New controversy engulfs 1MDB over ‘missing’ payment

KUALA LUMPUR — State investment firm 1Malaysia Development Berhad (1MDB) looks set for fresh controversy after The Wall Street Journal (WSJ) reported today (Sept 18) the troubled company had failed to transfer US$993 million (S$1.38 billion) to a Middle Eastern sovereign fund for a power assets deal, allegations the firm refuted in a strongly worded response.

Calling WSJ’s report “poorly sourced and sensationalist”, 1MDB said given the severity of the ­“unproven allegations, the malicious insinuations made and the impact on” 1MDB, the newspaper should have the decency and courage to name its source and/or provide proof. 1MDB said the “clear errors and wrong facts” ­also raise ­“serious questions” about WSJ’s quality of journalism.

WSJ had alleged Abu Dhabi officials are asking whether 1MDB has paid US$993 million to the International Petroleum Investment Company (IPIC) for the deal. Referring to a copy of a draft Malaysian Auditor-General report WSJ claimed it saw, the publication highlighted how 1MDB said it transferred nearly US$1 billion to an IPIC unit last November as partial payment for the options to buy a stake in some power assets. 

However, WSJ noted neither the ­financial records of IPIC — nor wholly owned subsidiary Aabar ­Investments — for last year, mention receipt of the money. “They say only in a footnote that, as of the end of 2014, 1MDB owed IPIC US$481.3 million in outstanding payments for the options,” it said. 

“No substantial amount of money was received by IPIC, the people ­familiar with the matter said,” according to WSJ, adding it was unclear how the Abu Dhabi firm came up with the US$481.3 million sum, nor how it is linked to the US$993 million transfer.

The missing US$993 million is the second payment 1MDB claimed has been made to IPIC, but with the latter saying it did not get funds. Last week, WSJ said Abu Dhabi officials were asking why a US$1.4 billion transfer 1MDB said it made to IPIC was not received. WSJ cited a draft ­report by the Auditor-General on 1MDB as well as a transcript of proceedings by the Malaysian Parliament’s Public ­Accounts Committee (PAC) investigating ­almost RM42 billion (S$13.9 billion) of debt incurred by the firm.

1MDB issued a statement on the same day last week in response to the ­report, expressing its concern over an ­alleged leak of PAC hearing information, which it believes is an attempt to “pre­judice the PAC investigations and ­deny 1MDB its right to due process”.

The business link between 1MDB and IPIC was established in 2012 when the latter agreed to guarantee US$3.5 billion worth of ­1MDB-issued bonds to finance the purchase of power plants. In exchange, IPIC was ­allowed to purchase a 49 per cent stake in those power assets.

In September last year, Second ­Finance Minister Ahmad Husni Hanadz­lah announced 1MDB would receive a US$1 billion injection from IPIC and Aabar ­Investments. This helped 1MDB pay off a US$975 million loan that was ­being recalled ahead of its due date by international bank lenders, thereby averting the scenario of defaulting by the state investor.

WSJ alleged in July that nearly US$700 million had been funnelled through 1MDB-linked companies ­into the personal accounts of Prime Minister Najib Razak, two months before the 2013 general election. Mr Najib has repeatedly denied any misappropriation of funds, while the Malaysian Anti-Corruption Commission stated last month the money was a political ­donation from the Middle East. 

Increasing global scrutiny over 1MDB has prompted several government agencies to conduct their own ­investigations. On Monday, Switzerland’s federal prosecutor said Malaysia had agreed to arrange for Swiss investigators to interview witnesses in their probe of alleged corruption and money laundering related to 1MDB. AGENCIES