KUALA LUMPUR (March 17): The DAP’s today chided Second Finance Minister, Datuk Seri Johari Abdul Ghani for suggesting that the debts of a company’s wholly-owned subsidiaries are not the debt of the parent company.
In a statement today, Pua who is DAP national publicity secretary and MP for Petaling Jaya Utara said Johari had himself confirmed several facts the opposition lawmaker had raised.
Pua said:
1. The Minister confirmed that real estate owned by the Government was sold to 1Malaysia Developent Bhd (1MDB) at “nominal” prices. A check on 1MDB financial statements would show that the 70-acre Tun Razak Exchange (TRX) land was priced at RM64 per square feet (psf) for a total of RM194 million, while the 486-acre Bandar Malaysia was at RM72psf for a total of RM1.67 billion.
2. The Minister concurred that the 1MDB real estate companies took loans amounting to RM800 million from SOCSO and another RM2.4 billion worth of sukuk for Bandar Malaysia.
3. The Minster also confirmed that the above debts amounting to RM3.2 billion are no longer under the books of 1MDB as they have been assumed by the Ministry of Finance (MOF).
“The question is, how else to describe the above transactions other than a bailout? The Government granted these parcels of land at “nominal prices” to 1MDB, but when effectively less than 50% of these parcels of land were ‘returned’ to the Government, they came with an attached liability of RM3.2 billion?”
Pua said Johari had failed to mention the fact that 1MDB has sold 30.5 acres of TRX and 40% of Bandar Malaysia for RM3.5 billion and RM7.8 billion respectively where the proceeds are due entirely to 1MDB.
“None of it went towards the settlement of these debts. So why is it that 1MDB gets to keep all the astronomical profits, while the Ministry of Finance is left to carry all the liabilities in their entirety?,” said Pua.
He said Johari tried to wriggle his way out of it by claiming that the above were merely the “operating debts” of the real estate subsidiaries.
“Malaysians fail to understand his convoluted argument that “there is therefore a clear distinction between 1MDB debts, which will not be taken over by MOF Inc, and the BMSB/TRXC project company operating debt, which are part of the assets and liabilities of the company…”
“I hope that Dato’ Seri Johari, who was formerly a corporate man himself, did not actually draft the statement because it makes no financial sense. No Finance Minister worth his salt would argue that the “operating debts” of a wholly-owned subsidiary does not belong to the parent company’s accounting books,” he said.
Pua said Johari might do well to consult 1MDB’s newly appointed auditors, Parker Randall for an accounting opinion before issuing such statements.
“The 1MDB CEO, Arul Kanda himself, confessed to the Public Accounts Committee that due to cashflow difficulties within the 1MDB group, these funds were “diverted” from their intended purposes.
“Hence while the intent of the RM3.2 billion of borrowings was perhaps “operational” as emphasized by the Second Finance Minister, in reality, the overwhelming bulk of the borrowings was brazenly utilised for “non-operational” purposes,” he said.
Pua said therefore, using Johari’s own argument, since more than RM2.8 billion of the borrowings were “non-operational” in nature, 1MDB must pay back these “advances” to MOF.
“Otherwise, it’s a triple-whammy for the Malaysian tax-payers – where (1) 1MDB made multi-billion ringgit profits from nominally priced land from the Government to partially cover up tens-of-billions of ringgit of losses from other 1MDB transactions; (2) the Government takes back less than 50% of the land attached to a RM3.2 billion liability and (3) the RM3.2 billion borrowed was never invested in the land in the first place, which means that MOF itself has to further invest in the projects to realise their value.
“The Malaysian tax-payers cannot be more screwed and victimised than the extra-ordinary bailout that is taking place right before our very eyes,” he concluded.