was founded by himself and close family members in the same year and is now worth well over 100 million Australain Dollars.   This first donation was used to refurbish the Law School, according to the University.
In 2001 it would appear that another $300,000 was donated by the Chief Minister, some of which was used to establish a new “Malaysian Room, complete with furniture and artifacts from Sarawak”.  The University describes the room as:
” a tribute to the generosity of the Chief Minister, who is also one of our most distinguished alumni and long-time benefactor”.

What price an honour?

In the absence of any official response, we can only surmise that a considerably larger sum was expended before the naming of the Taib Mahmud, Chief Minister of Sarawak Court in 2008.  Indeed at the time of the designation, the Vice Chancellor, Professor James McWha, thanked Taib for his “significant support and tireless work” and went on to say:
“The Chief Minister’s personal generosity has continued in numerous ways over the years”

Unfortunately, at no stage during these years of donations rewarded by status and accolades does the University appear to have questioned how a person in Taib’s position could legitimately have come by the means to extend such ‘personal generosity’.  As an elected holder of public office Taib’s salary is a matter of public record and (thanks to all his simultaneous positions) it adds up to a perfectly comfortable RM20,000 a month (approximately $10,000 Australian Dollars).  This means that the Malaysia Room alone cost more than double his annual salary.
Only slightly deeper enquiries by the University would have revealed even more concerning issues surrounding Taib’s wealth.  There is no shortage of information and evidence linking the Chief Minister to a vast web of timber corruption that has seen the entire Sarawak Rainforest razed to less that 5% of its original size during his 30 years in office.
In fact, the destruction by companies associated with the regime of Taib Mahmud has developed into a global threat.  Taib-related companies are operating with ruthless and wanton efficiency across the remainder of the Island of Borneo, in Irian Jaya, the Solomon Islands, the Congo Basin, Amazon and Siberia, as reported by numerous NGOs.  What’s more, somewhat closer to home, the Green Party in Tasmania has also been questioning why a Taib-related company has been subsidised to the tune of $8 million by the State to saw down trees for export back to Malaysia, which has now largely been stripped bare?

A crime with numerous victims


The impact of this orgy of destruction has been devastating to the wild life, rivers and eco-systems of what was until very recently the most bio-diverse and intact remaining jungle on the planet.  It has also left hundreds of thousands of native peoples, whose territories have been invaded, without sustenance and, likewise, on the brink of extinction.
Few of the people of Sarawak have received any benefited from the wealth generated by the destruction of their forests.  Instead it is the University of Adelaide that has profited, not from the ‘personal generosity’ of the Chief Minister, however, because it was not his wealth to give, but from the plunder of his people.

Our questions


It was for these reasons that Sarawak Report framed a limited number of questions that we hoped that the Vice-Chancellor would be prepared to answer.  We wished to know if the University holds any ethical guidelines when it comes to the acceptance of donations, and if so how Professor McWha could have concluded that Taib Mahmud was an acceptable partner for Adelaide?
We also requested information about the total extent of the donations which have been received from the University, on the basis that such sums could very well be identified as money laundered from the proceeds of corruption and therefore assets which should lawfully be returned to the people of Sarawak.
Indeed, since the University has made clear on numerous occasions that the donations have been the product of ‘personal generosity’ there can be no question that this is money that Taib Mahmud cannot legitimately account for on the basis of his limited official salary.

More in Australia


Of course, as NGOs have often pointed out, there are plenty of other Taib properties in Australia, adding to the mystery of the Chief Minister’s millions.  The 380 room Adelaide Hilton is one company registered under the names of his children and late wife and there are a string of other properties and enterprises belonging to the Mahmud family elsewhere.
Given  Australia’s own perfectly adequate wealth, would it not be more appropriate for Universities like Adelaide to find funding from legitimate and domestic sources, rather than profit from the exploitation of the poor people of Borneo and offering in return for this gift of much needed credibility to their corrupt Chief Minister?  Surely that credibility should have been denied?
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Special Purpose Con Job?

