1Malaysia Development Bhd. Nears a Sorry End

May 5, 2016

With International Relations Student at University of Cambodia Techo Sen School of Government and International Relations, Ven. Thy Theoun who is interested in Buddhist Economics and Ethics

COMMENT: The easy part of the whole saga is to dismantle  1MDB and then the Malaysian Treasury, basically the Malaysian taxpayers, will  absorb the losses. We are  now told that 1MDB directors have resigned and the Chairman of the Advisory Board who is also the Prime Minister cum Minister of Finance is absolved of any wrongdoing, despite irrefutable evidence that he admitted he had received money in the form of “donation” from a generous Arab into his personal bank account at Arab-Malaysian Bank.

This whole affair makes a mockery of transparency and accountability of directors and management. It is a disgrace that we haven’t done anything about coming to grip with our failure to hold our corporate leaders and their political leader to account. Recall that the Prime Minister of Iceland had to quit over the Panama Papers revelation and the President of Brazil is running the risk of being impeached for budgetary violations. What signal is the Najib administration sending to the banks and capital markets around the world? How long do  we in Malaysia want to perpetuate this culture of impunity.–Din Merican


1Malaysia Development Bhd. Nears a Sorry End – Asia Sentinel | Asia Sentinel

by John Bethelsen

Wan Saiful Wan Jan, Head of the Institute for Democracy and Economic Affairs, a think-tank in Kuala Lumpur, said: “The most powerful person in the country was chair of the advisory board. This is someone whose advice must be obeyed. It’s a serious conflict in terms of corporate governance — who is in charge, the Board of Directors or the Prime Minister?” 

The Malaysian government has begun to officially dismantle 1Malaysia Development Bhd., the Ministry of Finance-backed development fund that was brought into being by Prime Minister Najib Razak in 2008 and which has morphed into what arguably is the biggest scandal in Malaysian history.

The implications for investors are unclear. What assets are not sold off are expected to be moved into the Ministry of Finance, with the Board of Advisers – headed by Najib – and the Board of Directors being dissolved. A well-connected businessman told Asia Sentinel last week that the government – and thus the taxpayers – will probably end up having to eat the losses.

However, the eight-year history of the fund is an astonishing tale of greed and chicanery, with billions of dollars apparently having been stolen or otherwise unaccounted for, diverted into accounts in the Cayman and British Virgin Islands. Investigators believe that as much as US$1 billion was routed into Najib’s own accounts in March of 2013 before being diverted out again in October of that year, to disappear into cyberspace.

The scandal has played a major part in fomenting distrust in the United Malays National Organization, the leading party in the national ruling coalition, with Najib firing his own Vice President and Deputy Prime Minister, Muhyiddin Yassin, as well as Attorney General Abdul Gani Patail, in an effort to contain the scandal. Other government officials have been sidelined or neutralized.

It has driven former Prime Minister Mahathir Mohamad (above) to seek a deal with opposition figures including Lim Kit Siang, the head of the Democratic Action Party, whom he jailed in 1986, and others, in the vain attempt to bring down Najib. So far, propped up as head of UMNO and thus as Prime Minister by the votes of 196 district chiefs who are said to have been bought off with rent-seeking jobs and contracts as well as outright bribes, Najib has remained invulnerable, also by threatening opponents with jail, closing influential newspapers temporarily and short stopping a reported investigation by the Malaysian Anti-Crime Commission that was on the edge of recommending his indictment. A similar request from Bank Negara, the central bank, for an investigation into the movement of funds was simply ignored.

The scandal has also ensnared Goldman Sachs’ former Southeast Asia head, Tim Leissner, who engineered a huge US$3 billion sale of 1MDB bonds that earned Goldman an estimated US$500 million. Leissner left the firm and moved to Los Angeles, where he has reportedly been meeting with FBI officials.

The fund is believed to be RM42 billion (US$11.6 million) in debt against an unknown amount of assets, and with the government in a protracted squabble with an Abu Dhabi entity, the International Petroleum Investment Corp. (IPIC) over as much as US$3.5 billion of funds that 1MDB officials thought they were transferring to an IPIC subsidiary, Aabar Investments PJS.

