Wednesday, April 22, 2015

Confirmation : 1 MDB transaction generated no cash

by Ganesh Sahathevan

Sarawak Report has just reported   that 1 MDB  banker   "BSI Bank has dismissed documents supplied by 1MDB relating to its Brazen Sky Limited account in Singapore, saying they are false bank statements........ there is no actual cash in the relevant Brazen Sky Limited account."

This confirms the conclusion reached by this writer in an earlier posting about 1 MDB and its financial affairs,titled: 

1 MDB audit: AG must & will find that loss of RM 7 billion in cash was in accordance with proper procedures,accepted accounting practise

In that article 1 MDB's audited 2013 financial statements were presented ,and it was concluded that the transactions 1 MDB's management and directors strenuously  asserted had generated about two billion US dollars in cash, which they said  was eventually placed under 1 MDB subsidiary Brazen Sky Ltd,were  " nothing more than a series of book entries" which 

generated no cash.

In that article it was shown how,despite 1 MDB 

management's assertions, the audited  financial 

statements actually showed that no cash was generated.

The Sarawak Report story seems to have confirmed the 



Sunday, March 29, 2015

Is KPMG being "Enroned"?-Similarities to the Tricontinental matter in Australia

The following is an excerpt from a report by Roger Trapp in The Independent , Wednesday 26 January 1994

THE ACCOUNTANCY firm KPMG Peat Marwick is to pay the Victoria state government Adollars 136m (pounds 63.6m) to settle a court case arising from the collapse of the merchant bank Tricontinental Group.

The Tricontinental case stemmed from KPMG Australia's audit of the accounts of the bank, which collapsed in 1990 with a shareholders' funds deficit of AUD 2.6bn.

At the time the bank was owned by the state government of Victoria , but it was sold to the Commonwealth Bank of Australia after the collapse.

KPMG Australia 's executive chairman, John Harkness, agreed that the deal was the only practical solution to a very difficult situation. 'The sheer enormity of this case made the prospect of pursuing justice through the usual legal channels totally impractical,' he said.

In a sense, Tricontinental  Merchant Bank was to the State Bank Of Victoria what 1 MDB is to the Malaysian Government and taxpayer;an organisation left in the hands of a young "go getter" with little experience but regardless entrusted with the management of billions of dollars of borrowed money, KPMG's  Melbourne partners  handled the audit exclusively, saving the international partners financial embarrassment. However, as the 1 MDB story below illustrates, the Global Partnership would be hard pressed to distance themselves from the Malaysian partners.

Saturday, March 28, 2015

Is KPMG International being "EnRoned"? : Fallout from Malaysia's 1 MDB scandal may cost KPMG USD 10 billion

A new verb, "Enron-ed" was coined by John M. Cunningham, the former Arthur Andersen Director in the Seattle Office, to describe the demise of Arthur Andersen.

KPMG International ,the Swiss Cooperative under which KPMG partnerships worldwide come together to offer audit and other services under the direction of a Global Executive Leadership Team,  has found itself entangled in Malaysia's 1 MDB sovereign wealth fund scandal. 

It appears that in managing the crisis it now faces, KPMG may be managing its 1 MDB documents in a manner similar to  Arthur Andersen and its  documents related to the  Enron assignment which led to the effective demise of that firm which was once considered the gold standard in auditing. 

The Sarawak Report website that has in recent weeks published 1 MDB emails that reveal gross financial impropriety,  recently published email correspondence between 1 MDB and its former auditor, the KPMG partnership in Malaysia,where KPMG has been shown to provide directions  on how 1 MDB's books should be 
re- presented in order to receive an unqualified audit opinion. 

1 MDB is now unable to repay its loans worth USD 10 billion and counting, and it is likely that the company will be liquidated, with its debts assumed by the Malaysian Government which has effectively guaranteed 1 MDB's borrowing.

KPMG International has been queried about its potential liability for the possible if not probable  civil and criminal claims arising from the 1 MDB scandal, and its general counsel Tom Whetered has insisted that the Cooperative offers no client services and has nothing to do with 1 MDB.

