FGV Falls from Grace but Isa Samad Stays: Governance Malaysian Style


June 16, 2017

FGV Falls from Grace but Isa Samad Stays: Governance Malaysian Style

by P.Gunasegarm@www.malaysiakini.com

A QUESTION OF BUSINESS | The latest fallout at Federal Land Development Authority (Felda) controlled Felda Global Ventures Ventures Holdings Bhd (FGV), is just a continuation of the wrong and highly questionable actions of the company since listing in 2012.

Image result for FGV Chairman Isa Abdul Samad

The solution is to simply go back to basics which means that FGV should stick to the business it knows well – oil palm plantations and related processing. It should pay fair prices for related acquisitions, not astronomical sums. And be run by competent professional managers who understand the business and are straight.

But too much damage has already been done by these actions and it will be some time before it recovers completely.

In the latest controversy, FGV board chairperson Isa Abdul Samad announced on June 6 that FGV CEO Zakaria Arshad was to take an immediate leave of absence. He added that it was a board decision.

Apart from Zakaria, FGV chief finance officer Ahmad Tifli Mohd Talha, FGV Trading chief executive officer Ahmad Salman Omar and Delima Oil Products Sdn Bhd senior general manager Kamarzaman Abd Karim were also suspended.

Zakaria hit back saying he had tried to stop hundreds of millions in investments by the company’s board which he described as “ridiculous”.

Amongst the investments, he said, were plans for a 100 million pound sterling (approximately RM551 million) expansion of Felda Cambridge Nanosystems Ltd, a nanocarbon company, which had already lost RM117 million in the last three to four years.

“Now they (the FGV board) want to expand, they need another 100 million pounds. To me this is ridiculous, we’re a plantation company,” he was quoted as saying by The Star.

To understand what is going on, it is necessary to go back into FGV’s short history. While it was listed in mid-2012 with high hopes that it will provide great returns for Felda settlers who hold a direct stake, Felda which holds about a 34% stake and various government institutions including the Employees Provident Fund (EPF), the share performance has been atrocious.

When it was first listed on June 28, 2012 confidence was so high that it opened higher than expected over its initial public offer (IPO) price of RM4.55. Reuters reported: “Malaysian palm oil firm Felda Global surged 20 percent in its trading debut on Thursday (June 28, 2012) as investors cheered on the world’s second largest IPO after Facebook’s botched float and the company pledged stronger profits in the coming months.

“The firm raised US$3.1 billion (about RM10 billion then) in Asia’s biggest initial public offering of this year, running against the global gloom in IPO markets and giving the government a political dividend ahead of what is likely to be a closely fought election (the 2013 general election).”

FGV closed that day at RM5.30, some 16% higher than its IPO price but it has been downhill all the way after that, reflecting poor results and an extreme lack of market confidence in the share following a string of poor purchases over the years, squandering some RM4.46 billion net that came directly to FGV from the issue of new shares from the IPO.

Between June 28, 2012 and its last trading day on Friday, FGV’s share price went from RM5.30 to RM1.66, wiping out nearly seven-tenths of its market value. Even comparing with the IPO price of RM4.55, the drop was over 63% – more than six-tenths of value was lost. The EPF itself lost RM203 million when it sold off some of its investments in FGV.

If one thought that this decline in value is because of a general decline in plantation stocks generally, they are wrong. Bursa Malaysia’s plantation index, which aggregates the performance of major plantation companies, declined just 6% over the same period, or about a twentieth of its value against FGV’s seven-tenths, a rate of decline which was 20 times higher.

Acquisition spree

FGV’s acquisition spree under previous CEO Mohd Emir Mavani Abdullah included the takeover of Pontian United Plantations Bhd for RM1.2 billion, Asia Plantation Ltd for RM628 million and RM2.2 billion for Felda Holdings Bhd, and 836 ha of oil palm land from Golden Land Bhd for RM655 million cash.

It culminated in a deal with the Rajawali Group announced in June 2015 for FGV to acquire a 37% stake in PT Eagle High Plantations (EHP) and 93% to 95% stakes in Rajawali Group’s sugar project, in all worth about US$680 million (about RM2.9 billion) in cash and FGV stock.

