This article first appeared in The Edge Malaysia Weekly, on April 11 - 17, 2016.

Since April 2014, The Edge has published numerous articles on various aspects of the issues that were engulfing 1 Malaysia Development Bhd (1MDB). We were criticised by 1MDB, most notably by its current CEO Arul Kanda Kandasamy. We were even suspended for three months — a decision that was eventually overturned by the courts.

We have always stood our ground that our stories accurately reflected what had happened and the problems faced by 1MDB. Here, we would like to highlight the various matters that were brought up in the Public Accounts Committee (PAC) report and how The Edge reported on them previously.

1.PAC says the RM5.0 billion AmInvestment Bank bond issued by 1MDB in 2009 was originally objected to by the board of directors (BOD) of Terengganu Investment Authority Bhd (TIA) because they were not happy with the terms. However, TIA CEO Datuk Shahrol Azral Ibrahim Halmi went ahead on the advice of Low Taek Jho, better known as Jho Low.

The Edge reported: We questioned why a government-guaranteed bond had to be issued at a 12% discount, which gave the bonds a yield of 6.68%, compared with a typical yield of 4%.

2.PAC says the joint venture with PetroSaudi International Ltd was fraught with so many issues, such as the lack of proper valuation of the assets that were to be injected into the JV company and that the valuation report was carried out too quickly. PAC also says 1MDB could not provide any documented evidence of the assets and the ownership.

The Edge reported: We provided documented evidence of email trails showing that it was PSI that appointed Edward Morse on Sept 20, not 1MDB, and that PSI did not own the assets, but only had an option to farming rights in Turkmenistan owned by Buried Hill (this was confirmed by PAC).

This option was terminated in January 2010, so when the auditors (EY) wanted to audit the JV’s assets, they were terminated. This was because no such asset ever existed in the books of the JV company.

And subsequently, on March 31, 2010, the last day of the financial year, 1MDB sold its 40% stake in the JV in exchange for Murahaba Notes issued by a little-known PSI subsidiary, PSOSL.

3.The US$700 million paid to Good Star Ltd. According to PAC, both the JV company, 1MDB-PSI (BVI), and PSI Cayman were incorporated on Sept 18, 2009. The claim is that PSI Cayman advanced a loan of US$700 million to 1MDB-PSI on Sept 25 and five days later, PSI Cayman demanded the return of the US$700 million.

1 MDB remitted the cash directly to Good Star’s account at RBS Coutts on Sept 30, 2009. PAC says Good Star was not a party and should not have been paid and the 1MDB BOD did not approve the payment.

The Edge reported: We said that Good Star did not belong to PSI at that material time and that Good Star’s chief investment officer then — Seet Li Lin — was an employee of Jho Low.

Further, if the US$700 million loan was genuine, the accounts of the JV company with JP Morgan (Suisse ) SA would have captured an entry of US$700 million cash. We dare say that no such transaction ever appeared in the JV company’s accounts.

4.The US$1.4 billion deposit to IPIC/Aabar for co-guaranteeing the US$3.5 billion bonds. PAC says the 1MDB BOD did not approve this payment and that there was no evidence that Aabar Investments PJS Ltd was a subsidiary of IPIC.

The Edge reported: We questioned the economic logic of such a deal and the subsequent payment of US$1 billion to cancel an option to subscribe for shares in the listing of 1MDB’s power assets. A 49% option cannot be worth US$1.0 billion.
 

5.PAC says that 1MDB took a huge risk investing US$2.32 billion (the supposed cash in the Caymans) through Bridge Global Absolute Return Fund SPC, which was a one-month-old company without a licence as a fund manager and no experience in managing such a huge amount. 

The Edge reported: Bridge had a chequered history and we questioned why 1MDB did not place the money with more reputable funds. We also said that the fund was high risk and its prospectus stated that investors could lose all their money.

6.Finally, PAC laid the blame on the management led by Shahrol for the mess at 1MDB but also criticised the BOD for failing in their duty.

The Edge reported: Shahrol and 1MDB’s BOD must explain the various questionable multibillion- ringgit transactions between 2009 and 2013.

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