14 Jul 2016

Information now emerging from the Auditor General’s Report, led DAP Finance Spokesperson Tony Pua to state yesterday that he suspects that much of the money paid in 2014 to the bogus Aabar Limited BVI company was in fact circulated back through 1MDB’s Brazen Sky bank account in Singapore in an attempt to con Parliament and the auditors that cash had been “redeemed” from the so-called Special Purpose Vehicle (SPV), which had allegedly invested US$2.3 billion in the Cayman Islands.
“it occurred to me that the 1MDB Financial Statements for the year ending 31 March 2014 were signed off by the auditors, Deloitte coincidentally on 4 November 2014, when 1MDB GIL also made a payment of US$222 million to Aabar (BVI).” says Pua.
At that point in time, there was increasing concern over 1MDB’s US$2.318 billion investment in an obscure investment fund based in Cayman Islands.  The Board of Directors minutes have shown that the Management were repeatedly instructed to redeem the investment and repatriate the proceeds back to Malaysia throughout 2014. The company was under immense pressure because the authenticity of the investment was being publicly questioned…. 
The accounts were finally signed off by Deloitte when 1MDB was able to “show” the auditors that US$1.22 billion have been redeemed.  The money was however, not repatriated to Malaysia.”
It is a shocking suggestion, because it would mean that two Swiss banks, BSI and UBS, would have been involved in helping shift these suspicious transactions through their Singapore branches – in some cases turning round hundreds of millions of dollars in one day, according to the figures.  This is because BSI managed the Brazen Sky account and UBS managed the bogus Aabar Limited account.
Sarawak Report has now examined the Auditor General’s analysis of this alleged ‘redeeming’ and ‘repatriation’ of the SPV cash (see full excerpt beneath) and the figures in his report lend weight to Pua’s suspicions.
However, the AG complains he cannot reach a solid conclusion on the matter, because of the incomplete and limited information provided to him by the company.
“JAN [Audit Dept] was unable to verify 1MDB GIL’s subsequent payments or how the funds redeemed from the (SPC portfolio) funds were used because important documents such as bank statements and payment vouchers were not handed by 1MDB for JAN’s verification despite five requests being made between May and October 2015. Documents such as bank statements should be readily available to bank clients.” [8.12]
Such criminal obstruction of its own ought to demand severe action against managers, whom the Public Accounts Committee have called for the police to investigate.
What emerges from Chapter 8 on the Cayman SPV and supposed repatriation of the cash is yet again a litany of appalling bad practice at 1MDB, changing stories and missing money. The Auditor General officially confirms what critics have long suspected, which is that 1MDB serially lied to parliament and the public and utterly failed in its duty:
“The issues that were uncovered depict a company which had made unwise business decisions, took high risks and was not in line with 1MDB’s status as a Government-owned strategic development company to help develop the country.”[8.29] the Auditor General angrily concludes.

‘Round-Tripping’?

The figures from Chapter 8, make very interesting reading when compared to the bank transfer documents we publicised earlier in the week, which showed payments from 1MDB Energy and 1MDB Global to the Singapore UBS account of Aabar Limited during the relevant period in 2014.
The AG’s figures show the cash transfers that were allegedly made from the Cayman Island SPV to 1MDB’s Brazen Sky account at BSI Bank in Singapore Sept-December 2014 as the ‘cash’ was allegedly ‘redeemed’ through a number of transactions.
First look at the money that the Auditor General records as having arrived into Brazen Sky from anonymous portfolios linked to the fund during late 2014 (bearing in mind he complains he was not given any of the bank statements of the company to prove its financial status or the origin of the cash):
“Difficulties in obtaining important documents such as the Brazen Sky bank statements and 1MDB GIL statements resulted in JAN not being able to verify the transfer of funds or payment of Aabar’s termination of option and interest payments” [AG Rpt 8.26.g]
Screen Shot 2016-07-13 at 23.19.37

The money allegedly arriving in Brazen Sky from the SPV in the Caymans, according to figures provided to the Auditors Deloittes and later the Auditor General
The money allegedly arriving in Brazen Sky from the SPV in the Caymans, according to figures provided to the Auditors Deloittes and later the Auditor General
Second, look at Sarawak Report’s table of money flows obtained from the bank transfers to the UBS Aabar Limited account from 1MDB Energy And Global, published earlier this week.
Sarawak Report's summary of the information provided by the 9 transfer documents submitted to the auditor
Sarawak Report’s summary of the information provided by the 9 transfer documents submitted to the auditor
Finally, combine the two tables to see how virtually identical over-all sums were sent to the fake Aabar by 1MDB Energy and later 1MDB Global to those which arrived back a few days later in the Brazen Sky Singapore account – and were then forwarded straight on/back to 1MDB Global.
One two occasions the same multi-million sums left 1MDB Global to fake Aabar and then arrived back there (via Brazen Sky) on the very same day: US$255,500,000 on October 23rd and then US$222,222,000 on November 4th.  Tony Pua would seem to have a point!
Round-Tripping?
Round-Tripping?
As Pua points out it was on November 4th, after the key figure of US$1.22 billion was flushed through Brazen Sky, that the auditors Deloittes finally agreed to sign off the belated accounts for that year on the basis that this money had been ‘redeemed’ from the Cayman Islands.
Except, the AG points out that instead of being repatriated to Malaysia to pay 1MDB’s pressing debts as had been demanded again and again of management by the Board, this money was sent on to 1MDB Global’s BSI bank account in Lugano instead.
Or should we say it was SENT BACK to 1MDB Global’s BSI bank account in Lugano from where it had come in the first place?