However that is a denial based on form for everything in substance says otherwise. To begin with, KPMG International counts as its revenue fees from the Malaysian partnership,and that will include fees from the 1 MDB assignment. In fact its  recently retired chairman , Michael Andrews,  identified Malaysia as a target market for growth when he took on that role.

Then the Singapore managing partner Sai Choy Tham, who is also a member of KPMG International's Global Executive Team , is also Regional Head of Audit, South East Asia.  Mr Tham has been queried about his communication with the KL office with regards the 1 MDB emails revealed by Sarawak Report,and has been asked specifically if communications in the past weeks has included directions about the management of 1 MDB documents. He has refused to confirm or deny that he has issued  directions in that regard, in his capacity as Regional Head Of Audit and member of the KPMG Global Executive Team.
The queries put to Mr Tham were also put to KPMG International chairman John Veihmeyer, who has also chosen to remain silent.

Meanwhile ,KPMG's  partners in Malaysia have , in response to the Sarawak Report expose, insisted that all they have done they have done in accordance with international accounting standards.
Each of the Big 4 has its own auditing procedures that are considered proprietary, and in insisting that the 1 MDB audit was executed in accordance with international standards the partners in Malaysia are really saying that they have acted in accordance with KPMG International's established norms and procedures. 
Put in another way, the Malaysian partners are insisting that they have acted  as directed by KPMG International, even as KPMG International seeks to distance itself from them.

Friday, March 20, 2015

Bombadier announced its $2-3 billion CS100 deal knowing the deal is and remains unfunded

Bombadier Inc , a company listed on the Canadian Stock Exchange, presumably in the interest of keeping the market fully informed, announced on  17 March 2015:
Bombardier Commercial Aircraft and Fly Mojo Sdn Bhd announced today that the parties have signed a Letter of Intent (LOI) for the sale and purchase of 20 CS100 aircraft with options for an additional 20 CS100 aircraft.Based on the list price of the CS100 aircraft, a firm order would be valued at approximately $1.47 billion US, and could increase to $2.94 billion US, should flymojo exercise all its options.

Flymojo is , in relative terms, nothing more than a shell, with a paid-up capital of only USD 1.million, and nothing else. When asked about its funding for the deal the company first claimed to be backed by private equity, but then under interrogation said:
"flymojo is working alongside Bombardier and third parties to source potential financing solutions."
It appears then that Bombadier has made its announcement knowing that the deal is unfunded. It might as well have announced that it was buying Airbus and Boeing all at once. Bombadier and Flymojo initially gave the impression that Flymojo's private equity backers would fund the deal. However, when it was put to company spokeswoman Tan Wai Fun that the size of the deal would require an injection of capital that would in essence swamp the interest of existing shareholders to next to nothing, Ms Tan responded:

I checked, and noted my mistake in the response to the question on aircraft funding.
My apologies for that - the correct response is:
"flymojo is working alongside Bombardier and third parties to source potential financing solutions."
In fact,Ms Tan made no mistake. Managing director, Datuk Janardhanan Gopala Krishnan, told Malaysia's Sun Daily that the company is backed by private equity funds,"   and   "will look into sale and leaseback of aircraft of its fleet in a bid to keep the company asset light." 

It is clear from the differing accounts from the company's CEO and its spokeswoman that the deal is unfunded, and that Bombardier is aware of the fact. Announcing a deal of the given magnitude knowing it is yet to be funded, with a client that is little more than a shell, must cause Canadian regulators some concern.END 

Tuesday, March 10, 2015

Brandis & Sherburn will place the CVE programme above law enforcement: Which one of them will bear greater responsibility when they fail?

The following excerpt is from Australian Public Service's Gazette.It describes what the newly formed Countering Violent Extremism (CVE) Section will do:

Working with community and government partners, we emphasise intervening early – addressing violent extremism before a law enforcement response is required. This critical, internationally recognised work is complex, exciting and rewarding.

The CVE Section is headed by one Anna Sherburn.As her profile suggests, her background is in  human rights (and marketing ,media liaison). Her background is likely to  ensure that intelligence on individuals who are the subject of intervention  will not be conveyed to law enforcement.To do so would contradict her objective.

