QUESTION TIME 1MDB, inexplicably, has a great fondness for pointing out leaks relating to itself when it should really be much more concerned with its own, terrible state of affairs and focusing on putting it right while bringing those accountable for the problems to book and obtain restitution.
In fact 1MDB president and group executive director Arul Kanda Kandasamy, who was appointed in January this year to troubleshoot and bring about a revitalised 1MDB, has done precious little of that and is waging a media battle with the likes of DAP’s Tony Pua, almost sounding like an Umno politician in that respect.
And watching him on TV yesterday, he has great presence and is very slick - will make a great politician. But those who know 1MDB well and have followed it over the last few years know that he has not addressed the underlying issues affecting 1MDB, the sources of its problems, and bringing to account the people who brought it to where it is - grovelling for money to pay its debts.
Every time there is a report about 1MDB in the Sarawak Report or the Wall Street Journal or other places, Arul Kanda makes it a point to say that these leakages are against the law and urges the authorities to investigate them. In the true style of a politician, he even made a police report himself against some of these leakages.
But really, he should focus on replying to these leakages, confirming whether they are true or not and what he proposes to do about them rather than engage in endless verbal battles with opposition politicians on the media and at the end of the day say nothing new about 1MDB and the mess it is in.
In fact by now, if he had taken the trouble to investigate properly the issues at 1MDB, he should be quite ready to make quite a number of police reports over things that have happened in the past at 1MDB, bring those responsible to book, and obtain restitution.
10 reports to start with
If he is still at a loss as to what reports to make here are 10 for him to start with:
1. Under pricing of at least some RM20 billion of bonds which could have led to losses of around RM4 billion to 1MDB. To determine why bonds were priced so low when the loans which were backed by the government and other guarantors should have carried much lower interest rates.
2. To investigate who got these bonds cheaply and how and when they disposed off the bonds in the market to make the money they did.
3. A police report against Goldman Sachs for badly advising 1MDB, and perhaps malicious intent in deliberate mispricing of bonds, and for the massive amount that they got in fees amounting to hundreds of millions of US dollars while acting against the interests of 1MDB. Also to determine who in 1MDB colluded with them and to take appropriate action against them.
4. To investigate 1MDB’s investments in PetroSaudi where money was channelled into a dubious investment in the Caspian Sea and subsequently converted to a loan which was then returned. But instead of getting cash, this was invested in the Cayman Islands. And the story goes on and on. Over RM7 billion is involved.
5. To investigate the movement of funds from Cayman Islands to Singapore, to ascertain in what form they are being held and where and whether it is in fact there.
6. To investigate the purchase of power assets in 2012 and 2013 and to ascertain why there was a large overpayment for them and why these assets are now being sold for what could be a loss.
7. To determine how a huge part of a US$3.5 billion loan amounting to some US$1.4 billion was put back as a deposit with International Petroleum Investment Company (IPIC) of Abu Dhabi as a security deposit in return for a guarantee for that loan. Effectively that reduced the funds available to 1MDB from the loan by a huge amount. Also to investigate if a large part of payments went missing as reported by the Wall Street Journal.
8. To determine whether an option to purchase 49 percent in 1MDB’s power assets transferred from IPIC to a related company called Aabar Investments was extinguished at an outrageous price of as much as US$1 billion (over RM4 billion) or more. The entire energy assets were bought at RM12 billion and it is inconceivable that the option would be worth one third of the total price of the assets.
9. To determine whether funds of some US$700 million were moved into the accounts of a company related to Jho Low when it was supposed to go somewhere else and who authorised it.
10. To determine whether such movement of funds were made without the approval of the board and who was responsible for it.
These are just a fraction of the police reports that need to be made to unravel and make sense of 1MDB’s dubious doings and bring to account those who were responsible for this.
That 1MDB is not doing any of these things indicates clearly that the cover-up continues and there is no attempt to deal with the most basic and obvious of the critical issues affecting the company.
Instead, what’s being done is a desperate, mad scramble for cash (why sell energy assets now if not for the cash it brings?) here and there and everywhere to meet debt and interest repayment obligations without a care for a long-term solution to the entire problem.
Clearly, the assets that 1MDB has are not generating enough cash to service its debts and the question that arises is why and what did it do so wrong to have such a severe mismatch between earning assets and heavy debt repayments. And something needs to be done about this without further rolling of assets between the various parties concerned.
Arul the man to handle this?
Is Arul Kanda the man to handle this? We made an assessment of this in January this year when he came aboard 1MDB. And we concluded not, because he is just too close to the people involved in the deals - which include the Abu Dhabi government.
He joined 1MDB directly from Abu Dhabi Commercial Bank (ADCB), where he was executive vice president and head of investment banking. That’s a bank which is Abu Dhabi state owned, as is IPIC and Aabar Investments both of whom have rather convoluted deals with 1MDB.
Given that Arul Kanda is not the best man to deal with 1MDB’s problems, much of which stems from dubious deals with many Middle East parties, including those from Abu Dhabi, that simply means don’t expect 1MDB’s problems to be sorted out anytime soon but instead to be prolonged as much as possible in the hope that time will sort things out.
In this case, given 1MDB’s extremely troubled state, time does NOT heal all and there could be an explosion of problems in future if deals continue to be made to cover up deficiencies.
The sooner we realise that, the sooner there will be a real solution to the epic, unprecedented problem that 1MDB has become.
P GUNASEGARAM is founding editor of KINIBIZ which produces an online business news portal and a fortnightly print magazine.
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