Emir was strangely involved in a corruption case earlier this month when an employee of The Star newspaper was charged in the Kuala Lumpur Sessions Court with receiving RM20,000 in bribes. M Youganesparan was accused of receiving the money from Emir at The Intermark Hotel, Jalan Tun Razak about 9.15pm on May 30 this year.

By the time the Eagle High acquisition was announced, FGV needed to borrow money to do the deal as it had exhausted the RM4.46 billion from IPO proceeds. The deal was heavily criticised as being way too expensive, even by the EPF, at an estimated 70% premium to market. Also Peter Sondakh, the founder and owner of the Rajawali group was said to be part of Prime Minister Najib Razak’s inner circle and served as his adviser on Indonesian affairs.

Fortunately CEO Zakaria Arshad, appointed on April 1, 2016 and the same one who is now on a leave of absence, nixed the deal, which was officially aborted in July 2016 after FGV started negotiations to restructure the deal in December 2015. Eventually in December 2016, the Eagle High deal was done with Felda which paid US$505 million (about RM2.2 billion) a quarter less, for the same deal.

Zakaria also cut other merger and acquisition deals saying that FGV should concentrate on the plantation business instead, in all saving FGV at least RM4 billion in spending.

Isa was chairman of both FGV and Felda at this time but was replaced as Felda chairman in January this year by another politician Shahrir Samad, although it was not clear why he was replaced. Isa, during Abdullah Ahmad Badawi’s time as Umno president, was found guilty of money politics in 2005 and suspended from the party for six years. He had to give up his post as UMNO Vice-President and Federal Territories Minister.

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Idris Jala–The Financial Whiz appointed to fix GFV

Now former cabinet minister Idris Jala is supposed to look into this whole mess and make his recommendations. But at the end of the day, the solution is very straight forward. First, appoint people with impeccable credentials to the board and ensure that there is board diversity, independence and honesty.

Don’t just cram them chock full with politicians, often of dubious quality even then, and civil servants who know little or nothing about the corporate world and how it operates. Directors collectively should have expertise which covers all aspects of running a business.

Then pick a CEO with proven credentials and give him a free hand to run the company within the broad guidelines and mandate set out by the shareholders and the board. Make him accountable for set targets.

The needless failure of FGV is that of basic corporate governance. At the heart of this is the hijacking of what could have been a good, solid plantation company by the politicians for their own purpose, in the process screwing Felda settlers, investors and other stakeholders.


P GUNASEGARAM says too much is discussed but too little is done about corporate governance in Malaysia, even for listed companies. What happens with unlisted government companies, he wonders. E-mail: t.p.guna@gmail.com.

 

When Giants Fail


May 8, 2017

When Giants Fail

What business has learned from Clayton Christensen.

Tunku Mahkota of Johor lambasts MARA Chairman Annuar Musa


December 18, 2016

Tunku Mahkota of Johor lambasts MARA Chairman Annuar Musa

http://www.malaysia-chronicle.com

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Recently, there was a statement made by a Tan Sri, urging that football shouldn’t be run through proxies and that I should decide and make a decision on taking the job or not. To me, the best would be to let the affiliates and the fans decide on what is best for Malaysian football. First of all, I don’t need to take advice from a leader who have failed to lead.

Whenever a football club or a company faces financial problems, it is called mismanagement. It also ultimately reflects on the leader. When you were in the position where you had numerous sponsors, you should have used that opportunity to clear all your debts. Instead, you made the executive decision to employ a new foreign coach as well as 3 additional foreign players. With this decision, the ones who fell victim were the local players as they didn’t receive their salaries. Priority should be given to the local players and not the foreigners. It clearly shows that you overpaid these foreigners and as a result, you were not able to sustain the club.

It did not end here. Kelantan’s performance began to deteriorate and it was evident that the ship was sinking. To make things worse as a leader, you chose to abandon the ship leaving them to suffer. And it’s embarrassing when in that situation, you still have the desire to be FAM’s President.

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The Boss  (pic right) and his kaki ampu

So my advice to you is, concentrate on your political work. You are a very seasoned and senior politician and we respect the work that you’ve done. Hence, please focus on your political obligations and may you be able to clear the mess and scandal in Mara. Let’s leave it to the people to decide on what is best for Malaysian football.