The PetroSaudi black hole

What the evidence surely shows is that there was no money in the Caymans to be sent back in the first place and this was nothing more than a desperate cover-up and an audit con-job that went to extraordinary lengths.
Indeed, once the money had been ‘redeemed’ to Lugano 1MDB management made sure to write it off straight away, claiming the money had been immediately spent on terminating options and paying off loans.
What everyone who has followed 1MDB knows is that the original US$1.83 billion PetroSaudi investment, which was to go through no less than four different ‘investment strategies’ in as many years, to the Auditor General’s major disapproval, was actually stolen right from the start.
Jho Low’s Good Star Limited snaffled US$700 million on Day One, then a further US$330 million later in 2011. US$260 million was siphoned into the buy out of UBG in 2010 and the remainder went to PetroSaudi itself in return for its services in “acting as a front”.  The formerly two-bit company bought itself a drill ship and purchased a lucrative drilling concession in Venezuela on the proceeds of its “joint venture”.
So, when 1MDB claimed in 2012 that it had ‘cashed in’ its share of the PetroSaudi venture  for a fancy profit of US$2.3 billion they were defying the laws of mathematics and common sense. Who would have paid such money for an empty shell?
Hence began the series of twisted and turning shadowy tales about the supposed Special Purpose Vehicles, conveniently hidden in the Caymans with off-shore bank accounts, allegedly ‘investing’ in ‘portfolios’ that it was claimed could be translated back into solid cash.
No one believed Shahrol Halmi at the time and they will believe him even less now that they have seen how the money circulated round 1MDB in late 2014, with the help of the friendly off-shore fake Aabar and compliant Swiss bankers in Singapore.
The Auditor General was outrageously denied the full information he was owed to explain exactly what happened here, but what all the evidence suggests is that 1MDB started pumping money it had borrowed for its Energy and Global subsidiaries through the fake Aabar, so that it could then be sent on to Brazen Sky posing as cashed in profits from the separate Cayman Island portfolios.
No wonder that during this very November 2014 the management had started drafting resolutions to explain why 1MDB Global might need to pay money to Aabar – the remaining US$1.5 billion from their 2013 Tun Razak Exchange loan was about the only significant remaining ready cash available in the group.  Hence the agreement to ‘extend the Aabar guarantee’ to this loan as well, in order to find an excuse to pay for the privilege. Aabar’s parent company IPIC have confirmed they knew nothing of the deal – the money went to the fake Aabar of course.
So, while the AG was not given the statements to prove this is what happened, his remarks could not have delivered a clearer official verdict of utter condemnation that nothing that was done was done correctly or honestly by 1MDB (see below).  No wonder the Public Accounts Committee notified the police.

Remaining US$993 million

There was of course the alleged remainder of the SPV/Cayman money that the Board had called on 1MDB to return no less than 9 times for over a year:
The AG listed the occasions the Board had asked for the PetroSaudi/Cayman Islands money to be returned without success
The AG listed the occasions the Board had asked for the PetroSaudi/Cayman Islands money to be returned without success
The remaining money was US$993 and 1MDB had explained to the Board it would need to be used to pay off yet more options to the fake Aabar, for which purpose it was allegedly also paid to the Brazen Sky account.
Except, there turned out to be no money here either as the AG details in painful stages. First 1MDB had claimed they had sold the remaining SPV to fake Aabar again, because it was “as good as cash” although the market apparently was not keen on buying the SPV notes at that particular time.
Then the deal was reversed into an alleged cash sale, which turned out to be merely notes.   The Auditor established that there was no cash in the BSI account, which was plainly why 1MDB had had to borrow real cash from Deutsche Bank to pay its mounting obligations, based on the supposed collateral which turned out to be notes not cash.
When the truth because known in April 2015, Deutsche Bank pulled its loan and 1MDB had to pull its favours with the corrupt Aabar officials, who dragged IPIC into a bail out. The Auditor provides a useful further insight into the terms of that secretive ‘Term Sheet’, which finally expired on June 30th with 1MDB having failed to fulfil its obligations to IPIC, sparking legal action and a demand of US$6.5 billion, now facing the Malaysian taxpayer.
Many had asked what assets 1MDB had promised Aabar in return for its loan, as referred in that binding term sheet.  The answer, found the auditor, was that no one at 1MDB or Aabar actually seemed to know – even a year later. Because 1MDB had yet to demonstrate what were genuine assets and what were fake.
Read the Chapter 8 Translation
Chapter 2, Item 8 – Redeeming of investment portfolio from Segregated Portfolio Company (SPC)