The money instead went into a BVI-registered company called Aabar BVI and has since disappeared. IPIC officials refused to make a payment of US$50 million to bondholders when it discovered that the money had been diverted, stirring fears of a cross-default that could imperil the country’s financial system.

Rafizi Ramli, the Secretary -General of the opposition Parti Keadilan Rakyat, in March reportedly displayed figures indicating that transfers from Tabung Haji, the fund that invests savings for Muslims to make the Haj to Mecca, were depleted to the point that the fund was endangered. Rafizi was charged with sedition and briefly jailed. Several other opposition figures including Tony Pua, spokesman for the DAP, have been threatened with sedition charges for questioning the 1MDB operations.

Officials of 1MDB and others associated with the sovereign investment company, with interests in power and property, are being pursued by investigators in five countries, most prominently the United States, whose US Attorney for the Southern District of New York Preet Bharara, has sent FBI investigators to Malaysia to seek clues to allegations of money laundering on the part of the Najib family for the purchase of expensive real estate in New York and California and for the funding of the blockbuster movie Wolf of Wall Street.

Other law enforcement agencies include the Attorney General of Switzerland, which has accused unnamed individuals of laundering as much as US$4 billion from 1MDB through Swiss bank outlets in Singapore. Singapore is said to have frozen the bank accounts of several individuals as well. Most recently, officials in Luxembourg opened an investigation into 1MDB’s affairs.

The fund got its start in 2008 when Jho Taek Low, then a 27-year-old Penang-born financier and friend of the Najib family, persuaded Najib to take over a budding investment fund that he had proposed to the Sultan of Terengganu, who backed away from it. The fund embarked on a torrid acquisition process, buying vastly overpriced independent power producers from companies and individuals closely connected with the UMNO ruling clique including the Genting gaming and plantation conglomerate and Ananda Khrishnan, one of the country’s richest men. With 1MDB facing huge debts from the purchases, the government pushed through no-bid contracts to hand 1MDB’s power units lucrative deals at the expense of competitive bidding.

It was given the gift of the obsolete Sungei Besi air force base, close to downtown Kuala Lumpur, which it sought to turn into a high-priced financial center called the Tun Razak Exchange, named for Najib’s father

But hundreds of millions of dollars allegedly were diverted into Jho Low’s personal accounts. As Asia Sentinel reported in 2014, Jho Low – a private individual – attempted to use 1MDB guarantees in a vain attempt to buy three of London’s finest hotels, the Connaught, the Berkeley and Claridge’s. He acquired a 300-foot yacht and a flock of enormously expensive paintings that he has since begun to sell off.

Reuters reported in April that RM18 billion of 1MDB’s debt linked to its power assets would go under Edra Energy, which is due to be sold off in nine months’ times. It is also expected to sell off two high-profile property projects, the Tun Razak Exchange and Bandar Malaysia, after splitting them into separate entities. Critics have charged that the land under the stalled projects has repeatedly been revalued upward to unrealistic levels in an attempt to cover the indebtedness.  Once the assets are sold off, 1MDB is expected to be dissolved completely.

16 thoughts on “1Malaysia Development Bhd. Nears a Sorry End

  1. Borrowing from Stalin:

    “One million in losses to the Malaysian tax payer is a tragedy,
    one billion in losses to the Malaysian tax payer, courtesy of UMNO Baru,
    is merely a statistic”

  2. The Chinese Communist Party has its “princelings”.

    So does UMNO Baru in 1Malaysia.

    (Princeling = spoilt, corrupt, wastrel offspring of
    first generation political leaders who sacrificed for the
    benefit of the nation and the people)

  3. To be blunt, Its a condemnation of Malay leadership and Malays, and even more bluntly, their claims to their religion too given what Hadi is going around saying..

    Honestly, the biggest issue really is given the glaring proof, how can Malays do not get even more upset with Hadi’s PAS and his cooperation with Najib? Honestly, someone need to really dig deep into Hadi;s past especially his tenure in Terengganu. There were lots of rumours back then about Hadi’s own corruption and which explains a lot why he has completely washed Nik Aziz’s legacy down the toilet with his short tenure to lead the party..

