KUALA LUMPUR: SRC International Sdn Bhd is no longer a subsidiary of controversial 1Malaysia Development Bhd (1MDB) as it was “demerged” from the government-linked strategic development company three years ago.

Responding to PKR secretary-general Rafizi Ramli’s claim that SRC International had taken a RM4 billion loan in 2011 from Kumpulan Wang Persaraan (Diperbadankan) 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 demerged 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 the 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 yesterday.

On Tuesday, 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 and 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 the softening of the ringgit against the US dollar.

Penang Umno leader Datuk Seri Khairuddin Abu Hassan 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 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 while 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. — The Malaysian Insider

This article first appeared in The Edge Financial Daily, on January 15, 2015.