8.1       The investment in the SPC was made through the Investment Management Agreement signed on Sept 12, 2012. Between the period of Sept 2012 and Sept 2013, the (initial) investment of RM6.8 billion (USD2.318 billion) saw a returns of RM662 million, which is dividends of RM445.93 million and capital distribution of RM216.07 million as stated in the financial statements for the year ending March 31, 2014.
8.2       In response to criticisms that was raised in Parliament and through the media regarding the investment portfolio in the SPC which was managed by fund managers in the Cayman Islands, the Board had on May 20, 2013 agreed that the investment be redeemed in stages to improve public perception towards the credibility of 1MDB’s investments. In relation to this, the Board had issued 9 instructions between May 2013 and Aug 2014 to the Management to prepare a plan, schedule and (ultimately) redeem the SPC portfolio funds either in stages or as a whole, according to this schedule:
Table 2.3 – Board’s instruction regarding redeeming of SPC investment
Board Meeting Number Date of Meeting Instruction
3/2013 20/05/2013 Prepare plan and schedule of for redeeming of funds in stages
5/2013 19/08/2013 Prepare plan and schedule of for redeeming of funds in stages
6/2013 11/11/2013 Liquidate investments in stages and return funds to Malaysia
1/2014 27/01/2014 Opportune moment to redeem investments in view of high value of USD
Special 27/02/2014 Management to take immediate action in redeeming funds and returning it to Malaysia
3/2014 22/04/2014 Redeem funds as soon as possible although there are no needs for cash in the near term. Funds could be used in local institutions.
4/2014 10/06/2014 Redeem at least 1/3 of the portfolio investments on Sept 30, 2014 or all on March 31, 2015.
5/2014 21/07/2014 Redeem 1/3 of the portfolio investment on Sept 30, 2014 and all March 31, 2015. Management is instructed to redeem funds on those dates
6/2014 18/08/2014 Redeem everything before or on Dec 31, 2014.
Source: Board of Director’s meeting minutes.
8.3       However, no action was taken by the 1MDB management although there were specific clauses in the Subscription Agreement which allows the client to liquidate the funds at any time with a 30-day notice. The readiness of the management to liquidate the portfolio funds in a month was also confirmed by Hazem (then 1MDB CEO) during the Board Meeting on June 10, 2014.
8.4       Following repeated instructions from the Board, eventually, a portion of the SPC portfolio funds amounting to USD870 million were redeemed in mid-October 2014 while another USD300 million was redeemed a few days later. This was informed to the Board on Oct 20, 2014.
8.5       On Nov 4, 2014, Hazem informed the Board during a meeting that a total of USD1.2 billion from the SPC Portfolio Funds were redeemed. It was used to pay the interest on a loan and Aabar Investment PJS’s termination of option in order to secure 49% equity in Powertek Investment Holdings Sdn Bhd and 1MDB Energy (Langat) Sdn Bhd. During the same meeting, the chair of the Board had informed Messr Deloitte (who was present during the meeting) that the balance of the SPC portfolio investment would be redeemed before the end of November 2014 and gave a guarantee that he would oversee the redeeming of the funds.
8.6       During the meeting on Dec 20, 2014 Azmi (1MDB CFO) had informed the Board that the latest USD1.392 billion was redeemed from the SPC portfolio and the balance of USD939.87 million will be redeemed by the end of December 2014. The Board was also informed that the entire SPEC portfolio funds were used as collateral for the USD975 million loan from Deutsche Bank. The Board opined that it was unfair to use the entire SPC portfolio fund, valued at USD2.318 billion, as collateral when the loan from Deutsche Bank amounts to only USD975 million. Lodin (Board chair) raised the issue of 1MDB management not informing the Board regarding the collateral and that he and Ismee had given a guarantee to the BNM governor that money redeemed from the SPC portfolio investment would be brought back to Malaysia.
8.7       This information contradicts Arul Kanda’s statement to the PAC on Dec 1, 2015, in which he said that USD1.22 billion from the SPC portfolio funds were not used as collateral because it was already redeemed. Only the balance of USD1.11 billion from the SPC portfolio funds along with dividends of USD120 million were used as collateral with Deutsche Bank for the USD975 million loan. However, checks by JAN found that (Arul Kanda’s) statement was inaccurate because between Nov 14 and Nov 24, 2014, an additional USD173.5 million was redeemed, bringing the total amount redeemed from the SPC portfolio investment to USD1.392 million. All funds that were redeemed were transferred into the account of 1MDB GIL and only the balance of USD939.87 million which were not redeemed could be considered as collateral for the loan from Deutsche Bank.
8.8       Further checks by JAN on the Facility Agreement found that the conditions of the loan did not include clauses which support the statements of both Azmi (Dec 20, 2014) and Arul Kan (Dec 1, 2015). The conditions for the loan are as follows:
Table 2.4 – Condition for the USD975 million loan from Deutsche Bank AG, Singapore Regarding the SPC Portfolio Fund Collateral
Clause Condition
20.2 (b) Brazen Sky shall ensure that the Brazen Sky net worth will not at any time be less than USD1,500,000,000.
22.2 (b) With effect from the date which is six momths from the utilisation date, the borrower and Brazen Sky shall ensure that, at all times thereafter, the amount standing to the credit of Brazen Sky Account is at least equal to the Brazen Sky Required Balance.
Note:
Brazen Sky Account – Bank Account in Hong Kong
