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:~~~
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]
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
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?
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 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:
- A definitive agreement must be implemented by July 31, 2015
- Transfer of assets at the minimum value of USD1 billion to IPIC/Aabar by Dec 31, 2015
- 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:
- Payments for the Aabar termination of option were not put before the Board for prior approval
- 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
- 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
- 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
- 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.
- 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.
- 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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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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Other stories:
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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]
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
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?
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 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:
- A definitive agreement must be implemented by July 31, 2015
- Transfer of assets at the minimum value of USD1 billion to IPIC/Aabar by Dec 31, 2015
- 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:
- Payments for the Aabar termination of option were not put before the Board for prior approval
- 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
- 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
- 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
- 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.
- 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.
- 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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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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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]
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
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?
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 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:
- A definitive agreement must be implemented by July 31, 2015
- Transfer of assets at the minimum value of USD1 billion to IPIC/Aabar by Dec 31, 2015
- 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:
- Payments for the Aabar termination of option were not put before the Board for prior approval
- 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
- 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
- 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
- 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.
- 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.
- 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.
|
|
|
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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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]
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
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?
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 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:
- A definitive agreement must be implemented by July 31, 2015
- Transfer of assets at the minimum value of USD1 billion to IPIC/Aabar by Dec 31, 2015
- 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:
- Payments for the Aabar termination of option were not put before the Board for prior approval
- 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
- 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
- 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
- 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.
- 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.
- 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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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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