The Australian Friday May 25 2018
Also Newspaper Reports and 1MDB Wikipedia
For many years, Malaysia and the United Arab Emirates have strong diplomatic ties and state-linked Abu Dhabi firms have invested in Malaysian real estate, banks and infrastructure. In 2009 Ex-PM Najib Razak forms 1MDB, a Malaysian Sovereign Investment Fund. $6.5 billion investment from Abu Dhabi and Qatar. 2012-2013 Receives $6.5 billion in three bond sales in 2012 and 2013 from Goldman Sachs to invest in energy projects and real estate to boost the Malaysian economy. Principal not due till 2022. It doubles their deposits. $4.5 billion invested elsewhere, luxury real estate in London, New York, Beverley Hills, a private jet, paintings by Vincent Van Gogh and Claude Monet, "Wolf of Wall Street" movie, and to pay off gambling debts in Las Vegas. June 2015 With lack of funds, Abu Dhabi state fund International Petroleum (IPIC) agreed to bail out 1MDB to prevent them going into default. IPIC agreed to lend $1 billion to 1MDB and assume coupon payments on $3.5 billion of 1MDB debt. It also forgave an undisclosed amount of debt that 1MDB owed, in exchange for assets which were not identified. November 2015 1MDB agreed to sell its energy assets, worth around $2.3 billion, to China General Nuclear Power Group and its subsidiaries. July 2016 The US Justice Department filed civil lawsuits seeking to seize $1 billion in assets bought with money stolen from 1MDB. Goldman Sachs, which earned close to $600 million to arrange and underwrite the 1MDB bonds, was not accused of any wrongdoing in the lawsuits. But they allege investors were not properly informed about the use and nature of the bonds. In response, Goldman Sachs defended its track record, saying it could not have been expected to know what would happen to the money once raised. By the end of 2016, the tie-up with Abu Dhabi unravelled when IPIC said 1MDB had defaulted on the loan, and the Malaysian firm defaulted on interest payments for two bonds which IPIC had guaranteed. Malaysia's finance ministry dissolved 1MDB's board of advisers and took over most of its remaining assets. December 2017 Payment to Abu Dhabi for $1.2 billion. Malaysian Govt sells land to Malaysian Central Bank to build a Financial-Education institution for $663 million, $500 million was then used by 1MDB to pay to Abu Dhabi. Currently, 1MDB has almost no cash flow, and has liabilities of $8 billion. It was later found that 1MDB has only one employee since the beginning of 2018 - CEO Arul Kanda, and he was on "garden leave" until the end of his contract in June 2018 This week, ex-PM Najib Razak was questioned about $10.6 million transferred into his account from 1MDB subsidiary, with a total of $700 million thought to have been transferred to his account from 1MDB offshore shelf companies - companies simply created and "put on the shelf". Full Article in The Australian below
Sovereign fund a time bomb for Mahathir
Tom Wright,Bradley Hope, The Wall Street Journal
In its final months in office, the government of former Malaysian prime minister Najib Razak turned to the nation's central bank to pay off $US500 million in debt owed by the troubled state investment fund 1MDB, people familiar with the transaction said. The fund has been struggling to stay afloat, and the money helped cover an obligation due to an Abu Dhabi state fund at the end of last year. The Malaysian fund said in December it came up with the money via an "ongoing rationalisation program" that involved selling off holdings such as power plants and land. Instead, the people familiar with the transaction said, the money came from a land deal involving the central bank — raising new questions about the use of state assets to support a fund the US Justice Department says is mired in fraud. Mr Najib did not respond to a request for comment. He has repeatedly denied wrongdoing in the 1MDB affair, as has the fund. Malaysian investigations carried out during Mr Najib's premiership cleared him. The Finance Ministry did not respond to a request for comment on the central bank land deal. New details of the fund's dealings have been trickling out since Mr Najib's surprise election loss on May 9. The new government, under Prime Minister Mahathir Mohamad, has been trying to get a grip on the financial position of 1MDB, which is sitting on more than $US8 billion in debt and has almost no cash flow, sources say. The debt to the Abu Dhabi fund dates to a crisis in 2015, when 1MDB was on the precipice of default. The Middle Eastern fund stepped in with an emergency bailout, and Malaysia's Finance Ministry agreed to repay $US1.2bn by the end of last year. The government turned to Bank Negara Malaysia, the central bank, sources said. The bank bought a piece of land from the government in December for two billion ringgit ($663.7m) as part of a plan to construct a financial-education institution. The central bank publicly acknowledged the purchase at the time, and bank governor Muhammad Ibrahim said the bank had acted in self-interest. Attempts to reach the governor for comment were unsuccessful. Finance Ministry officials recently told Dr Mahathir's government the $US500m went into a special-purpose vehicle it set up to repay a portion of the $US1.2bn owed to Abu Dhabi, sources said. How to repay 1MDB's debt is a major issue for Dr Mahathir's government. In a statement this week, Finance Minister Lim Guan Eng said $US36m in interest payments were due at the end of this month. He said he had instructed Arul Kanda, 1MDB's chief executive, to explain whether the fund had cash to make this payment. Discovery of the central bank's land deal is the latest in a string of revelations about the state of 1MDB. The Finance Minister on Wednesday publicly questioned whether almost $US1bn in investments listed by the fund truly existed or were worth anything. He also ordered a new audit of the company by PricewaterhouseCoopers. Mr Lim said after meeting with Mr Kanda that he found him "to be utterly dishonest and untrustworthy, and instructed the legal advisers to the Ministry of Finance to review his position as the president of 1MDB". Mr Kanda, who has been barred from leaving the country by the new government, declined to comment. The fund, founded in 2009, took on debt of more than $US13bn, about half of it via international bonds sold by Goldman Sachs. At least $US4.5bn of the money raised was funnelled out of the fund and used to buy mansions in the US and a private jet and even to help finance Hollywood movies, according to civil asset-forfeiture lawsuits filed by the US Department of Justice in 2016 and last year. The fund's debt problem will become more acute from 2022 when the principal on the bonds sold by Goldman comes due. Goldman has defended its track record, saying it could not have been expected to know what would happen to the money once raised. ** End of Report