Brazen Sky Required Balance – a cash amount of USD600 mil up to a maximum of USD1,170 mil; USD500 mil plus aggregate of each Accordion Increase Amount x 1.2 [?]
Source: Facility Agreement USD975 mil
8.9       The Board, during a meeting on Dec 20, 2014 was also informed that Deutsche Bank AG, Singapore had agreed to allow USD993, from the USD1.392 billion redeemed fromt he SPC funds, to be used for Aabar’s termination of option payments. The balance of USD399 million was used to pay the interest of the USD Note.
8.10     However, details of the USD993 million payment to Aabar for the termination of option and the payment of interest for the USD Note could not be verified by JAN. The board also sought details on the payment on Dec 20, 2014, but JAN’s checks showed that the matter not raised during the subsequent Board meeting. During the Feb 23, 2015 meeting, the Board had raised questions regarding the payment for Aabar’s termination of option which was only told to the Board after payment was made. This demonstrated that the payment for Aabar’s termination of option was made without the approval of the Board.
8.11     During a meeting between 1MDB and JAN on Sept 9, 2015, 1MDB had said that the physical payment to Aabar was made through the account of a 1MDB subsidiary – Brazen Sky Limited (Brazen Sky) through BSI Bank – on behalf of the terminating company because 1MDB did not own an account abroad. However, checks by JAN found that funds redeemed from the SPC portfolio amounting to USD1.392 billion which were transferred to Brazen Sky’s bank account between Sept 11 2014 to Nov 24 2014 were transferred to 1MDB Global INvestment Limited (1MDB GIL) between SEpt 12 2014 and Dec 8 2014 amounting to USD1.417 billion. An analysis on Brazen Sky’s transactions between Sept until December 2014 found that there were no payments for the purpose of the Aabar termination of option. Details of Brazen Sky’s transactions are as follows:
Chart 2.5 – Brazen Sky Limited Transactions for Period Between September and December 2014
­­ Transactions In (USD) Out (USD)
11/09/2014 Portfolio C2 110,000,000.02
12/09/2014 1MDB GIL 94,420,000.00
07/10/2014 Portfolio C2 146,518,719.52
Portfolio C1 228,481,280.48
1MDB GIL 375,000,000.00
14/10/2014 Portfolio B2 280,045,600.00
Portfolio C1 104,954,400.00
1MDB GIL 340,000,000.00
23/10/2014 Portfolio A2 27,099,840.00
Portfolio B1 198,247,200.00
Portfolio B2 30,152,960.00
1MDB GIL 255,500,000.00
31/10/2014 Portfolio A1 93,292,800.00
31/10/2014 Dividends 131,707,200.00*
04/11/2014 1MDB GIL 222,000,000.00
14/11/2014 Portfolio A2 125,000,000.00
1MDB GIL 125,000,000.00
24/11/2014 Portfolio A2 48,500,000.00
26/11/2014 1MDB 43,168,213.17*
08/12/2014 1MDB GIL 5,500,000.00
TOTAL 1,392,292,800.02 1,417,420,000
Source: Brazen Sky Limited Bank Statement, obtained from foreign authorities
Note (*): Not included in total amount
8.12     The transfer of funds redeemed from the SPC portfolio from Brazen Sky to 1MDB GIL was found to be in contravention of the instructions from the 1MDB Board, which has demanded that the funds be brought back to Malaysia. The Board’s approval was also not sought for this transaction. The reason for the transfer to 1MDB GIL by 1MDB’s management could not be ascertained because 1MDB GIL has its own investment assets with fund managers amounting to USD1.56 billion on March 31, 2014. 1MDB GIL had also obtained a USD Note loan amounting to USD3 billion. JAN was unable to verify 1MDB GIL’s subsequent payments or how the funds redeemed from the (SPC portfolio) funds were used because important documents such as bank statements and payment vouchers were not handed by 1MDB for JAN’s verification despite five requests being made between May and October 2015. Documents such as bank statements should be readily available to bank clients.
8.13     After redeeming USD1.392 billion from the SPC portfolio, the Board on Nov 13, 2014 urged (the management to) redeem the balance of USD939.87 million before the end of November 2014. The same instruction was given again on Nov 25, 2014.
8.14     On Jan 12, 2015, the Board voiced their disappointment with the 1MDB management who had previously given the impression that the SPC funds would be brought back (to Malaysia) but as of that day, it had not happened. The situation then became more complicated because 1MDB was facing serious cash-flow problems in its attempt to repay a RM2 billion Maybank loan and payment obligations for equity in the 3B Project [Note: Jimah power plant] at the time.
8.15     During the same meeting, Arul Kanda had informed the Board that the balance of the SPC portfolio funds amounting to USD939.87 million was redeemed and held in the form of cash since Dec 31, 2014. This was in line with what Azmi told the Board on Dec 20, 2014 – that the balance would be redeemed by end-2014.
8.16     However, checks by JAN found several statements which raises doubts on whether the balance of the SPC funds amounting to USD939.87 was in the form of cash or units. An analysis on the statements made between Jan 12, 2015 until Mar 3, 2015 showed that the redeeming of SPC funds in the cash amounting to USD939.87 had taken place. However, checks by JAN found that the sum of USD939.67 did not exist in Brazen Sky’s bank account during the period. The chronology of statements regarding the redeeming of SPC portfolio investment is as follows:
Table 2.6 – Chronology of statements regarding redeeming of the balance of SPC portfolio investment funds amounting to USD939.87 million
Statement Source
12/01/2015 Mr Arul updated the Board that the balance of USD939,874,085 had been redeemed and had been held as cash since Dec 31, 2014. Special Board Meeting
07/02/2015 Mr Arul: “The cash is in our accounts and in US dollars. I can assure you (about that) … I have seen the statements”. The Business Times, Singapore, Feb 7, 2015.