Regardless, it is more likely than not that the CVE will fail (ask the Malaysians,Indonesians etc etc) and that the general public will suffer the consequences .When that happens, Ms Sherburn, and her Minister, one George Brandis, ought to be held responsible, and not allowed to hide behind public service secrecy.


Anna SherburnAnna Sherburn Profile Picture

Director, Countering Violent Extremism Unit, Attorney-General’s Department

Anna Sherburn is the Director of the Countering Violent Extremism Unit in the Attorney-General’s Department. In this role, she is responsible for coordinating the Australian Government’s approach to countering violent extremism, which involves working with Government, non-government and community partners to enhance Australia’s community cohesion, community engagement and education, address online radicalisation and propaganda and efforts to intervene and divert individuals who are already radicalising to violent extremism to turn them away from ideologies of hatred and violence. Anna’s previous roles been in a variety of fields including human rights and anti-discrimination, media liaison and marketing.
An example of Ms Sherburn's work:


It is important to understand what the radicalisation process looks like, in order for families, friends and communities to help prevent acts of violent extremism.

The radicalisation process

There is no single pathway of radicalisation towards violent extremism, as the process is unique to each person. However, there are some common elements in the experiences of most people who have become radicalised in Australia, regardless of their beliefs or motivations.
These elements include significant behavioural changes in major areas of a person's life including ideology, social relations and criminal activity. If someone is radicalising towards violent extremism, changes can often occur in all three of these areas.
A person's behaviour must also become more intense and extreme over time, when compared with that person's previous or 'normal' behaviour. Their circumstances and environment should also be taken into account.
Increasing religious devoutness or commitment to unconventional beliefs is not the same as radicalisation towards violent extremism.
If there is a valid alternative explanation for the changes in behaviour, these changes should not be considered a sign of radicalisation.
If a person radicalises to the point of promoting, threatening or using violence for an extremist cause, the Australian Government and the wider community have a responsibility to act.

Identifying radicalisation

Most individuals begin the radicalisation process in one of three key areas—ideology, social relations or criminal activity. This normally means that a person's behaviour will noticeably change in one area first, and not across all three areas at the same time, but change in these areas can happen very quickly.
Most people do not go all the way to becoming a violent extremist. Something or someone might interrupt the radicalisation process, and the person does not get to the point of threatening or using violence, and may even reject their radical ideas. When this happens, it is called disengagement. The active involvement of families, friends and the community in this process is very important.
More information on understanding and identifying radicalisation to violent extremism is available in the information sheet:

The APS Advertisement 

Attorney-General's Department
Closing date: Wednesday, 15 October 2014
On 31 October 2013, the Minister Assisting the Prime Minister for the Public Service, Senator the Hon. Eric Abetz,
announced interim recruiting arrangements for the Australian Public Service. As a result of these arrangements only
current ongoing APS employees are eligible to apply for this vacancy. Further information regarding the interim
arrangements is available here: target='Interim arrangements page'>

Vacancy N.N. 10632205
National Security Law and Policy Division
National Security Policy and Capability Branch
Job Title:
Expression of Interest (APS Employees Only) - Senior Policy Officer
Non-ongoing (Temporary), Full-time
Barton - ACT
$95,154 - $115,778
Executive Level 1
Position No:
Job Description
Please quote reference number 492483-EOI-NSRPD.
To obtain a copy of the Vacancy Information Kit for this vacancy, please click on the ‘Apply Online’ button at the bottom of this
The Countering Violent Extremism (CVE) Section is responsible for delivering the Government’s new CVE programme. Our
vision is to reduce the risk of home grown terrorism by strengthening Australia’s resilience to radicalisation and helping individuals disengage from extremist influences and beliefs.
Working with community and government partners, we emphasise intervening early – addressing violent extremism before a law enforcement response is required. This critical, internationally recognised work is complex, exciting and rewarding.
As a Senior Policy Officer, you would be responsible for driving the development and national roll-out of an intervention
framework that is focussed on supporting individuals to deradicalise and disengage from violent ideologies by connecting them
with support services and diversion activities.