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Football did not give me any benefits. It’s just the sport that i love. The difference between me and certain individuals is they serve a political ideology and for their own personal interests. I serve the people.

HRH Brigadier General Tunku Ismail Ibni Sultan Ibrahim, Crown Prince of Johor

 

Nationalism in Malaysia in Extremis


November 17, 2016

The Edge logo

Nationalism in Malaysia in Extremis

by Dr. Ooi Kee Beng

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Malay Nationalism or Tribalism ala Ku Kluk Klan

One thing that shocked me when I first went to Sweden for my studies 35 years ago was how dirty a word “Nationalism” was in Western Europe. This reaction, I realized, was very much a reflection of how the concept was positively implanted in my mind while a schoolboy in Malaysia; but it also demonstrated how greatly human experiences can differ in different parts of the world.

More importantly, it revealed to me how strongly we are intellectually captured by the language use of our times and our location.

But the Swedes are very proud of their country, so how come nationalism is frowned upon so badly? The same thing applied throughout Europe, at least until recently. Excessive immigration over the last two decades, coupled with declining economic fortunes and waning self-confidence has buoyed the ascendance of ultra-rightists groups in all countries throughout the continent.

So why was Nationalism so despised? Europe is after all the home continent of the Nation State.

For starters, Europe was always a place of endless wars often fought ostensibly for religious reasons between feudal powers. The arrival of the Nation state ideology helped to lower the frequencies of these tragedies, but only to replace it soon after with non-religious types of rationale for conflict. The American Revolution and French Republicanism added the new phenomenon of “government by the people”. The French case also brought into the equation the Left-Right Dimension that would define politics and political thinking for the next two centuries.

This conceptual division between Popular Mandate and Elite Rule expressed sharply the rights of common people on the one hand, and the role of the state on the other. Once this gap was articulated, conflating the two poles anew became a necessary task.

The three major articulations in Europe of this mammoth mission to bridge the divide and achieve a functional modern system were Liberal Democracy, Communism and Fascism. While the Anglo-Saxon world championed the first, Stalin’s Soviet Union perfected the second and Adolf Hitler developed the third to its insane conclusion. In Europe, it was basically these three actors who fought the Second World War.

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Malay Tribalism in Action

In Asia, Japan’s brand of state fascism ran riot throughout the region, rhetorically championing nationalism in the lands it took from the European colonialists.

While the National Socialism of the Third Reich died with Hitler, Fascism lived on in Franco’s Spain until 1975 and Nationalist Communism of Stalin continued in Eastern Europe until the early 1990s.

Nationalism in the rest of Europe after 1945 came to be understood with disdain as the longing of the Nation State for purity and autonomy taken to pathological lengths. It is after all always a defensive posture, as is evidenced today in its return in the form of right-wing anti-immigrant groups.

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Maruah Melayu dijual ka-Cina untuk membela masa depan politik Najib Razak–Jualan Aset 1MDB

In Malaysia, nationalism was—and for many, still is—the most highly rated attitude for a citizen to adopt.There are obvious reasons for this, given the historical and socio-political context in which Malaysia came into being. Constructing a new country out of nine sultanates, the three parts of the Straits Settlements, with Sabah and Sarawak on top of that, was a more daunting task than we can imagine today. Furthermore, the contest was also against other powerful “-isms”, especially Communism and Pan-Indonesianism. These threatened to posit what are Malaysia’s states today in a larger framework, and would have diminished these territories’ importance and uniqueness.

Putting a new regime in place of the retreating British required a rallying idea; and what better than the very fashionable image of a new nation to whom all should swear allegiance. Malayan nationalism was thus born.

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For Inclusive, Liberal and Progressive Malaysia–Escaping the Nationalism Trap

It is no coincidence that the path to independence became much easier after Malaysia’s major political party, UMNO, decided under Tunku Abdul Rahman to change its slogan from the provincial “Hidup Melayu” [Long Live the Malays] to the inclusive “Merdeka” [Independence].

But already in that transition, one can see the problem that Malaysia still lives with today. Is Malaysia the political expression of the prescriptive majority called “Melayu” [later stretched to become “Bumiputera”], or is it the arena in which the multi-ethnic nation of “Malaysians” is to evolve?