23/02/2015 Mr Arul informed the Board that, per the terms of the Deutsche Bank loan taken out in Sept 2014, there is a need for the USD975 million loan to be cash-collateralised at USD1.20 for every USD1.00 of the loan, by March 2, 2015. He therefore recommended, and that Board agreed, that the loan be repaid from the remaining USD939 million cash proceeds from the redemption of the investment portfolios held by Brazen Sky Limited, and the balance from the proposed Government of Malaysia loan. Board meeting No 1/2015
03/03/2015 Mr Arul updated the Board that further to the Board decision on Feb 23, 2015 he had instructed the CFO to utilise the proceeds of Brazen Sky Limited redemption to repay in full the USD975 million Deutsche Bank loan on March 2, 2015. However, the CFO informed him today that BSI apparently declined to apply the proceeds in that manner until they received a suitably worded indemnity from Deutsche Bank to release BSI from any liability in relation to application of the funds in that manner. Special Board meeting
Source: 1MDB board minutes and news articles
8.17     Arul Kanda’s statement to the Board on March 3, 2015 raises the question of why BSI had previously shown no objection towards the transfer of the monies from the SPC portfolio investment amounting to USD1.417 billion between Sept 12, 2014 until Dec 8, 2014. This appears to show that 1MDB’s management did not provide the correct or complete information regarding the SPC investment (money) to Arul Kanda. Arul Kanda had frequently attributed the information he was presenting during Board meetings to Azmi (CFO) and Terence (Executive Director, Finance). During PAC’s meeting on Dec 1, 2015, Arul Kanda also acknowledge that his understanding of the redeeming of SPC funds was learned in stages. Azmi and Terence, as the directors of Brazen Sky, should have provide details about the SPC portfolio investment to Arul Kanda.
8.18     During the Board meeting on March 24, 2015, Arul Kanda explained, based on information supplied by Azmi, that Aabar agreed to purchase the balance of the SPC portfolio investment fund amounting to USD939.87 million from Brazen Sky at the same value. Checks by JAN found that the agreement that was referred to was the Asset Sale Agreement signed on Jan 1, 2015 between Brazen Sky and Aabar Investments PJS Limited (Aabar Ltd). The agreement was made by 1MDB management to ensure that the receipt of funds redeemed from the balance of the SPC portfolio can done before March 31, 2015 in accordance to the wishes of the Board. The redeeming of the funds was done through an agreement because Brazen Sky was of the opinion that the SPC fund managers were unable to redeem the SPC funds through normal redeeming processes because of weak market sentiments at the time. However, it was found that the agreement was signed without prior knowledge of the Board and shareholders.
8.19     Checks by JAN also found that the sale of the balance of SPC portfolio investment to Aabar Ltd contradicts Clause 21.4 (a) in the USD975 million Facility Agreement by Deutsche Bank – “No obligor shall enter into a single transaction or a series of transactions to sell, lease, transfer or otherwise dispose of any asset.” This showed that the management had acted against the instructions of the Board which required the redeeming of SPC portfolio investment before the end of Dec 2014 and that the proceeds be brought back to Malaysia. The management’s justification for not carrying out the instruction in January 2014 can be disputed because the value of the USD at the time was high. 1MDB’s management should rightfully not be concerned about losses during the redeeming process because the value of the SPC portfolio investment was guaranteed by Aabar Investment PJS on the principle value.
8.20     Arul Kanda also told the Board on March 24, 2015 that Azmi had explained that the redeeming of the entire SPC portfolio investment had happened in early January 2015. However, a sum of USD939.87 which should be received from Aabar was still in the SPC portfolio fund structure. Since 1MDB’s management took into consideration of Aabar’s credit position and the good relations between the two companies, the agreement in which Aabar takes over the SPC portfolio investment was considered to be “as good as cash”. However, without the cash payment, 1MDB was unable to repay its debt of USD975 million to Deutsche Bank or prepare a cash collateral of USD1.17 billion for the loan.
8.21     Following this, the Board through a resolution dated March 25, 2014 agreed with a proposal by Azmi and Terence for Brazen Sky to terminate the Asset Sale Agreement, dated Jan 2, 2015, with Aabar Ltd and replace it with a Share Sale Agreement. According to the proposal, all equity in Brazen Sky is to be sold to Aabar Ltd at a consideration value of USD1.20 billion and the first payment of USD300 million must be made before April 30, 2015. The purpose of selling Brazen Sky was to fulfill the condition set by Deutsche Bank regarding the cash collateral of USD1.17 billion which must be prepared by Brazen Sky on behalf of the lender – 1MDB Energy Holdings Ltd. The shareholders agreed with the proposal via a resolution on March 25, 2015. However, this document was not presented to JAN because 1MDB’s management said that the deal was not yet finalised. All statements to the board on March 24, 2015 – beginning with the Asset Sale Agreement and proposed Share Sale Agreement – give the impression that information is being changed according to the situation, in which the balance of the SPC portfolio investment which was initially said to have been redeemed in cash, but is now reported to be in the form of units.