We are seeking an experienced and highly motivated officer with excellent interpersonal skills and a strong ability to drive
projects and work in a collaborative way with governments, academics and community stakeholders. Some of the tasks that
the Senior Policy Officer will be involved in include:
- securing State and Territory agreement to an implementation plan for a high profile new policy
- developing funding and performance agreements with service providers
- working with researchers and community groups on the development and roll-out of assessment tools
- engaging with communities, local institutions and families to ensure that they are well-informed and equipped to prevent
Australians from being willing to support or participate in overseas conflicts
This vacancy can only be filled through a temporary assignment of duties at the same or higher classification (not a promotion).
Non-ongoing opportunity will be offered for a specified term
This non-ongoing opportunity will be offered for a period of up to 8 months.
**Please note that this opportunity is only available to current Australian Public Service employees.**
About Attorney-General's Department
Australian Public Service Gazette
No. PS40 - 09 Oct 2014
Page: 3 of 110
Page 4
The Attorney-General’s Department serves the people of Australia by working to achieve a just and secure society. The
Department provides expert advice and support to the Australian Government to maintain and improve Australia's system of
law and justice and its national security and emergency management systems as well as providing support for cultural affairs,
including movable cultural heritage and support for the arts. The Department’s work covers a broad array of policy and program
initiatives, including protecting human rights, combating organised crime, enhancing our counter-terrorism arrangements,
improving access to justice, emergency management and support for cultural heritage.
The Department is the central policy and coordinating element of the Attorney-General's portfolio, for which the Attorney-
General and Minister for the Arts; and the Minister for Justice are responsible. We encourage and value a diverse workforce
and offer a wide range of challenging and exciting career opportunities.
To find out more, visit our website at or email
To Apply
Selection Documentation:
HR Assist, (02) 6141 3333,
Position Contact:
Anna Sherburn, (02) 6141 4107
Agency Recruitment Site:
This notice is part of the electronic Public Service Gazette PS40 - 09 Oct 2014 Published by Australian Public Service
Applicants to vacancies notified in all formats of the electronic Public Service Gazette should be aware that the names of
successful applicants will also be notified in all formats of the electronic Public Service Gazette

Monday, March 09, 2015

Goldman Sach's Roger Ng," leaves behind a controversial legacy with regard to 1MDB.": He should be found,and questioned by the Malaysian AG's 1MDB task force

As written  by Jonathan Green of IFR Asia:

It emerged last week that a gentleman called Roger Ng has departed from Goldman Sachs, where he had most recently headed up South-East Asian sales in the US titan’s fixed-income, currencies and commodities unit. It’s no secret that Goldman has done rather nicely from its fixed-income business in Malaysia, and Mr Ng’s connections within the country are often hailed as the root of those successes. There’s no doubt, however, that he leaves behind a controversial legacy with regard to 1MDB.

It is hard to see how, when even the Malaysian Prime Minister Najib is being investigated with regards the 1 MDB scandal, Mr Ng is not. He needs to be found and interrogated. 
The US Government ought to cooperate in the matter, if it is in fact serious about fighting corruption.

Sunday, March 08, 2015

US criticised for not probing Goldman Sach’s role in 1MDB


The Foreign Corrupt Practices Act of 1977, as amended, 15 U.S.C. §§ 78dd-1, et seq. ("FCPA"), was enacted for the purpose of making it unlawful for certain classes of persons and entities to make payments to foreign government officials to assist in obtaining or retaining business


Goldman's client in this case was the Malaysian Government and/or an agency it owns and controls, 1Malaysia Development Bhd.

US criticised for not probing Goldman Sach’s role in 1MDB

1 MDB audit: AG must & will find that loss of RM 7 billion in cash was in accordance with proper procedures,accepted accounting practise

The outcome of the 1 MDB audit ordered by the Prime Minister,and which is to be undertaken by the Auditor-General must and will conclude that the loss of some RM 7 billion in cash from or via 1 MDB was really in accordance with proper procedures,accepted accounting practice ,and therefore the company and its directors are free of blame.