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Nationalism in essence, and most evidently so in its narrow ethno-centric sense, is defensive and fearful, and understood simplistically and applied arrogantly very quickly show strong fascist tendencies. The issue is therefore a philosophical one.

What Malaysia needs today, is to accept the regional and global context that sustains it, and work out as best it can a suitable balance between Popular Mandate and Elite Rule which is clearly less belaboured and less painful than the cul-de-sac alleyway it has backed itself into.

OOI KEE BENG is the Deputy Director of the Institute of Southeast Asian Studies (ISEAS–Yusof Ishak Institute) and the Editor of the Penang Monthly (Penang Institute). He is the author of the prizewinning The Reluctant Politician: Tun Dr Ismail and His Time (ISEAS 2006).

KJ John on Great Leadership


October 21, 2016

KJ John on Great Leadership

by Dr. KJ John

http://www.malaysiakini.com

Great leadership is only when all community leaders of Malaysia, whether appointed, elected, or voluntary choose to put nation-state interests above their own and ‘Serve to Lead’ our nation out of the current quagmire.–KJ John

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For all his faults, contradictions and paradoxes, Dr. Mahathir is Malaysia’s Great Leader and he comes from my state Kedah–Din Merican

Premised upon my last three columns on patriotism, a small debate ensued on Facebook about whom or what defines good or great leadership. This column is my response to that query, but I would like to address it from a perspective of an RMC Old Putera, the alumni of the Royal Military College (RMC); our alma mater.

All Old Puteras were trained to ‘Serve to Lead’, or ‘Berkhidmat Memimpin’. The unasked question is who then do we serve and lead? Every Saturday, at the parade square, we actually saluted the flag of the federation, what is now called the ‘Jalur Gemilang’. Therein lay the answer as to whom we were called and taught to serve or seek to lead.

From good to great

Many books have been written about the two words ‘good versus great’. ‘Good to Great’ by Jim Collins is one very popular one. In the nineties, ‘Built to Last’ was published about great companies with good work ethics and a mature performance culture. But the question remained, what about the company which is not born with a great DNA? How can good companies, mediocre companies, even bad companies achieve enduring greatness?

“For years, this question preyed on the mind of Jim Collins. Are there companies that defy gravity and convert long-term mediocrity or worse into long-term superiority? And if so, what are the universal distinguishing characteristics that cause a company to go from good to great?”

I can fully understand why most authors, writers, and scholars shy away from the word, ‘good’. When a Nicodemus, a teacher of the laws of Israel, approached Jesus and asked the question by night, “Good Teacher, how do I inherit eternal life?” Jesus responded with another question: “Why do you call me good; only God is good”.

Therefore, for human systems or organisations like companies or countries, it is easier to talk about being great places for good to great experiences. In fact, Robert Levering, another researcher, as a sequel to ‘In Search of Excellence’ by Peters and Waterman, wrote ‘A Great Place to Work’:

“Good workplaces are worth examining if for no other reason than that they enrich the lives of the people working there. Everyone, after all, would prefer working in a pleasant environment to an unpleasant one. Since most of us spend the greater part of our waking hours at work, this is no small matter.”

Great leadership in Malaysia

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What would great leadership in Malaysia look like? Would it just be, “I did it My Way?” which appears to be Donald Trump and Rodrigo Duterte’s favourite song? Or, is it our Malaysian way of ‘close one eye culture’ of ‘nasi campur’ – all and sundry meshed together on the same plate, but very delicious to the stomach and human desires? While palatable, it may not be good either for health or body?

What is the kind and quality of good leadership for Malaysia; of the ‘Serve to Lead’ kind? To answer this question, first we need to define the units of analysis to peg the problem definition at its core and essence.

Malaysia is a federation

Any federation is a coming together, a willing one, of many parts to make a whole greater than the sum of its parts. That means the whole federation is a unit of analysis greater that all its parts. We are not a confederation either. A confederation is the coming together of small groups of constituent sub-wholes to make a greater whole. The European Union (EU) is more like a confederation.

For example the Federation of Malaysian Manufacturers is a confederation of many industry associations and they come together as a greater whole to dialogue and take concerns with the government or any other party.

