This article first appeared in The Edge Financial Daily on May 24, 2018

KUALA LUMPUR: Finance Minister Lim Guan Eng has slammed scandal-ridden 1Malaysia Development Bhd’s (1MDB) president and chief executive officer Arul Kanda Kandasamy for being “utterly dishonest and untrustworthy”, and instructed the ministry’s legal advisers to review his position in 1MDB.

The strong statement came after Guan Eng had a meeting with Arul Kanda yesterday, together with former 1MDB chief financial officer (CFO) Azmi Tahir and former general counsel Ivan Chen.

On the same day, he also met with two 1MDB directors, Datuk Norazman Ayob and Datuk Kamal Mohd Ali, who confirmed that 1MDB was “insolvent” and was unable to repay its debts. Azmi also wrote to the ministry of finance (MoF) in March 2018 saying 1MDB would not be able to service its interest due in April and May this year, Guan Eng said in a press release.

Guan Eng conducted the meetings — the objective of which was to determine 1MDB’s financial status, especially with regard to its ability to repay and service its debts — with three deputy treasurers-general, Datuk Siti Zauyah Md Desa, Datuk Ahmad Badri Mohd Zahir and Datuk Asri Hamidon.

However, Arul Kanda, when asked, said he was on “garden leave” until the end of his contract in June 2018, and so was in the dark as to 1MDB’s financial situation, Guan Eng said.

He also said it is “completely unbelievable that a highly paid and ‘experienced’ investment banker can be so irresponsibly clueless” as to not know whether the fund’s investments worth some RM9.8 billion exist.

Guan Eng was referring to some US$940 million worth of investment “units” previously held with BSI Bank, Singapore, as well as US$1.56 billion worth of overseas investment funds belonging to 1MDB Global Investments Ltd.

“Together, these investments are worth purportedly some RM9.8 billion, which if redeemed, would be more than sufficient to meet 1MDB’s financial obligations for the next few years,” said Guan Eng.

But Arul Kanda claimed all financial matters were handled strictly by the company CFO, and so he has no knowledge as to the value of the investments, or whether they even exist, Guan Eng said.

“Arul Kanda’s response was utterly shocking and preposterous because prior to the change of government, he toured the country preaching the financial viability of 1MDB and the soundness of its investments,” Guan Eng said.

Guan Eng also said Arul Kanda “is today singing a completely different tune” from when he spoke to the Public Accounts Committee and as recorded in the Hansard.

“I have found Arul Kanda to be utterly dishonest and untrustworthy, and instructed the legal advisers to the MoF to review his position as the president of 1MDB,” he added.

On the other hand, Azmi and 1MDB’s board gave contrasting statements with regard to the investments.

Both Norazman and Kamal, who will be supplying the ministry with minutes of 1MDB’s board meetings, claimed they repeatedly disputed the value and existence of these investments during monthly board meetings, said Guan Eng.

“This is because the 1MDB management has repeatedly failed to supply the board with any evidence over the existence of these investments over the past two years. Kamal called these 1MDB investments a ‘scam’,” he said.

But Azmi claimed the investments exist even though BSI has wound up, and gave the “unbelievable excuse that the fund managers refused to communicate with 1MDB in writing because of the ongoing investigations by the US Department of Justice”.

To get to the bottom of 1MDB’s financial affairs, Guan Eng said the ministry will appoint PricewaterhouseCoopers to conduct a special position audit and review of 1MDB to be submitted to the 1MDB Special Committee upon completion. “We would then be able to determine the cost of the shenanigans to the taxpayers,” he added.

On Tuesday, Guan Eng revealed 1MDB has interest payment amounting to RM143.75 million due May 30, and another RM810.21 million due between September and November this year. Under 1MDB’s debt agreement, the government, which has paid RM6.98 billion to bail out 1MDB since April 2017, will have to continue to pay on 1MDB’s behalf if the fund fails to meet its debt obligations.