The reasons are simple.
First, the RM 4 billion borrowed from the KWAP and  funneled  by 1 MDB into its FORMER  subsidiary , SRC International Sdn Bhd.
Now, this is really a non-issue,for SRC was "de-merged" and is no longer a 1 MDB subsidiary, so really it is no longer of any concern to anyone
auditing 1 MDB. However, for those who insist, really, can you say that 1 MDB's directors have been negligent in getting rid of a RM 4 billion liability?
Did the de-merger not add value to the company,and hence in its best interest?  Need we explain the basics of good governance? 
(See reports below) 

Next, that USD 700 million (about RM 3 billion) that is supposed to have been funneled via Petrosaudi to one Jho Low. The dealings of some Saudi company are beyond jurisdiction ,and in any case, that entire transaction has been accounted for in the 2013 financial statements. That the public and others with no knowledge of accounting and who cannot otherwise understand English and basic arithmetic  cannot see this and choose instead to rely on website reports is not of concern. The accounting of that transaction is so straightforward:  

a) In the Notes to the Accounts,in particular  Notes  18,19 and 30 ,the details of the 1 MDB PetroSaudi loan are provided,and it is clear that the transactions were all executed and completed in the year ended 31 March 2013
Therefore, everything about that transaction ,or series of transactions, should be detailed in the 2013 financial statements

b)Note 18 on Page 86 says that in 2012 there was a revaluation loss of  RM 516 018,000.This is due to an accounting procedure ,where cashflows from the notes are revalued according to current market interest rates (which is different from the interest payable on the notes) .So,in 2012 applying that procedure the notes had to be devalued,hence therevaluation loss of  RM 516 018,000.
This however is a paper loss (ie no money has been lost selling the notes),so in the Statement Of Cash Flow, that figure is backed into profit,to reflect the fact that no cash was lost.

c) However, also in  the cash flow statement on page 17 a sum of RM 510,578,000 in Mudaraba profits has beenbacked out..Note that this is not the opposite of the above, and note  that there is a difference in terminology, ie "Mudaraba revaluation loss" vs  "Mudaraba profits". 

d)So, what are these  "Mudaraba profits"?
They are, as explained in Notes 18,19 and 30,  and are clearly the profits from the Mudaraba notes issued by 1 MDBPetroSaudi .
However, Arul Kanda and 1 MDB all say that the profit was RM 1.78 billion ,that is about  RM 1.2 billion short of what is implied in the Statement of Cashflow,

e) In addition,this is a PAPER profit .So, it does appear that  no cash profit was  generated from the transaction.That would explain why 1 MDB is having trouble showing us the money from that deal.

f) Could it be, for the sake of argument,  that the RM 510,578,000 in Mudaraba profits was only the paper portion of the profit,and that the actual profit included a RM 1.78 billion cash profit,for a total profit of approximately RM 2.3 billion?

g) To confirm if that is true, we look at the Net Cash From Operations (ie cash from running the business) on Page 18-and we see that the number is only RM 762,930,000.We also know  that almost all of that came from the power stations. 

h)Then,perhaps, 1 MDB considers the profit from the notes to be profit from investment activities. To test that proposition we look at Page 19,and there is nothing there to support that proposition. Instead what we do see is  that in 2012,1 MDB contributed a RM 1,018,000,000 to an investment in a Mudaraba facility -one assumes this is the same 1MDB PetroSaudi facility.

So, in conclusion, it does seem  that no  cash was ever received from PetroSaudi,and that the profit from the Notes,was only  a paper profit,,and that profit  was only RM RM 510,578,000.

Meanwhile, books must balance,and anything lost must be accounted for.
So far we know that the "investment" in PetroSaudi was "converted" into Murabaha Notes. To support that assertion one can see from the  Balance Sheet  on Page 13 , that 1 MDB held RM 5,710,215,000 in Murabaha Notes as at 1 April 2011.

However, while Note 19 says that the Murabaha Notes are now classified "investments held for sale", there is no such item on the balance sheet.
The figures for investments and other assets held do not reflect anything near RM 5 billion,EXCEPT for one item, and that is "Amount Due From Subsidiaries". 