8.22     Thus, Aabar Ltd’s commitment to uphold their end can be questioned because Azmi had told the Board on April 23, 2015 that the balance of USD939.87 which should have been received by Aabar Ltd was still in the structure of the SPC portfolio investment because Aabar Ltd had yet to confirm when the payment should be made. Meanwhile, Arul Kanda told the Board on May 11, 2015 that the takeover of Brazen Sky by Aabar Ltd had yet to take place.
8.23     However, on May 25, 2015 the Board was informed that negotiations with Aabar were taking place, in which IPIC/Aabar were to takeover a portion of 1MDB Group’s assets alongside obligations for two USD Notes amounting to USD3.5 billion. The Board was also informed that the agreement and advance payment of USD1 billion will be finalised by the end of May 2015. This is the third time the redeeming of the balance of the SPC portfolio investment and negotiations with Aabar/Aabar Ltd was changing in shape.
8.24     On May 28, 2015 the Board approved through a resolution to have a Term Sheet for Settlement Arrangements (Binding Term Sheet) between 1MDB Group, Ministry of Finance Inc (MKD), International Petroleum Investment Company (IPIC) and Aabar Investments PJS Groups (Aabar). The Binding Term Sheet was signed by all four parties on May 28, 2015. Among the important terms in the Binding Term Sheet was that IPIC will pay 1MDB USD1 billion before or on June 4 2015 and takeover the obligation to pay interest and principle for the two USD Note – each amounting to USD1.75 billion. According to Arul Kanda’s explanation to the Board on June 14, 2015, the Binding Term Sheet did not state in detail which assets would be transferred to IPIC/Aabar because it is still under negotiation. Among the assets which have been identified amounts to USD4.892 billion, consisting of a deposit amounting to USD1.4 billion for the IPIC guarantee on the USD Note, 1MDB GIL investment fund amounting to USD1.56 billion, the SPC portfolio investment amounting to USD939.87 million and payment for the Aabar termination of option amounting to USD993 million. Three important issues have been set for the following dates:
  1. A definitive agreement must be implemented by July 31, 2015
  2. Transfer of assets at the minimum value of USD1 billion to IPIC/Aabar by Dec 31, 2015
  3. Transfer of the balance of asset that have been identified by June 30, 2016
 8.25     On June 5, 2015, 1MDB had received the advance of USD1 billion from IPIC under the Binding Term Sheet through its subsidiary Brazen Sky. Based on the shareholders resolution on May 28, 2015 and resolution by the Board dated June 2, 2015, the sum was to be used for the payment of USD50 million in fees to Yurus Private Equity I and the balance was for the Deutsche Bank loan amounting to USD975 million.
8.26     Issues regarding the redeeming of SPC Portfolio INvestment for the period between 2013 and 2015 are as follows:
  1. Payments for the Aabar termination of option were not put before the Board for prior approval
  1. Proceeds of funds redeemed from the SPC portfolio amounting to USD1.392 billion was not brought back to Malaysia as instructed by the 1MDB Board
  1. Proceeds redeemed from SPC portfolio amounting to USD1.417 billion were shifted to 1MDB GIL but the Board was told that it was used for the Aabar termination of option payment amounting to USD993 million
  1. Difficulties in obtaining important documents such as the Brazen Sky bank statements and 1MDB GIL resulted in JAN not being able to verify the transfer of funds, payment of Aabar’s termination of option and interest payments
  1. The Asset Sale Agreement signed on Jan 2, 2015 between Brazen Sky and Aabar Ltd for the sale of the balance of SPC portfolio investment amounting to USD939.87 milllion to Aabar Ltd was signed without the knowledge of the Board or shareholders.
  1. The value of the first redeeming process (USD1.392 billion) and the balance which will be taken over (USD939.87 million) amounts to USD2.33 billion, which is almost the same as the initial investment amount of USD2.318 billion on Sept 12, 2012. This shows that the SPC portfolio investment did not make significant gains.
  1. The change in statements on the balance of the SPC portfolio investment – first it was said that it was redeemed and kept in cash on Dec 31, 2014, subsequently it was stated that it was taken over by Aabar Ltd on Jan 2, 2015, but still regarded as “good as cash” although no money was received.
8.27     In summary, 1MDB’s initial investment through PetroSaudi in 2009 which involved a large sum did not bring foreign investment into Malaysia, which was not in line with the objective of establishing the company. […] 1MDB’s early investments through funds from the issuance of IMTN bonds amounting to RM5 billion saw a change in investment instruments four times. Beginning with the USD1 billion equity investment in 2009 through the JV with a subsidiary of PetroSaudi International Limited, followed by the investment in Murabahah Note (USD830 million/RM2.59 billion) in 2011 and 2012, until it was changed to into the SPC portfolio investment amounting to USD2.318 billion in Cayman Islands on Sept 2012. A portion of the SPC portfolio investments was redeemed in 2014 and used to finance various commitments and its investments. This investment resulted in a balance of USD939.87 million in the form of SPC portfolio investment units on March 31, 2015.
8.28     The decision to switch from one investment instrument to another within a short period of time while involving large sums showed that the investment decisions were not made in accordance with a proper management structure and does not appear to have a long term strategic investment plan.
8.29     Issues that were uncovered depicts a company which had made unwise business decisions, took high risks and was not in line with 1MDB’s status as a Government-owned strategic development company to help develop the country. It should be managed in accordance to best practices in order to safeguard the company and Government’s interest.

