Public interest in 1MDB’s debts warrants probe, says PAC chief

Public Accounts Committee chairman Datuk Nur Jazlan Mohamed says 1MDB’s auditors, Deloitte Malaysia, will likely be summoned first if PAC is to probe into the strategic investment fund. – The Malaysian Insider file pic, February 15, 2015.

Debt-laden strategic investor 1Malaysia Development Berhad (1MDB) may still come under Parliament's Public Accounts Committee (PAC) scrutiny despite settling its RM2 billion debt, because of public interest over the firm's inconsistencies, The Edge business weekly reported today.

Noting that the fund's debt settlement by billionaire T. Ananda Krishnan had raised a lot of questions despite its accounts being cleared by an international firm of auditors, PAC chairman Datuk Nur Jazlan Mohamed said 1MDB's external auditor Deloitte Malaysia would likely be summoned first if PAC were to start a probe.

"We have been informed that Bank Negara Malaysia is also concerned about the 1MDB issue and PAC would like to enquire (from them) about their concerns," he told the business weekly in its latest edition.

"We are monitoring developments and recent developments granted us new grounds to relook at 1MDB with a fresh pair of eyes," he also said.

Deloitte, which was appointed by 1MDB in December 2013, had signed off on 1MDB's accounts ending March last year on November 3, stating that the accounts represented a "true and fair view" of the group's financial position then.

1MDB had changed auditors twice before. Its previous auditor was KPMG, which said it could not conclude the strategic development fund's accounts.

Its first was Ernst & Young, appointed when the fund was first set up in 2009 but stopped in 2011 without a single audit.

1MDB president and group executive director Arul Kanda Kandasamy on Friday had confirmed that the government-backed company had settled the loan, six days before bankers were to trigger a default.

"I can now confirm that 1MDB has settled in full a RM2 billion loan owed by an operating subsidiary of ours to Malaysian banks. The loan was settled in advance of the due date, per the terms of the loan facility agreement.

“With the settlement of this loan, I reaffirm 1MDB’s commitment to continue meeting all our debt obligations as they become due,” Arul Kanda had said in a statement.

However, he did not disclose the sources of fund, although The Malaysian Insider had, citing sources, reported the loan was settled with money from Ananda Krishnan.

The payment is a last-minute reprieve for 1MDB – a cross between a sovereign fund and a private investment firm wholly owned by the Ministry of Finance. Its debt woes were seen as pressuring the ringgit and Malaysia's sovereign credit rating.

Faced with criticism that PAC was hesitant to probe into 1MDB's activities, Nur Jazlan said the committee never "took its eyes off" the strategic development firm.

"We couldn't come in (before this) because the first thing is, it isn't mandated, it isn't on the Auditor-General's list. Technically, we can't go in," he said, explaining that PAC inquiries are based on the Auditor-General reports which only covered companies mandated by the government.

But because of public interest in 1MDB, PAC could now start inquiries, he said, noting various issues that warranted scrutiny.

These, Nur Jazlan told The Edge, were Ananda Krishnan's alleged involvement, 1MDB's heavy debts at almost RM42 billion, as well as frequent changes of the company's CEOs.

The firm has had three CEOs in five years.

The contradictory statements from its leadership have also kept the firm on the PAC's radar, Nur Jazlan said.

"We are not finished with 1MDB. There are concerns for PAC to look into. There are a lot of developments, including contradictory statements from the leadership of 1MDB. They are not consistent with what they are telling everyone," he was quoted as saying.

He also noted contradictions in Arul Kanda's statements on 1MDB funds in the Cayman Islands.

"Arul Kanda's statement was that they will not repatriate the money from the Caymans account, when earlier, he was reported to have said otherwise. He also gave the assurance that as long as there is an audit trail, PAC can still go back and track down anything (if something is) amiss.

"With the audit trail, it doesn't matter when PAC goes in on it... you can always go back and track it again, and that's why we can track earlier or later," he was quoted as saying.

The Pulai MP also expressed his reservations over talks that EPF and Petrona were either interested or being wooed for 1MDB's initial public offering of its energy unit.

"I am not comfortable with the idea of state funds, including contributors' money, being used to invest in 1MDB when there are still unanswered questions," he was further quoted as saying.

1MDB, whose advisory board is chaired by Prime Minister and Finance Minister Datuk Seri Najib Razak, has been heavily criticised for taking on the debt and the difficulty in repaying its loans.

Among its harshest critics are former prime minister Tun Dr Mahathir Mohamad and former finance minister Tun Daim Zainuddin, apart from opposition lawmakers who say its debts are a risk to the country's financial system.

The opposition had queried 1MDB's financial health after Arul Kanda had told Singapore's Business Times last weekend that the remaining US$1.103 billion (RM3.91 billion) of the Cayman Islands funds would not be repatriated back to Malaysia.

- TMI