As one can see that figure , compared to the previous year, has grown by approximately RM 5 billion, suggesting that there has been a BOOK ENTRY moving the  RM 5,710,215,000 in Murabaha Notes to "Amount Due From Subsidiaries". 
Note 28 which provides details of the item  "Amount Due From Subsidiaries" does not say which or what subsidiaries, but there is a clue in the the currency exposure profile, where it is disclosed that the US dollar exposure (in Malaysian Ringgit) is RM 7 118 578 ,000 ie the bulk of that sum.
I cannot think of any other 1 MDB subsidiary except 1 MDB PetroSaudi that has been extended a facility of that size.Note also that 1 MDB PetroSaudi appears to still be a subsidiary, even if it is dormant.There is nothing to suggest that it has been liquidated. 

Therefore, the  above taken together suggests  that the Murabaha Note "redemption" was nothing more than a series of book entries. In other words, whatever cash was contributed to 1 MDB PetroSaudi is lost for good.
The 2013 financial statements were audited by Delloites ,who have certified that the statements have been prepared in accordance with accepted account practice, and provide a true and fair view of 1 MDB's financial position.



Where did RM4 billion for Putrajaya’s SRC International go, asks DAP

Published: 16 October 2014 1:52 PM

Tony Pua said it was puzzling that the finance minister could not be specific about the business SRC International was involved in. – The Malaysian Insider pic, October 16, 2014.Prime Minister Datuk Seri Najib Razak must explain what has happened to a RM4 billion loan secured by a wholly-owned subsidiary of the Ministry of Finance, which failed to submit its annual accounts on time, a DAP lawmaker said today.

Petaling Jaya Utara MP, Tony Pua said SRC International Sdn Bhd had secured a RM4 billion Islamic loan from the government's pension fund, Kumpulan Wang Amanah Persaraan (KWAP), and which was guaranteed by the federal government.

The loan was disbursed in two tranches in August 2011 and March 2012.

However, Pua said that despite the size of the loan, SRC's financial accounts were last filed for the year ending March 2012.

He said the accounts for March 2013 which were due by September 2013 have yet to be submitted.

"Why is it so difficult for a company with hardly any activity other than a mega loan to submit its financial statements to the authorities?” he asked in his statement today.

Pua said the reply to from the Finance Minister to his parliamentary question stated that the company was set up to handle a “few stragetic national infrastructure projects”.

It also stated that “SRC was a strategic company with a long-term view to implement strategic infrastructure projects that will double the country's efforts to spur sustainable, long-term growth”.

Pua said it was puzzling that the finance minister could not be specific about the business SRC was involved in.

"There were, however, no reasons given for the delay in submitting the accounts, other than to say that the financial statements for both March 2013 and 2014 will be submitted before the end of October," he added.

Pua said another cause for suspicion was the fact that SRC was hastily acquired from 1Malaysia Development Bhd (1MDB) in February 2012, after the RM4 billion was fully disbursed.

"Why did 1MDB raise the RM4 billion government-guaranteed loan via SRC, and then why did MOF take over SRC so soon after the RM4 billion loan was fully disbursed?," he asked, adding that the same question did not get a reply from the finance minister.

Pua added that failure by the government to provide transparent answers could only lead to speculation that there was serious financial breach or misappropriation of the RM4 billion loan to SRC, which could not be reflected in the consolidated accounts of 1MDB.

"What has happened to the RM4 billion since March 2012?

"Datuk Seri Najib Razak, who is both the finance and prime minister, as well as the chairman of 1MDB, must answer this question," Pua said.

He added the lack of governance, transparency and accountability from the wholly-owned government corporation chaired by the prime minister himself was shocking and disgraceful.

"Such behaviour serves as a terrible example to all other government agencies," he said, adding that this could also have caused the delays in the submission of 1MDB’s March 2013 accounts and the resignation of its auditors then, KPMG Malaysia.

"To resolve this conundrum, MOF “acquired” SRC so that problems in SRC will not be reflected in 1MDB’s books.

"However, as the problems in SRC remain, the company is unable to submit its financial accounts since March 2012," he added.

It was reported that 1MDB only submitted the annual report for financial year ended March 2013 in April this year and the accounts were only finalised after 1MDB dropped its auditors KPMG just months before that, and appointed Deloitte to complete the annual audit.