  4. The whole 1MDB is a indictment on the apathy of the Malaysians. The mega scandal is a reflection on the failed culture, pretentious religious tenement, and decadent morality of the dominant Malays. There is no tow ways about it. The responsibility rests on the faces of the ruling Malays including the Royalty who command respect from its subjects. What a shame.

  5. “Recall that … the President of Brazil is running the risk of being impeached for budgetary violations. What signal is the Najib administration sending to the banks and capital markets around the world? How long do we in Malaysia want to perpetuate this culture of impunity, ” Din Merican.

    Malaysia could stop this culture of impunity 28 years from now if we reform to make Supreme Court’s judges serve for life with no retirement age. Why 28 years? Well, in Wall Street Journal investigative article titled “Brazil’s Giant Problem” (http://on.wsj.com/1VKKbvP), it was reported 1/3 of parliament members are indicted by Brazil justice system and the WSJ reports:

    “Part of the credit goes to the 1988 Constitution, which ensured lifetime jobs for judges and prosecutors and shielded their budgets from politicians. ”

    For Malaysia, instead of trying prosecuting corruption with non-existing judiciary capability, I think it is better for the opposition to settle with Najib by demanding only lifetime jobs for Supreme court judges and wait 28 years or something like that for our judiciary system to mature.

    Damage to our judiciary system by Dr. Mahathir cannot be recovered overnight.

  6. Ardent opponents of Najib would like you to believe Najib is the only root cause of 1MDB scandal, and therefore his removal will solve almost all major corruptions that are happening and going to happen in Malaysia. If we stand back and think through the situation we are in, then I think we will find both the prognosis (Najib is the root cause) and the solution (removal of Najib outside constitutional means) are false.

    Common sense tells us it is unlikely Najib alone committed the fraud of 1MDB and he has no accomplices. In the modern states like Malaysia, a wrongdoing is a crime only if the law enforcement is capable of prosecuting the wrong doing. Since there is no single accomplice is indicted so long after the scandal was first revealed, we have to conclude our law enforcement capability is not capable of prosecuting those low-ranking accomplices, much less the PM. This assessment of law enforcement capability is like when a teacher gives you a grade of F for your exam, it is better for you to accept that you are a F-level student at least for the time being as opposed to fighting with the teacher to upgrade the grade immediately.

    Despite being a third world country, Brazil has the law enforcement capability to prosecute about one-third of the elected official for the latest corruption scandal engulfing even the president Rousseff.

  7. Bro BUMmer resident abroad but still much informed on *MalSian* affairs, and this blardy creature called 1MDB and its founder I call THE CLUELESS WAN since WSJ broke the story last July ARE MAKING A LAUGHOING STOCK OF THE w.w.w.both cyber n terrestrial. I hope you stay put where yr talents are more appreciated — just like many young Malaysians are resident abroad. Cheers, YL, Desi PS I’m C&Ping this post into my Midnight Voices abode. PPS I’m ready wit’ my SECOND book towards end-June, hope you do me the honour again with a PREFACE> THank you, xie xie, terima kasih:)

  8. Publicizing his afternoon speech on Twitter, Mr. Bharara chose a quote from Edward R. Murrow: “A nation of sheep will beget a government of wolves.”

    In his speech from the performance studio, Mr. Bharara repeatedly hammered the complacency and implicit collaboration of other lawmakers, whom he called “enablers,” in the “rancid culture” of Albany.

    “What’s been going on in New York State government lately is simultaneously heartbreaking, head-scratching and almost comic,” he said, echoing remarks he made last month in front of the Kentucky Legislature.

    Mr. Bharara rejected complaints about prosecutorial overreach. “Blaming the prosecutors is not leadership,” he said. “Whining is not leadership.”

