DAP MP Tony Pua, the sharpest critic of 1Malaysia Development Bhd (1MDB) today revealed the company has failed to submit to the authorities its accounts for the year ending March 2013 just as its auditors KPMG have suddenly resigned from their post.
From checks made with the Companies Commission of Malaysia (CCM) as of yesterday, Pua found that 1MDB has yet to file its accounts for the financial year ended March 2013. According to Pua, the last available set of accounts was for the financial year ended March 2012.
Similar CCM checks made by KiniBiz confirmed 1MDB last submitted its accounts to the regulator on Dec 28, 2012 for the financial year ending March 2012.
“It is both shocking and suspicious that an multi-billion ringgit entity 100% owned by the Ministry of Finance has failed to produce its audited financial statements after nearly a year,” Pua said in a statement today.
“The directors of 1MDB have clearly run afoul of the Companies Act 1965 by failing to hold the company’s annual general meetings, file its annual returns to the Registrar of Companies together with their audited financial report within the specified time period,” added Pua.
The Petaling Jaya Utara MP pointed to section 169(1) of the Companies Act, which requires directors to submit annual reports “at intervals of not more than fifteen months (and) lay before the company at its annual general meeting a profit and loss account for the period since the preceding account made up to a date not more than six months before the date of the meeting.”
The prescribed penalty for failing to comply with section 169(1), according to Pua, is imprisonment for five years or a fine of RM30,000 as stated in section 171(1) of the Companies Act.
“What rings the loudest alarm bells however is the sudden resignation of the company’s external auditors, KPMG, who has audited the company since its inception. Instead, Deloitte Malaysia has been appointed its new auditors,” Pua claimed.
It was KPMG, Pua said, who in 1MDB’s first financial statement in 2010 raised an “emphasis of matter” over the US$1 billion (RM3.49 billion in 2009) investment in a mysterious joint venture (JV) with PetroSaudi International Ltd, which was subsequently converted into a US$1.2 billion (RM3.95 billion) loan within a period of less than 6 months.
KiniBiz investigations in March last year into 1MDB’s loans to PetroSaudi found the deal could put nearly RM6 billion at risk.
While the “emphasis of matter” was removed in subsequent financial accounts as the JV was servicing the loan with interest payment, Pua said, it was also curious that 1MDB extended an additional US$700 million (RM2.3 billion) in loans to the JV, despite receiving less than US$200 million in interest between 2011 and 2012.
“Through a series of complicated financial engineering in the latter part of 2012, the loan was prematurely terminated and redeemed. However, the repayment of US$2.32 billion (RM7.93 billion) was made in a perplexing manner in a ‘segregated investment portfolio’ based in the Cayman Islands,” Pua explained.
“To date no one has been able to verify with any certainty who the investment portfolio manager is, the fund’s performance or for that matter, if the money actually exists,” he added.
Pua drew suspicion to 1MDB’s Cayman Island’s ‘investment’ given that the company is now planning to sell RM2.4 billion worth of sukuk (Islamic bonds) to finance the relocation of the Sungei Besi military airport for its Bandar Malaysia development.
“1MDB is desperately trying to raise funds through new bond issuance in Malaysia to funds its aggressive acquisitions of independent power producers as well as its mega-projects in Bandar Malaysia and Tun Razak Exchange,” Pua said. “In fact, 1MDB is already laden with an estimated more than RM40 billion in debt, and hence such investments is a luxury that 1MDB does not have.”
Pua called for “detailed and immediate clarification” from 1MDB “as a matter of public accountability in line with Prime Minister Najib Abdul Razak’s call for transparency and government transformation.”
“Most urgently, 1MDB must remove any doubts that the resignation of an internationally reputable auditor is due to an unverifiable US$2.32 billion (RM7.67 billion) parked at an anonymous ‘segregated portfolio fund’ in the highly secretive Cayman Islands, which is better known as a tax haven for global money launderers.” Pua insisted.
“If 1MDB fails to provide satisfactory answers to the above scandal, then Malaysians are likely to be witnessing the seeds of the single largest financial scandal in the country, which makes the RM12.5 billion Port Klang Free Zone catastrophe look like child’s play.
The Kuala Lumpur offices of KPMG and Deloitte have not responded to Pua’s claims as of press time.
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