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Australia's Adelaide University Takes Action On Taib

13 Jul 2016

[Please note that Sarawak Report has started uploading a copy of the Auditor General’s report on 1MDB, which can be accessed from the front page of this site]
Back in 2011 Sarawak Report first broke the story in which we raised questions about the honours given by Austalia’s Adelaide University to its former pupil and benefactor Taib Mahmud.
At the time the University hierarchy chose to ignore our investigation and it refused to answer our questions.  However, persistence pays in the face of wrong-doing and over the following years students, public figures and NGOs have joined to campaign against the association with Borneo’s billionaire politician.
The old guard left the university management and the new management have now done the right thing and removed their honour from a kleptocrat, who tossed some money their way. BRAVO!
Link to our original story or read below:

Cash for Honours at Adelaide University?


For some weeks Sarawak Report has been attempting to question Adelaide University about the circumstances surrounding its decision to name a large chunk of its campus after the Sarawak Chief Minister.
The ‘Taib Mahmud, Chief Minister of Sarawak Court’ was designated in honour of the controversial East Malaysian politician in 2008.  It was described at the time as “a newly landscaped social space” in publicity material, which also provides a photograph of the billionaire politician, strolling through the area with the University’s Vice-Chancellor, Professor James McWha.
Our requests however, have failed to receive an acknowledgement.  There has been no reply to our emails or to questions made verbally to the University’s press department.  Equally snubbed have been a number of Malaysian graduate alumni of the University, who had previously raised their own concerns about the honouring of Taib Mahmud last December, complaining in a joint letter:
“It is a shame for us all that our university is honouring a kleptomaniac and a person who is also a human rights abuser”
The reason for this failure to elicit a civilised response would appear to be that while Taib Mahmud has showered the University with huge amounts of cash, Sarawak Report and the other alumni have not.

Taib’s ‘personal generosity’ bestowed ‘numerous ways’!


Taib graduated from Adelaide in law in 1961, but then received a further honorary doctorate in 1994, followed by repeated accolades and statements of support.  Announcements by the University have indicated some of his donations over the years, however owing to the current silence, it is hard to calculate the full amount.
Adelaide has acknowledged that Taib’s first donation was made in 1987, six years after he became Chief Minister and started to display a serious level of disposable income.  His North American property company, Sakti International, was founded by himself and close family members in the same year and is now worth well over 100 million Australain Dollars.   This first donation was used to refurbish the Law School, according to the University.
In 2001 it would appear that another $300,000 was donated by the Chief Minister, some of which was used to establish a new “Malaysian Room, complete with furniture and artifacts from Sarawak”.  The University describes the room as:
” a tribute to the generosity of the Chief Minister, who is also one of our most distinguished alumni and long-time benefactor”.

What price an honour?

In the absence of any official response, we can only surmise that a considerably larger sum was expended before the naming of the Taib Mahmud, Chief Minister of Sarawak Court in 2008.  Indeed at the time of the designation, the Vice Chancellor, Professor James McWha, thanked Taib for his “significant support and tireless work” and went on to say:
“The Chief Minister’s personal generosity has continued in numerous ways over the years”

Unfortunately, at no stage during these years of donations rewarded by status and accolades does the University appear to have questioned how a person in Taib’s position could legitimately have come by the means to extend such ‘personal generosity’.  As an elected holder of public office Taib’s salary is a matter of public record and (thanks to all his simultaneous positions) it adds up to a perfectly comfortable RM20,000 a month (approximately $10,000 Australian Dollars).  This means that the Malaysia Room alone cost more than double his annual salary.
Only slightly deeper enquiries by the University would have revealed even more concerning issues surrounding Taib’s wealth.  There is no shortage of information and evidence linking the Chief Minister to a vast web of timber corruption that has seen the entire Sarawak Rainforest razed to less that 5% of its original size during his 30 years in office.
In fact, the destruction by companies associated with the regime of Taib Mahmud has developed into a global threat.  Taib-related companies are operating with ruthless and wanton efficiency across the remainder of the Island of Borneo, in Irian Jaya, the Solomon Islands, the Congo Basin, Amazon and Siberia, as reported by numerous NGOs.  What’s more, somewhat closer to home, the Green Party in Tasmania has also been questioning why a Taib-related company has been subsidised to the tune of $8 million by the State to saw down trees for export back to Malaysia, which has now largely been stripped bare?

A crime with numerous victims


The impact of this orgy of destruction has been devastating to the wild life, rivers and eco-systems of what was until very recently the most bio-diverse and intact remaining jungle on the planet.  It has also left hundreds of thousands of native peoples, whose territories have been invaded, without sustenance and, likewise, on the brink of extinction.
Few of the people of Sarawak have received any benefited from the wealth generated by the destruction of their forests.  Instead it is the University of Adelaide that has profited, not from the ‘personal generosity’ of the Chief Minister, however, because it was not his wealth to give, but from the plunder of his people.

Our questions


It was for these reasons that Sarawak Report framed a limited number of questions that we hoped that the Vice-Chancellor would be prepared to answer.  We wished to know if the University holds any ethical guidelines when it comes to the acceptance of donations, and if so how Professor McWha could have concluded that Taib Mahmud was an acceptable partner for Adelaide?
We also requested information about the total extent of the donations which have been received from the University, on the basis that such sums could very well be identified as money laundered from the proceeds of corruption and therefore assets which should lawfully be returned to the people of Sarawak.
Indeed, since the University has made clear on numerous occasions that the donations have been the product of ‘personal generosity’ there can be no question that this is money that Taib Mahmud cannot legitimately account for on the basis of his limited official salary.

More in Australia


Of course, as NGOs have often pointed out, there are plenty of other Taib properties in Australia, adding to the mystery of the Chief Minister’s millions.  The 380 room Adelaide Hilton is one company registered under the names of his children and late wife and there are a string of other properties and enterprises belonging to the Mahmud family elsewhere.
Given  Australia’s own perfectly adequate wealth, would it not be more appropriate for Universities like Adelaide to find funding from legitimate and domestic sources, rather than profit from the exploitation of the poor people of Borneo and offering in return for this gift of much needed credibility to their corrupt Chief Minister?  Surely that credibility should have been denied?
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