1MDB – Najib’s Political Slush FundTo Prop Taib And His Cronies

Wednesday 13 April 2011

As you may recall, I raised my concerns about 1MDB in September 2010 when Pakatan Rakyat exposed how the fund, which was already allocated RM5 billion in 2009 via government bonds, was planning to raise another RM10 billion. That would have raised the fund’s liabilities to RM15 billion by 2013, which is four times the value of bonds issued for PKFZ that amounted to RM3.68 billion.

To hoodwink the Rakyat, Dato’ Seri Najib said that 1MDB had in fact declared a profit of RM425 million in the first year of operation. He never told us how.
We have today 1MDB’s financial statements that expose BN’s blatant abuse of government funds and how it continues to mismanage the country.

1MDB was able to declare a profit for 31 Mac 2010 because it entered into a very suspicious transaction tantamount to a blatant attempt to deceive the Rakyat. The profit declared was nothing more than an accounting entry to hide a trail of arrangement to create slush funds for BN.
Hardly five months after paying RM3.5 billion in cash for an investment in a joint venture with PetroSaudi of Saudi Arabia, 1MDB sold the investment back to the owners of the Saudi concern for RM4.1 billion.

On the surface this looks like a stunning financial return; a roughly RM615 million gain that helped 1MDB show profit.

But careful reviews of the 1MDB’s financial statements show a different picture. PetroSaudi, which received cash when 1MDB bought the stake, is now paying for the transaction through an 11-year loan scheme that will only be fully repaid in 31 March 2021.

Why such a sweetheart financial arrangement?

Nearly 70% of 1MDB’S original capital is now tied-up in a loan, which there is no certainty it will be paid.

PetroSaudi and many of its associates are companies incorporated in tax havens, such as Cayman Islands and the British Virgin Islands. Therefore, there will not be any transparency of the transactions between 1MDB and PetroSaudi and the latter’s associates which will remain to be shrouded in secrecy.
What is even more astonishing is that the deal to sell the investment was done on 31 March 2010, which is the last day of the financial year. This sleight of hand accounting is a blatant attempt to show the dubious profit that Dato’ Seri Najib declared.

What is also as explosive is the Taib Mahmud’s connection to 1MDB and the dubious transactions it recorded.

Last year PetroSaudi paid over RM1.5 billion to takeover UBG Bhd, the financial arm of the business empire owned by Taib Mahmud’s family that was facing difficulties.
Where did that money come from?

The financial statements strongly suggest that 1MDB’s financial merry-go-round is clearly a political slush created by the BN and Najib to enrich cronies and bail them out.

Therefore, in light of the massive and unprecedented spending and political bribery seen in this Sarawak election, Pakatan Rakyat demands the following:
An appointment of a special audit to probe into the transactions involving 1MDB, PetroSaudi and UBG to ascertain whether or not government money has been used for a slush political fund;

The immediate halt of the company’s efforts to raise more funds from the banks until such probe is completed;

A freeze on any attempt by BN to transfer any government property into 1MDB, such as the plan to award the company the prime piece of real estate in Jalan Cochrane; and

A full disclosure on who is behind PetroSaudi and 1MDB to convince the Rakyat that the company is financially sound to meet all its obligations to repay the loan.



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