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‘No misappropriation, only administrative weakness’ in 1MDB

KUALA LUMPUR — Despite the dragnet tightening around 1Malaysia Development Bhd (1MDB), Malaysia’s Finance Ministry yesterday insisted that there was no misappropriation but only administrative weakness in the state investment firm.

KUALA LUMPUR — Despite the dragnet tightening around 1Malaysia Development Bhd (1MDB), Malaysia’s Finance Ministry yesterday insisted that there was no misappropriation but only administrative weakness in the state investment firm.

However, 1MDB will be barred from borrowing public funds, Deputy Finance Minister Johari Abdul Ghani said in Parliament amid growing calls from opposition members for accountability over the saga.

“It is our responsibility to ensure that 1MDB does not borrow any money from public funds again after this,” Mr Johari said yesterday, adding that 1MDB has a “wrong business model”, that saw it relying on loans to conduct business.

Mr Johari did not, however, specify if this meant taxpayers’ monies or loans from government-linked corporations such as Employees Provident Fund and Retirement Fund Incorporated. He said the government has acted on the recommendations made by the Public Accounts Committee , including requesting the police to investigate the company’s management.

“I would like to state here that based on investigations by the police, action will be taken against any member of the management or board of directors if proven guilty of wrongdoings.”

In a parliamentary written reply to an opposition lawmaker, the finance ministry cited a report by the bipartisan PAC that was probing 1MDB for alleged financial irregularities.

“The PAC report stated that there is no misappropriation or disarray in the administration of 1MDB, but it instead has weakness in its administration,” said the ministry.

Speaking to reporters later, Mr Johari said 1MDB will be dissolved once it pays off its debts. The firm currently has debts totalling RM50 billion (S$16.8 billion) as of January, as opposed to its assets of RM53 billion. He also said the government would stand on 1MDB’s RM5 billion Islamic sukuk bonds, which is guaranteed by Malaysia.

“1MDB debts, you have RM5 billion sukuk guaranteed by the government, whatever it is we try to match the future revenue. A guarantee is a guarantee. If anything happens, the government has to stand on the guarantee; that is our sovereignty’s credibility, we have to protect that.

“If you make (a) mistake, (it) doesn’t mean you have to destroy the country. We take note of the mistake and make sure it doesn’t recur. We cannot allow the country’s sovereignty to get affected,” he said.

1MDB, which was founded by Malaysian Prime Minister Najib Razak in 2009 shortly after he came to office, is being investigated in at least six countries, including in Switzerland, the United States and Singapore over allegations it was used to funnel money to politically-connected individuals.

In April, the PAC investigating 1MDB identified irregular transactions by the firm. It recommended the fund’s advisory board, which Mr Najib chaired, be disbanded. Both 1MDB and Mr Najib have denied any wrongdoing.

Mr Najib has been under pressure to quit following the alleged financial irregularities in 1MDB as well as US$681 million (S$939 million) deposited into his personal bank account. The Malaysian attorney general’s office in January cleared Mr Najib of any criminal offences or corruption, declaring that the money deposited into his personal bank account was a gift from Saudi Arabia’s royal family.

A Swiss private bank BSI, which has dealings with 1MDB, was ordered shut by the Monetary Authority of Singapore on Tuesday, citing serious breaches of anti-money-laundering rules.

On claims that 1MDB is the cause of the closure, Mr Johari said yesterday “we don’t have much dealings with BSI anyway. BSI is a bank that also has problems with other country’s sovereign fund, so it is not just 1MDB”.

However, opposition Democratic Action Party lawmaker Tony Pua urged the Malaysian government yesterday to announce steps to recover US$940 million 1MDB had deposited into BSI.

“We call upon 1MDB and the Minister of Finance, Datuk Seri Najib Razak, to explain steps which will be taken to withdraw the assets from BSI and which bank they will move these assets to,” he said in using Mr Najib’s honorific title. AGENCIES

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