Neither are we a unitary state like the Philippines or Indonesia. They have no states with legal existence; except for the newly-created autonomous zones of Aceh, or the Muslim South areas of Mindanao. In Indonesia, post the tsunami, Aceh was made an autonomous zone because of the unique problems they faced.

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Najib Razak is Malaysia’s Most Corrupt Politician  but no Leader, Amen

Malaysia is a therefore a federation of three constituent parts; of the two Borneo States, and the Federation of Malay States. Our whole is greater but the sum of the parts is not 13 or 14; whichever way we argue it, but rather three constituent parts, since Singapore left in 1965.

Parliamentary and constitutional democracy

While nine feudal Malay kingdoms came together to make the Federation of Malaya with two Straits Settlements in 1957, our system of governance was designed, developed, and crafted to become a constitutional democracy. The Parliament defines our laws; both in letter and spirit.

Then, in 1963, when the new Borneo States with Singapore came together to make or form the bigger reality called Malaysia; it was not merely a linear projection of the Merdeka Democracy. It really is an improvement of our parliamentary and constitutional democracy of the four, and later, three states to become a brand new whole greater than the sum of its three parts.

The Federal Constitution is the Supreme Law of the Federation, and it defines all else, including the structure, format, and principles of how our democracy is to be framed, shaped, and continue to be improved.

Anything that detracts from the supremacy of this Federal Constitution, including new developments through the specific interpretation of a Wahhabi form of Islam, or a Shiite-Sufi Islam cannot be included simply because of the tyranny of a majority. The constitution reigns supreme.

Constitutional monarchy

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A Gallery of Malaysia’s Constitutional Monarchs

This past week we had the meeting of the Rulers-in-Council; these include all nine Malay State Rulers, plus politically appointed ‘Malay’ governors, or the other four legitimate entities and their respective politically elected heads of state. All such meetings and protocols are well enshrined protocols within the constitution.

What is not well enshrined by the Federal Constitution can be considered as traditional Malay customs or culture from their historic system of feudal governance of these nine respective states.

Great leadership is only when all community leaders of Malaysia, whether appointed, elected, or voluntary choose to put nation-state interests above their own and ‘Serve to Lead’ our nation out of the current quagmire. May God continue to forgive our ignorance and arrogance.

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(This column is dedicated as my prayer for the future of the nation-state, especially for my grandson who turns two years of life as a Malaysian living in this country we love.)

 

Ralph Marshall and Ananda Krishnan (AK) part company


October 8, 2016

 

Ralph Marshall and Ananda Krishnan (AK) part company, says Asiasentinel

http://www.asiasentinel.com/politics/1mdb-criminal-probe-separate-key-aide-malaysia-tycoon-empire/

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Augustus Ralph Marshall parts company with Ananda Krishnan

by Asiasentinel correspondent

Augustus Ralph Marshall, the trusted key aide to T. Ananda Krishnan – Malaysia’s second-richest man – has left all posts in the sprawling cross-media empire as of end September, several sources told the Asia Sentinel.

Marshall has been under investigation in the past few years in India and Indonesia over joint ventures by Malaysia’s dominant satellite television provider Astro and cellular provider Maxis, both part of Ananda Krishnan’s business empire.

Swiss prosecutors have also asked for information on one of the companies Marshall sits in – Tanjong PLC – over money missing in the USD11 billion 1MDB scandal.

Company insiders and those in business circles say Marshall’s exit from Ananda Krishnan’s companies is anything but amicable. “It is a terribly acrimonious break,” said an executive who has worked with Marshall.

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Corporate Malaysia heard rumors of the impending departure from Ananda Krishnan’s empire in the past month but are awaiting announcements to be made in Bursa Malaysia, the local stock bourse, when it opens after the October 3 public holiday to celebrate the Muslim New Year.

“He is leaving AK, and not in the best of ways,” according to a businessman who is close to Marshall. AK is the moniker for Ananda Krishnan, who first made his fortune in the oil and gas boom of late 1970s before entering the telecommunications and satellite television industries.

Ananda Krishnan’s key aide

Forbes has listed Ananda Krishnan as the 158th wealthiest person in the world with US$7.3 billion and second wealthiest Malaysian in March 2016. He was 129th wealthiest in 2015 with a personal fortune of US$9.7 billion but his wealth tanked due falling Maxis share prices.

