1 MDB confirmed in writing outflow of funds WSJ says went to a dummy corporation in the BVI-Delloite appears to have been hoodwinked

by Ganesh Sahathevan

The Wall Street Journal's Bradley Hope reported today, 17 December 2015 :

A 1MDB unit transferred at least $850 million via three transactions last year to a British Virgin Islands-registered company with a name that made it look like it was controlled by IPIC, according to wire transfer documents viewed by the Journal and two people familiar with the matter.
The 1MDB fund sent the money to “Aabar Investments PJS Ltd.” which closely resembles the name of IPIC’s wholly owned subsidiary Aabar Investments PJS, the wire documents show.

The background to today's story , Hope explains:
The 1Malaysia Development Bhd. fund, or 1MDB, set up by Malaysian Prime MinisterNajib Razak in 2009 to promote economic development, is under investigation in at least six countries over a broad array of allegations that money was siphoned off for political spending and for personal gain.
One focus of investigation is $2.4 billion in payments that 1MDB said it made to a unit of Abu Dhabi’s International Petroleum Investment Co., or IPIC, as part of a deal involving the Malaysian fund’s purchase of power plants. The Journal reported in September that IPIC officials had concluded they did not receive the money, according to people familiar with the matter.
In response to the story in September 1 MDB issued  a press release in which it confirmed that the payment in question was in fact made:

We refer to a biased article by the Wall Street Journal today relating to US$1.4 billion of payments made by 1MDB. We note that the Wall Street Journal does not name its source or provide any proof of the unproven allegations it is making, thereby seriously discrediting its sensationalist story.
1MDB cannot speak on behalf of Aabar or IPIC nor can we comment on the accounting arrangements of third parties. What we can confirm is that the 1MDB audited financial statements clearly describe the amount and purpose of the payments, which for the avoidance of doubt, is structured as a deposit (i.e. a financial asset belonging to 1MDB and not an expense to 1MDB).
Secondly, based on those payments, we can confirm that IPIC did provide and continues to provide, guarantees for the principal and interest of 2 x US$1.75 billion bonds issued by 1MDB, with a total principal and interest amount of approximately US$5.5 billion.
Thirdly, we can confirm that 1MDB auditors, Deloitte, made specific and detailed enquiries on these payments prior to signing off on the 1MDB audited accounts.
Fourthly, Deloitte has strongly defended its methodology and audit process of 1MDB at the Public Accounts Committee (PAC) hearings, a bipartisan select committee of the Malaysian Parliament. Accordingly, the Wall Street Journal is wrong to state “it isn’t clear what happened to the funds”, at least not from a 1MDB perspective.
More importantly, we are shocked that a hitherto reputable publisher such as the Wall Street Journal would make use of clearly confidential information in its reporting. We refer specifically to the WSJ confirming it has reviewed a “transcript of the proceedings”, from a parliamentary committee probing 1MDB, of which the only possible source is the PAC hearings on 1MDB.
The Standing Orders of the Malaysian Parliament very clearly states that “the evidence taken before any Select Committee and any documents presented to such Committee shall not be published by any member of such Committee, or by any other person, before the Committee has presented its Report to the House”.
The actions by Wall Street Journal are a potential breach of Malaysian law by a supposedly respectable foreign publication. We are further concerned as to who involved in the PAC hearings may have leaked this transcript, which is clearly an attempt to prejudice the PAC investigations and deny 1MDB its right to due process as provided for by the laws of Malaysia.
1MDB strongly urges the relevant authorities to investigate this matter thoroughly and take all requisite action to preserve the process integrity and Standing Orders of the Malaysian Parliament.

Bradley Hope's story today suggests that 1 MDB transferred funds it called a deposit to a dummy corporation neither it nor the apparent recipient, Aabar PJS, owned or controlled. 1 MDB's statement above confirms everything but the  identity of the recipient.
The assertion " that 1MDB auditors, Deloitte, made specific and detailed enquiries on these payments prior to signing off on the 1MDB audited accounts" seems to be an attempt to hide behind the auditors error. Deloitte appear to have made a  mistake not uncommon among auditors, in this case not realizing    “Aabar Investments PJS Ltd" and “Aabar Investments PJS" are not the same entity.  It should be kept in mind that Deloitte were investigating a deposit, not a payment, in which case the auditors would have likely requested a proof of deposit from the entity in question, in this case Aabar Investments PJS Ltd. Audit processes are not likely to have required Delloite to seek proof of anything else. It does appear as if 1 MDB (and/parties acting in concert )was itself the party that provided the proof of deposit.
END

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