PAC inquiry on 1MDB to follow after Auditor-General findings

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KUALA LUMPUR (Mar 5): The Public Accounts Committee (PAC) said the results of the Auditor-General's audit of the debt-ridden 1Malaysia Development Berhad (1MDB) accounts will form the basis of its own inquiry into the company’s activities.

PAC chairman, Datuk Nur Jazlan Mohamed said he hoped the Auditor-General's Department will start work soon, and would look into the issues raised by the committee last week concerning the company.

Among them were the source of the RM2 billion used to settle 1MDB's loans with local banks, the RM3 billion injection of government funds into the debt-ridden firm, its dealings with PetroSaudi International (PSI), and whether the money parked in Cayman Islands has been brought back.

"Of course the scope of the audit can be widened but that is up to the Auditor-General.

"But letting an independent party like the Auditor-General's Department to audit 1MDB is certainly a good step by the federal government,” he told The Malaysian Insider.

Prime Minister Datuk Seri Najib Razak yesterday said he had instructed the Auditor-General to independently verify 1MDB's accounts.

“If any wrongdoing is proven, the law will be enforced without exception,” he said.

The Prime Minister's Office (PMO) said this was decided at the weekly Cabinet meeting today, where 1MDB's management and auditors Deloitte were called to brief the ministers.

The Auditor-General’s report on the company will then be passed for transparent inspection to PAC, a bipartisan committee which reflects Parliament’s composition.

Jazlan said PAC had last week asked the Auditor-General to look at 1MDB's books and was happy that Putrajaya agreed to the request.

"It shows that the government is willing to provide answers to the people about 1MDB," he said.

A cross between a sovereign wealth fund and a private investment firm, 1MDB has come under intense criticism from both Barisan Nasional and Pakatan Rakyat leaders, including former Prime Minister Tun Dr Mahathir Mohamed.

Some have claimed that 1MDB has debts totalling RM42 billion and its difficulties in settling them have put pressure on the ringgit and the nation’s sovereign credit rating.

On February 13, it was reported that the company had to turn to tycoon Tan Sri Ananda Krishnan for a RM2 billion loan to settle debts owed to a consortium of local banks, due in the middle of the month, or trigger a default.

More than a week later, DAP lawmaker Tony Pua claimed that documents from the PetroSaudi deal in 2009 made the venture seem like an elaborate scam to siphon US$700 million (RM2.5 billion) from 1MDB.

The opposition had also queried 1MDB's financial health after its president and group executive director, Arul Kanda Kandasamy said that its remaining US$1.103 billion (RM3.91 billion) Cayman Islands funds would not be returned to Malaysia.

On February 23, The Edge Financial Daily reported that 1MDB would further require a cash injection of as much as RM3 billion from the Finance Ministry, even after it had borrowed RM2 billion from Ananda.

Sources said the controversial outfit was facing a cash crunch as income from its power assets is not enough for debt servicing and it had run out of borrowing options.

Paying off the RM2 billion debt does not solve the problem for 1MDB, as it still needs to service annual debts worth RM2.31 billion and faced a negative cash flow of RM2.25 billion in its financial year ending March 31, 2014.

1MDB yesterday said it would cooperate fully with the Auditor-General.

“It is clear that the attacks being directed at 1MDB are politically motivated. These are deliberately coordinated attempts to undermine the company by spreading unsubstantiated allegations and speculation, which in turn could potentially harm the economy,” Arul said in a brief statement, adding that it hoped that the outcome of the audit findings would put to rest speculation about its activities.

The Cabinet yesterday said it found no wrongdoing committed by 1MDB.