With nearly 40 years of experience in financial and general management, Marshall has been with Ananda Krishnan when the reclusive tycoon was given a cellular communications license and an exclusive 21-year concession to run Malaysia’s first and only satellite television provider. That license expires next year.

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The brilliant Malaysian Born and Harvard Business School Educated Entrepreneur in trouble with Law in India

The 64-year-old  Marshall was last the executive director of Ananda Krishnan’s private vehicle Usaha Tegas Sdn Bhd and also in ASTRO ALL ASIA NETWORKS plc, where he is also the deputy chairman, apart from being group chief executive officer of Tanjong Public Limited Company, where Usaha Tegas has a significant interest.

Marshall resigned in July 2015 as non-independent executive director of Maxis Bhd, the cellular provider which is partially owned by Saudi Arabia’s dominant provider Saudi Telecom Co, Usaha Tegas also has a significant stake in Maxis.

Marshall, who is regularly cited in the business media in Ananda Krishnan’s corporate deals, found himself in the other sections of regional newspapers in 2014 when police in India filed corruption charges against Dayanidhi Maran, who was India’s telecommunications minister between 2004 and 2007; and his brother billionaire Kalanithi Maran.

Both Ananda Krishnan and Marshall were named in the charge sheet with India requesting extradition but Malaysian police have said the request has not been made officially. Both Ananda Krishnan and Marshall have not discussed the matter publicly.

Reuters reported that India’s Central Bureau of Investigation (CBI) started investigating the Maran brothers and Ananda Krishnan in 2011 after allegations that the telecoms minister had forced the sale of mobile carrier Aircel, allowing Maxis to acquire a controlling stake in 2006.

Maxis Communications Bhd has denied any wrongdoing and said it would vigorously pursue all available legal remedies to defend itself and Marshall, the Reuters news agency said.

In 2012, Marshall was also named a suspect in a case that involved illegal use of operational funds in a company in Indonesia.

The Jakarta Globe reported the Indonesian police were in the process of requesting Interpol to issue a Red Notice against Marshall, who was then group chief executive officer of Astro All Asia Networks. The matter has since been resolved.

1MDB link

In January this year, Ananda Krishnan’s company Tanjong PLC, where Marshall is a top executive, was named in the Switzerland Attorney-General investigations into the 1MDB scandal, the biggest in Malaysia’s history, which has tarred Prime Minister Najib Razak.

The Swiss Attorney-General asked Malaysia’s assistance in its investigations into alleged misappropriation of US$4 billion linked to 1MDB – the first time that a foreign-government investigator has openly waded into the financial scandal.

The Switzerland’s Office of the Attorney-General (OAG) said funds were transferred to Swiss accounts belonging to former Malaysian public officials and were seeking information on 1MDB and its former subsidiary SRC International apart from Malaysian conglomerates Genting and Tanjong said to be connected to the money missing from government companies.

The OAG said four cases involve allegations of criminal conduct – bribery of foreign public officials, misconduct in public office, money laundering and criminal mismanagement. It said these occurred between 2009 and 2013 relating to PetroSaudi, Genting and Tanjong, SRC and Abu Dhabi Malaysia Investment Company (ADMIC), with the cases “each involving a systematic course of action carried out by means of complex financial structures”.

“So far, it has been ascertained that a small portion of the money was transferred to accounts held in Switzerland by various former Malaysian public officials and both former and current public officials from the United Arab Emirates,” the OAG said of the probe it opened in August last year.

Private Saudi energy firm PetroSaudi was involved in a plan in 2009 to jointly develop an oil field with 1MDB but the venture was aborted, with questions raised over the return of 1MDB’s initial investments.

Genting and Tanjong sold power plants to 1MDB at what were considered inflated prices in 2012. ADMIC was a joint venture between Abu Dhabi’s state fund Aabar Investments and 1MDB to jointly develop the Tun Razak Exchange financial hub in Kuala Lumpur.

Outside the tycoon’s ventures, Marshall has interests in the food-and-beverage sector in capital city Kuala Lumpur that ranges from upscale European restaurants to a cricket bar.