3 CEOs, 3 auditors, 2 chairmen in 5 years, and still nothing’s wrong at 1MDB?

The Tun Razak Exchange is one of the key projects by 1MDB. – Pic courtesy of Skyscrapercity, January 6, 2015.

1Malaysia Development Bhd (1MDB) has the distinction of being possibly the only government-linked company (GLC) to have changed three chief executive officers (CEOs), three external auditors, and two chairmen all in a span of only five years.

While both the government and 1MDB via its chairman Tan Sri Lodin Wok Kamaruddin insist that there is nothing amiss at the strategic investment fund, this merry-go-round of its top brass and auditors should be a red flag.

The departure of Mohd Hazem Abdul Rahman who replaced its first CEO Datuk Shahrol Halmi in March 2013, raises more alarm bells.

“A third CEO in five years, three accountants in five years, debts of more than RM40 billion... I’m only concerned (as to) who will bear responsibility if and when something goes wrong?” a veteran corporate player asks.

The Edge Financial Daily understands that Hazem’s departure coincides with the strategic investment fund, obtaining yet another extension – until January 30 – to settle a RM2 billion debt which first went due at end-November 2014, but was extended to end-December last year.

While the company has been mired with losses, it is into its third auditor, starting with Ernst & Young, moving on to KPMG and now tying up with Deloitte.

Arul the new CEO

The appointment of Arul Kanda Kandasamy as its third CEO has also raised alarm bells as it is seen by some corporate players as Low Taek Jho (Jho Low) and Abu Dhabi interests strengthening their hold on 1MDB.

While Jho Low has often denied any links to 1MDB, his name consistently surfaces when 1MDB is mentioned.

Arul was on the board of RHB Capital Bhd from July 2009 to May, 2011, as a non-independent non-executive director representing Abu Dhabi Commercial Bank PJSC. He was executive vice-president, head of investment banking and head of corporate finance at Abu Dhabi Commercial Bank.

Abu Dhabi Commercial Bank bought RHB Capital in May 2008, acquiring 538.37 million shares or 25% of RHB Capital from the Employees Provident Fund (EPF). It later sold the block to its related entity to Aabar Investments PJS.

It is well known that Jho Low brokered the deal for Abu Dhabi Commercial Bank to buy into RHB Capital, and Abu Dhabi-Kuwait-Malaysia Investment Corp buying into UBG (formerly Utama Banking Group Bhd), and even for Abu Dhabi Commercial Bank selling its RHB stake to Aabar Investments PJS.

Both UBG and RHB Capital were at one time linked. UBG sold Bank Utama Bhd to RHB Capital for RM1.8 billion in 2002, and thus had 32.14% of Rashid Hussain Bhd, which in turn had a 67.34% interest in RHB Capital. UBG, however, sold its stake in Rashid Hussain to the EPF.

Arul has wide experience in banking, having worked as head of Islamic financing solutions, Barclays Capital, Dubai, from September 2006 to July 2008, prior to which he was at Calyon (part of the Credit Agricole group) and was based in London and Bahrain between 2002 and 2006.

Among others, at Calyon he was director, head of Islamic banking, London, from July 2005 to August 2006; director of capital markets, Bahrain, from June 2004 to June 2005; and associate director of securitisation, in London, from July 2003 to May 2004.

He has a Masters in Law from University College, London, and obtained his bachelor’s degree in law from the London School of Economics.

Not withstanding his credentials and the fact he is Malaysian, some corporate observers are concerned that someone with close links to Abu Dhabi interests is now the CEO at 1MDB.

This is because 1MDB has numerous business links with Aabar Investments and is in the process of unwinding some of them, including negotiations for 1MDB to buy back options given to Aabar to take a stake in the proposed listing of 1MDB’s power assets. – The Edge Financial Daily