GEORGE TOWN (May 3): There is no denying that 1Malaysia Development Bhd (1MDB) was fraught with wrongdoings but they are mostly linked to bad business calls, said its chief executive officer Arul Kanda Kandasamy.
“The Public Accounts Committee said 1MDB has lots of debt, its business model is bad, management is inefficient while the board of directors’ supervision was weak but all that is not criminal wrongdoing but bad business calls,” he said.
As a result, PAC asked the police to investigate 1MDB when the inquiry was still ongoing, Arul told some 400 people at a question and answer session on the state investment fund in Balik Pulau.
“To be clear, I am not saying there is wrongdoing or not but definitely there were business problems but I am not sure if they are civil or criminal wrongdoings. That is up to the investigation by the police, we will have to wait,” he added.
On the payment of a deposit to Aabar BVI, he said acknowledgment was received, and at the same time, there was verification by then-1MDB auditor Deloitte LLP and Abu Dhabi sovereign wealth fund International Petroleum Investment Co (IPIC) over the receipt of the legal deposit and confirmation of that.
“There is a legal agreement with Aabar BVI. The payment was made to Aabar BVI and Deloitte confirms that the deposit was paid there. It was always meant to go there,” he stressed.
However, he said had he been on the management of 1MDB then, he would have questioned the payment to Aabar BVI when the guarantee was given by IPIC.
“If you get a guarantee from IPIC, it should go to IPIC. Why should you pay the deposit to its subsidiary? Usually, if you get a guarantee from someone, we should give the deposit to them, so that it can be legally set-off but this (payment to Aabar BVI) is a contractual set-off, meaning it had to be set off via a contract, which is difficult.
“It should have been a legal set-off, so I would say that this was the weakness of 1MDB which was not clever at doing business (as) I was not there then. (The payment) was not a diversion but should be 'legally set-off’. (A contractual set-off) was not the best structure,” Arul explained.
In 2012, 1MDB issued bonds amounting to US$3.5 billion which saw IPIC coming in to guarantee the principal of the debt. In return, IPIC asked for a collateral or deposit that totalled US$3.5 billion from 1MDB for the bonds.
According to Arul, IPIC asked that the deposit be paid to Aabar BVI but later the US Department of Justice civil suit filed in July 2016 showed that the funds paid to Aabar BVI were allegedly 'misappropriated’ by then IPIC managing director Kadem Abdullah al-Qubaisi, IPIC’s wholly-owned subsidiary Aabar Investments PJS Abu Dhabi chief executive officer Mohamed Ahmed Badawi Al-Husseiny, businessman Low Taek Jho or Jho Low and Prime Minister Datuk Seri Najib Razak’s step son Riza Aziz.
“Here is where Jho Low comes in. He was always with the Arabs (and) never with 1MDB. We are not sure whether he was an agent or a broker but these people are the ones who went ahead to buy paintings, a yacht and properties.
“The Opposition parties criticise 1MDB for not claiming these assets. The thing is the DoJ case has not been heard in court yet. If there is no court decision that proves that the assets are from 1MDB funds, how can we take action?” he said.
Meanwhile, Arul said it would have been 'stupid’ for 1MDB to borrow US$3.5 billion and pay a deposit of US$3.5 billion (to Aabar BVI) at one go.
“The US$3.5 billion deposit was not paid at the same time. The first deposit of US$1.4 billion was paid as a collateral (to Aabar BVI), the second payment of US$1 billion was to terminate the option on 1MDB’s power asset, Edra Global Energy Sdn Bhd and the third payment was a result of 1MDB failing to fulfill conditions that resulted in 1MDB paying a higher collateral of US$1.15 billion.
“So altogether, it came up to US$3.5 billion over three years and due to various reasons as agreement was signed, this had to be paid. It was down to bad business decision,” he added.