Declassified 1MDB audit report reveals mess in management, S$14 billion needed to service loans

KUALA LUMPUR — Malaysia state fund 1Malaysia Development Bhd (1MDB) would need around RM42.26 billion (S$14.3 billion) to pay off the principal cost and interest of loans maturing between November 2015 and May 2039, a Malaysian audit of the fund that was declassified on Tuesday (May 15) showed.

The report added that senior 1MDB officials also withheld information from its board and took some decisions without the board's approval.

In the executive summary of its declassified audit report, the National Audit Department said 1MDB would need massive funds to pay off its borrowings in several years: RM4.88 billion in 2016, RM14.74 billion in 2023, and RM5.14 billion in 2039.

It said 1MDB would also need RM1.52 billion each year between November 2015 and May 2024 to pay off its loans.

The department found as of October 31, 2015, the balance of 1MDB Group’s loan or investment principal was RM55 billion, compared to its asset of RM58.6 billion.

It said 1MDB had raised a capital of only RM1 million, indicating its “instability” because it had to procure loans to fund its activities.

Earlier on Tuesday, the Auditor General Madinah Mohamad had declassified the report prepared by her predecessor, Mr Ambrin Buang. 

Former prime minister Datuk Seri Najib Razak had ordered Mr Buang to perform the audit during the early days of the 1MDB scandal when the fund's financial troubles were being investigated.

Mr Buang initially said his report would only be classified for the duration of a separate parliamentary audit committee’s inquiry into 1MDB, but the document was kept a secret even after the parliamentary watchdog tabled its own report in Parliament. 

Malaysia, under former Prime Minister Datuk Seri Najib Razak, had classified the audit report in early 2016 under the Officials Secrets Act. 

Reports had emerged by that time that about US$700 million (S$937.01 million) said to be linked to 1MDB had gone to Datuk Seri Najib's personal bank accounts. He denied any wrongdoing and the attorney general cleared him following local investigations that found that the amount was a donation from Saudi Arabia.

After Datuk Seri Najib lost last week's election, new Prime Minister Dr Mahathir Mohamad said he would reopen investigations into 1MDB and declassify the audit report.

He barred Datuk Seri Najib and his wife from leaving the country, and has replaced the attorney general who cleared the former prime minister.

"In several instances, the 1MDB management had presented incomplete or inaccurate information to the 1MDB board before an important decision was made and had taken action without the approval of the 1MDB board," according to the audit report's executive summary.

Between 2009 and 2015, several decisions involving high-value investments were made through 1MDB board resolutions without detailed discussion or evaluation, the report said.

Several high-risk investments were made in a very short time, and the 1MDB management went against the board's and the shareholders' wishes in some instances, it said.

"There were also instances where the 1MDB management gave inaccurate or different information to interested parties," the report said.

The US Department of Justice has filed civil lawsuits alleging that over US$4.5 billion was misappropriated from 1MDB by high-level officials and their associates.

The lawsuits seek to seize about US$1.7 billion in assets, including a luxury yacht and paintings, that were bought with 1MDB funds.

1MDB is under investigation in at least six countries, including Switzerland, where federal prosecutors on Tuesday said they were seeking quick talks with the new Malaysian government on how to press forward with its investigations.

“After the latest developments in Malaysia the Office of the Attorney General of Switzerland (OAG) is very much interested in renewing dialogue with the competent authorities in Malaysia," an OAG spokesman said by email. 

"In order to establish the most efficient form of cooperation and to ensure good coordination of the criminal investigations, the OAG favours an exchange between partnering authorities at their earliest convenience.” Agencies