DAP Parliamentary Leader Lim Kit Siang asked me to tutor Dato’ Seri Salleh Keruak on 1MDB yesterday. This was in response to the Communicatioarns and Multimedia Minister’s incredible claim yesterday that the 1MDB scandal is only a puny RM1 million scandal compared to the BMF RM2.5 billion scandal.
I really would, if I could.
I now believe that the Minister is actually untutorable because he really cannot count nor understand simple accounting fundamentals.
This was after he insisted yesterday that he didn’t need any tutoring, that “1MDB's start-up capital was only RM1 million” and that debt-stricken company has “RM51 billion worth of assets to show for it plus ongoing development for the next couple of decades.”
Unfortunately, Dato’ Seri Salleh Keruak is spinning a story that even the CEO for 1MDB, Arul Kanda has stopped spinning since a year ago. And it only goes to prove that he really doesn’t know what he is talking about.
Firstly, while the Government did inject only RM1 million in cash into 1MDB, that Government has provided direct and indirect guarantees to various lenders from whom 1MDB borrowed RM5.8 billion and US$7.73 billion (RM3.4bn), or a total of approximately RM39.8 billion. The amounts, which have been verified by the Auditor-General as disclosed in the Public Accounts Committee Report on 1MDB included:
- RM5.0bn – 30-year bond guaranteed by the Federal Government (2009)
- RM0.8bn – 10-year loan from SOCSO guaranteed by the Federal Government (2010)
- US$3.5bn –10-year bond guaranteed by IPIC, Abu Dhabi but indemnified by MOF Inc (2012)
- US$3.0bn – 10-year bond backed by a “Letter of Support” signed by the Minister of Finance which effectively guaranteed the debt (2013)
- US$1.0bn – Advance by IPIC to 1MDB, indemnified by MOF Inc (2015)
- US$0.23j– Advance interest payments by IPIC on behalf of 1MDB, indemnified by MOF Inc (2015/6)
All the indemnities, direct and indirect guarantees above mean that should 1MDB fail to pay the above, then the Federal Government of Malaysia, funded by ordinary tax-payers are liable to pay for the RM39.8 billion of 1MDB borrowings.
The above does not yet include additional billions of borrowings by 1MDB which are not officially guaranteed by the Federal Government. If Salleh Keruak doesn’t trust me or the Auditor-General with the above figures, he could perhaps request for tuition from Arul Kanda instead.
The question is, does 1MDB really have “RM51 billion worth of assets”, a figure Arul Kanda no longer cites and worse, a figure that 1MDB’s own auditors have publicly renounced, to pare down its debts?
Has Dato’ Seri Salleh Keruak completely forgotten the fact that much of the RM51 billion worth of assets have either been sold (at a loss) or worse, been proven to be misappropriated by the investigations published in the United States, Switzerland and Singapore?
The documents which have surfaced since the international scandal broke showed the following sums have been outrightly siphoned from 1MDB:
- US$1.83bn – Investment in or with Petrosaudi, which was mostly misappropriated to Good Star Limited, a company owned by Jho Low (2009-2011)
- US$1.367bn – Purported “deposit” paid a fraudulent Aabar set up in the British Virgin Islands (BVI) which has since been liquidated (2012)
- US$0.855bn – Additional “deposit” paid to the same fraudulent Aabar in 2014
- US$1.56bn – Investment by 1MDB “Global Investment” in fraudulent investment funds (2013)
The total of funds misappropriated and hence completely lost, amounts to US$5.612 billion or approximately RM24.7 billion! These losses do not yet include losses arising from 1MDB various “real” business transactions like the acquisition of power plants and real estate, astronomical fees paid to Goldman Sachs etc.
And despite all of the above, Dato’ Seri Salleh Keruak still deemed 1MDB “a going concern”. The Minister obviously do not understand what is the meaning of “a going concern”. Does he not realise that 1MDB no longer has any income sources despite remaining tens of billions of ringgit in debt? Even Deloitte has given up auditing the company, and 1MDB itself has failed to produce a single financial statement since March 2013.
I sincerely hope that Dato’ Seri Salleh Keruak is merely pretending to be stupid. Because if he is really that stupid, then even Arul Kanda would give up on him. In fact, the 1MDB CEO might just prefer that the Minister keeps his mouth shut to save himself, BN, 1MDB and the Government further outrageous embarrassment.