    In a Q. and A. after his speech, Mr. Bharara said his public-corruption unit was “not closing up shop anytime soon.” – http://www.nytimes.com/2016/02/09/nyregion/preet-bharara-us-attorney-making-a-rare-visit-to-albany-receives-a-glowing-reception.html?_r=0

  9. The same with Saddam Hussein, Marcos, Ceiscescu and all those despots, dictators and leaders who for a moment in time thought the world was theirs to do as they like….. for a moment in time they thought that “Cash was King” and that political power was forever. No my friends, cash will sooner rather than later, run out….. and political power is fleeting.

    So again I ask that you look at the above image of Najib and ask yourself if that is not an already dead man still walking? – http://steadyaku-steadyaku-husseinhamid.blogspot.my/2015/12/najib-razak-dead-man-walking.html

  10. It ain’t over till the terrible thieves are trounced and tortured by their transgressions.

  11. Quote:- “Despite being a third world country, Brazil has the law enforcement capability to prosecute about one-third of the elected official for the latest corruption scandal engulfing even the president Rousseff”

    The big difference between Brazil and Malaysia is that in the latter case, the dominant Malays felt no visceral compulsion to overtly criticize, let alone tear down their own community / political leaders, however corrupt and useless, for fear that it may somehow unwittingly aid and abet the ever present covert intentions of the minority non-Malays to economically / politically subjugate them, (like what the British did for 150 years), and the non-Malays have to self-censor themselves, (ala MCA / MIC), so as not to be seen to appear or be accused of being anti-Malay and worse treasonously disloyal to King and country, something regularly regurgitated when an opportunistic occasion arises.

    This “us and them” does not exist in Brazil where there are no “pendatangs” to fear. If one Brazilian president gets sacked, another Brazilian becomes president. In Malaysia the fear is what if the non-Malays, who are already or made out to be economically dominant, become politically dominant as well and a non-Malay becomes PM, then “Melayu akan di hilangkan”

    So the end result, better do nothing and better not do something.

  12. Wayne,

    Patriotism sentiment has to be stronger than Malay-Chinese antagonism in order for law enforcement to take its course. That, I agree.

    However, I suspect overall patriotism sentiment of Malaysians is already strong enough for the purpose of law enforcement. One historical case supporting my assessment is that, in 1987, Supreme Court under Tun Salleh Abas had ruled UMNO election illegal and therefore rocked the boat of the incumbents. Tun Salleh Abas was not worried about being sacked or asked to retire early until he was actually sacked through an unconstitutional tribunal concocted by Dr. Mahathir. The case demonstrated then Supreme Court was capable to dispense justice even against political corruption at the highest level. Those judges were also not worried about Malay-Chinese antagonism or Malay losing its position even when Malay’s economic position was weaker than it is now.

    There is no reason to believe Malay-Chinese antagonism in 1987 was weaker than that of 2016. The remaining plausible reason for 1987 Supreme Court to rule against political corruption is that Tun Salleh Abas and other judges thought they could rule based on law without the risk of being sacked or humiliated.

  13. Wayne,
    The Malay Muslims believe in Qada’ and Qadar (divine will and divine decree) is so strong that often times they throw up their hands and say “dah takdir tuhan”. This gives the impression that the Malays are so docile and not willing to take steps to,stop the plundering or make changes to the government of the day. Even when they are given the paltry RM 50 handout, they will say Alhamdulillah, what more when they get BR!M.
    Yes, Orang malaya, we both know too well that the Malays like to attribute everything to God. Religion (Islam) is their opiate. When they are poor, they are told not to worry, just sabar (be patient) because they will be rewarded with grapes, dates and 72 virgins in Heaven (and I assume the women will get 72 studs). On earth, they cant, for example, commit time for an appointment except to say insha’Allah. If they can’t make it, they will tell us God’s not willing. How can we do business and compete? In Malaysia, that crook Najib is their God because he can give them money, not his own but from taxes paid by hard working Malaysians.

    Thanks to Che Det, UMNO members are made to think duit rakyat itu duit UMNO (peoples’ money is UMNO’s money) so that they can use it without being accountable to us the people. That is why with this mentality our country is sinking fast.–Din Merican

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