SCANDAL-RIDDEN national investment fund, 1Malaysia Development Berhad (1MDB), has lost an estimated RM39 billion through fraud and mismanagement, said an anti-graft watchdog, most of which is irrecoverable.

The losses, which were revealed in a report by the Centre to Combat Corruption and Cronyism (C4), come on the heels of a March 29 government announcement that the firm has paid off its short-term loans.

The RM39 billion losses, C4 said, were separate from the RM39.8 billion in outstanding debts 1MBD still owed in various bonds.

One of the report’s authors, P. Gunasegaram, said the RM39 billion losses included money that was allegedly stolen and funds wasted through mismanagement.

The breakdown of the RM39 billion losses is:

* RM27 billion overpayment of assets and questionable purchases. This includes overpaying for power plants from local companies and RM7 billion in a dubious venture with a member of Saudi royalty.

Gunasegaram said the US$3.65 billion (RM14 billion) allegedly stolen from 1MDB, as revealed in the July 2016 United States Justice Department civil suit, was hidden in these deals.

* RM 10 billion lost in the mispricing of bonds, of which RM6 billion was siphoned off by under-valuing and re-selling them.

* RM 2 billion lost to overpaying its advisers, notably Goldman Sachs.

1MDB, which is Prime Minister Najib Razak’s brainchild, is at the centre of a graft and money-laundering probe involving six countries, the US, Switzerland, Singapore, the United Kingdom, Hong Kong and Luxembourg.

The DoJ suit said US$681 million (RM2.6 billion) was credited into the accounts of “Malaysia Official No.1” (MO1). 

Minister Abdul Rahman Dahlan had confirmed that MO1 was Najib. But the government and Attorney-General Mohamed Apandi Ali had cleared him of all wrongdoing.

Najib maintained that he did nothing wrong, saying the US$681 million was a donation from a Saudi royal.

Speaking at C4’s launch of the report today, Gunasegaram, a veteran business journalist, said: “1MBD operated outside all governance structures that are present within all government-linked companies. 1MDB was specifically set up to steal billions from Malaysians.”

Also present at the launch were C4 founder Cynthia Gabriel, political economist professor Edmund Terence Gomez, Petaling Jaya Utara MP Tony Pua and former Treasury secretary-general Mohd Sheriff Mohd Kassim.

Pua said although 1MDB had repaid RM3.8 billion in short-term debts, it still owed RM39.8 billion in the form of bonds.

“This amount (RM39.8 billion) will likely have to be paid with public funds.

“This is since the money to pay the RM3.8 billion is from the sale of its assets, such as the power plants and Bandar Malaysia land,” Pua said.

Among the bonds are a RM2.4 billion sukuk due between 2021 and 2024, and two US$1.75 billion bonds due in 2022.

On March 29, Najib, who is also finance minister, said 1MDB had paid off all its short-term debts over the past two years.

In his speech, Gomez said 1MDB’s directors, Lodin Wok Kamaruddin and Ismee Ismail, as well as Shahrol Azral Ibrahim Halmi, were also culpable in the firm’s mammoth losses and questionable business deals.

Shahrol, for instance, was named in the Public Accounts Committee (PAC) report on 1MDB as a person who should be investigated.

“Yet till today, no action has been taken against them,” said Gomez of Universiti Malaya’s economics and administration faculty. – April 1, 2017.