Pua: 1MDB party to illegalities in USD1b ‘joint-venture’

Ministry of Finance-owned company involved in a scam to siphon US$1 billion in government-guaranteed funds.

KUALA LUMPUR: Petaling Jaya Utara MP, Tony Pua, has alleged that given the chronology of events on a joint-venture, 1Malaysia Development Berhad (1MDB) may have been involved in a scam to siphon out US$1 billion in funds guaranteed by the Malaysian Government.

In short, 1MDB has been a party to illegalities, if the case ever comes to Court.

• 18 Sep 2009
  • PSI incorporated a wholly-owned subsidiary “1MDB Petrosaudi Limited”
• 25 Sep 2009
  • PSI signed an agreement with its subsidiary, where “1MDB Petrosaudi Limited” agreed it owed PSI US$700 million (RM2.5 billion) in “advances”
• 29 Sep 2009
  • 1MDB buys 40% of new shares in “1MDB Petrosaudi Limited” by injecting US$1 billion into the joint venture.
• 30 Sep 2009
  • “1MDB Petrosaudi Limited” repays US$700 million to PSI.

He was commenting on a joint-venture agreement uploaded by the UK-based whistleblower website Sarawak Report run by Sarawak-born Clare Rewcastle Brown.

The 1MDB and Petrosaudi International Limited (PSI) joint venture agreement dated September 29, 2009 points towards a highly elaborate scam to siphon money from the former, reiterated Pua who is also DAP National Publicity Secretary. “The scandalous 1MDB-Petrosaudi joint-venture agreement stinks to high heavens, highlighting gross abuse of US$1 billion of funds guaranteed by the Federal Government.”

Najib Abdul Razak, who is the Finance and Prime Minister, as well as the Chairman of the Board of Advisors of 1MDB, must bear the biggest responsibility over this multibillion ringgit debacle, he added. “He is accountable for the actions of 1MDB and must immediately explain the transactions and the losses the joint-venture agreement caused by the Malaysian government and tax-payers.”

The question that needs to be asked, according to Pua:

Why on Earth did 1MDB invest US$1 billion in a joint venture where the joint venture partner immediately gets to siphon 70 per cent of the funds out of the joint venture for practically nothing in return?

“This obscene transaction stinks to high heavens and points toward an obvious collusion between PSI and 1MDB to siphon US$700 million from 1MDB,” said Pua. “This money was raised by 1MDB from debts guaranteed by the Malaysian Federal Government.”

The 1MDB and Petrosaudi joint venture, claims Pua, is the very first “investment” made by 1MDB. “It is the first hole dug by the company, which resulted in more and bigger holes being dug subsequently to cover up the earlier holes.”

As a result, he argued, 1MDB’s debt escalated rapidly since 2009 to reach RM42 billion in 2014, where it now has widely publicised problems repaying its debts.

PSI immediately cashed in a cool US$700 million for its own use.

Delving into the details of the joint-venture agreement, Pua notes that the fact that PSI took the initiative to incorporate a subsidiary with the name “1MDB” on September 18 clearly demonstrates that PSI was well aware it would be forming a joint venture vehicle with 1MDB.

“1MDB Petrosaudi Limited” was an empty shell at that point of time, and knowing that a joint venture agreement will be signed soon, PSI created a loan document under which “1MDB Petrosaudi Limited” owed its parent US$700 million in “advances”, he explained. “As a result, ‘1MDB Petrosaudi Limited’ immediately became an empty shell with a US$700 million outstanding debt.”

Despite knowing that “1MDB Petrosaudi Limited” had an existing debt of US$700 million, Pua lamented, 1MDB agreed to invest US$1 billion (RM3.5 billion) into the newly set up company to subscribe for 40 per cent of new shares. “On the other hand, for PSI’s remainder 60 per cent, the parent company injected ‘assets’ valued at US$1.5 billion instead of cash.”

Immediately after the signing of the agreement, perhaps before the ink was even dry, Pua pointed out, “1MDB Petrosaudi Limited” repaid in full, the US$700 million (RM2.5 billion) “advances” from PSI, using the newly received funds from 1MDB. “The arrangement meant that PSI immediately cashed in a cool US$700 million for its own use.”

The joint-venture agreement was signed between Tarek Essam Ahmad Obaid, CEO of PSI and Shahrol Azral Ibrahim Halmi, the then Managing Director of 1MDB.