Yesterday, the government confirmed the award of the 2,000mw combined cycle gas power plant in Malacca to the sovereign wealth fund via direct negotiations.

Earlier this year, 1MDB won the RM11 billion, 2,000mw coal-fired power plant project known as 3B, which was renamed Jimah East, in a controversial open tender.

It also secured a 50mw solar project on a direct award basis.

On Tuesday, Pua lambasted the third successive award of the multi-billion ringgit power contract to 1MDB this year, conveniently ahead of its planned listing.

“The rapid succession of the multibillion power producing contracts awarded to 1MDB proves that the government is pulling all stops to ensure the viability of the initial public offering (IPO) of 1MDB Energy Sdn Bhd, which was postponed twice due to unattractive valuations.

“Basically, what it means is that there is not enough value in 1MDB. [So] the government keeps giving [it] new contracts to create value in 1MDB to make sure 1MDB Energy Sdn Bhd becomes a viable listing option,” Pua said. – October 16, 2014.

- See more at:

SRC International no longer subsidiary, 1MDB tells PKR’s Rafizi


Published: 14 January 2015 3:36 PM

PKR's Rafizi Ramli claimed that SRC International took a RM4 billion loan in 2011 from the pensions fund to purchase a mining company in Mongolia. – The Malaysian Insider file pic, January 14, 2015.SRC International Sdn Bhd is no longer a subsidiary of controversial 1Malaysia Development Berhad (1MDB) as it was "de-merged" from the government-linked strategic development company three years ago.

Responding to PKR secretary-general Rafizi Ramli's claim that SRCInternational had taken a RM4 billion loan in 2011 from the Retirement Fund Incorporated (KWAP) to purchase a mining company in Mongolia, 1MDB said since the divestment, its former subsidiary is now an independent company.

"SRC International Sdn Bhd was de-merged from 1MDB in February 2012, almost three years ago, and has operated as an independent company since then.

"We understand that SRC’s audited accounts are filed with Companies Commission of Malaysia,

documents that are available to be viewed by the public, and would refer the honourable MP to these for any information he seeks on the company's financial or operational performance," 1MDB told the Pandan MP in a brief three paragraph response on its blog today.

Yesterday, Rafizi alleged that his investigations into the matter revealed that SRC International did not exist, raising questions of where the money was actually spent.

"Initially, the money was meant for buying a mining company called Gobi Coal & Energy as an investment in Mongolia, as reported in the Business Times," he said at a press conference.

"The investment has not happened until now and it is not known how the RM4 billion was spent."

1MDB has come under fire from Rafizi and other opposition politicians as well as influential former prime minister Tun Dr Mahathir Mohamad over the fund's heavy debts its use of money and its opaque operations.

There were concerns over the firm’s burgeoning debts estimated at some RM40 billion, just five years into its operations, amid softening of the ringgit against the US dollar.

Penang Umno leader Datuk Seri Khairuddin Abu Hassan had also lodged a police report late last year against the company over its alleged dubious financial activities and massive borrowings.

However, the company's newly appointed group executive director, Arul Kanda (pic, right), told The Malaysian Insider that the string of attacks were mostly politically driven and not "grounded in reality".

The high-flying banker said it was quite clear most of the allegations directed at the company were driven more by politics, rather than genuine business considerations.

Without naming them, Arul said "certain individuals" who were not privy to the company's operations, and who do not have the full facts or understand the context of decisions made by 1MDB, have been at the forefront of these attacks.

"I’ve stated this before but, as a banker, I take due diligence very seriously. As such, when considering whether to take on this role, I examined every piece of information I could find about 1MDB, including numerous media reports concerning allegations directed at the company.

"Subsequently, I had the opportunity to hold in-depth discussions with the Board, and I have personally looked into the background of the issues covered by these allegations as well.

"On the back of this, what I can tell you is that whilst there are certainly some challenges that we will need to – and can – overcome, the majority of the allegations directed at the company have no grounding in reality," he said in an email reply to The Malaysian Insider last week. – January 14, 2015.