What exactly did the Singapore MAS licensed NRA Capital evaluate? Publications in the public domain raise (even more) obvious questions for the Singapore regulator
by Ganesh Sahathevan
The material is presented as is, apart from the comment above which concerns the Monetary Authority Of Singapore and its apparent discomfort in having to deal with the entire 1 MDB matter.
Singapore's NRA Capital emerges as valuer of 1MDB's Cayman investments
Anita GabrielThe Business TimesFriday, Apr 15, 2016
1mdb_reuters.jpg
Reuters
Singapore - Singapore's boutique finance house NRA Capital was roped in to value 1Malaysia Development Berhad's US$2.318 billion (S$3.15 billion) controversial Cayman Islands investment by fund manager Bridge Capital Partners.
This was disclosed in the Hansard transcripts on the hearings of Malaysia's Public Accounts Committee with Deloitte, the auditor which signed off the March 2013 and 2014 accounts of the troubled state-backed firm 1MDB.
NRA Capital is under the Netresearch group of companies founded by Kevin Scully, a well-known veteran market strategist in Singapore.
When contacted by The Business Times, Mr Scully said "valuing listed and unlisted companies and assets is what NRA Capital does in the ordinary course of the business."
During the three-hour PAC proceedings which largely delved into the factors that led to Deloitte's true and fair view of 1MDB's accounts, Deloitte disclosed that it had met with NRA Capital to understand its "methodology and competence" in valuing the Cayman-Islands registered Bridge Absolute Return Fund in which 1MDB had invested.
The fund was managed by little-known - up until the scandal blew up, that is - Hong Kong firm Bridge Capital which in turn hired NRA Capital as valuer of the investments; Bridge Capital subsequently changed its name to Avestra of Australia.
Ng Yee Hong, Deloitte Malaysia's partner, said at a hearing with PAC in June last year: "We met with the fund manager... and we obtained evaluation statement from the fund administrator. We further met with the valuer that has given input to the fund administrator, who in turn came up with the valuation statement.
"This company is called NRA Capital."
Mr Ng was responding to questions by the members of the bi-partisan parliamentary committee on whether Deloitte - 1MDB's third auditor since the firm's inception in 2009 - was "satisfied" with its investments in Cayman Islands funds, which took place in 2012.
1MDB's Cayman investments was slammed by critics for its choice of Bridge Partners, a modest outfit for a state-backed entity, as fund manager and the investment, among others, have since morphed into a full-scale financial scandal for Malaysia.
Moreover, the investments in Cayman Islands-registered funds followed complex transactions of Islamic notes issuance and asset flipping which began with a US$1 billion cash investment by 1MDB in a joint-venture with PetroSaudi International that eventually flopped.
The much-awaited PAC report which was released last week highlighted that key aspects of this investment were pushed ahead by 1MDB's top management without the board's approval and that funds were paid to firms whose ownership could not be verified.
The Cayman Islands investments was one of two "level three assets" - assets that are deemed illiquid - worth over RM13 billion (S$4.53 billion) held by 1MDB as stated in the 2014 accounts.
The second portion, according to Mr Ng in the transcripts, have been invested in funds managed by DBS Bank Ltd Hong Kong, Amicorp Fund Services, Orangefield Fund Services and Manulife Trust Ltd.
The custodian bank for all these investments is Swiss bank BSI, whose private banker at its Singapore branch was also the relationship manager to Jho Low and several 1MDB entities. The banker, Yak Yew Chee, has had his bank accounts frozen amid a probe by the Monetary Authority of Singapore and the Commercial Affairs Department into the 1MDB money trail. Mr Yak left the bank in February.
Deloitte was appointed after KPMG, which had signed off 1MDB's accounts for 2010, 2011 and 2012, was "removed".
According to the Hansard transcripts on PAC's session with KPMG Malaysia partners, 1MDB's management was "unhappy over delays on the 2013 audit" as KPMG had requested further details on the Cayman Islands investments to ascertain its underlying value.
This article was first published on April 15, 2016.
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It is an international mystery featuring tropical islands, a Saudi oil company and the fate of billions of dollars of Malaysian state investment fund money. It is also a central enigma in a scandal that has engulfed the south-east Asian country and left Najib Razak, its prime minister, fighting for his political life.
At the heart of the tangled web of global dealings lies a seemingly simple query: what is the story of the more than $2.3bn said to have been held in the Cayman Islands on behalf of 1MDB, the troubled Malaysian government-owned company?
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A new Australian court case and documents compiled by Malaysia’s auditor-general raise questions about why the Caribbean investment was set up, how it was run — and what the holdings in it were actually worth. 1MDB, which is trying to cut a debt pile of more than $11bn, is adamant that an internal probe into its past dealings has uncovered no evidence of crimes.
The political storm has spawned a campaign to oust Mr Najib, who drove the fund’s development after becoming prime minister in 2009 and still chairs its advisory board. In July it emerged that almost $700m had been transferred into a bank account in his name. Mr Najib insists the money was not linked to 1MDB but was a political donation from an unnamed Middle Eastern source. The broader 1MDB affair has sparked multiple probes at home and overseas, including in the US, Switzerland and Hong Kong.
The 1MDB Cayman story began in the fund’s early days, when it agreed a joint venture with PetroSaudi, an energy company. That tie-up — a contentious episode in itself — ended in 2012 after a complex chain of deals, according to a section of a draft report by Malaysia’s auditor-general completed in June and seen by the Financial Times.
1MDB said it sold equity and debt interests linked to the PetroSaudi venture to a company called Bridge Partners International Investment, generating $2.32bn of proceeds, according to the auditor-general’s report. The proceeds were in the form of promissory notes — or IOUs. 1MDB used these to buy, via a subsidiary known as Brazen Sky, portfolio investments in a Cayman-registered vehicle called Bridge Global Absolute Return Fund SPC. Bridge Global had been incorporated just a month earlier, in August 2012.
An early alarm about the Cayman dealings came from KPMG, 1MDB’s auditor, according to the auditor-general’s draft report. The accounting firm was unhappy because 1MDB would not give it documents it wanted to help it assess the ownership of the investments, their value and Bridge Global’s financial standing. On New Year’s Eve 2013, 1MDB sacked KPMG as its auditor — having cut loose Ernst & Young over another dispute three years earlier. The fund’s 2012-13 accounts were finally signed off by Deloitte instead.
KPMG, Deloitte and EY declined to comment.
Big questions hang over what exactly 1MDB’s Cayman assets were, how they were invested — and what the little-known Bridge Global’s credentials as fund manager were. Bridge Global did not obtain a Cayman mutual fund licence until November 2013, more than a year after the 1MDB deal. Even Bridge Global’s website is now defunct: as of December 2014, it claimed to have “in excess of $2.5bn under management”.
Nick McDonald, who answered a Hong Kong number for Bridge Global and confirmed he was a director of the company, said he could not comment on the matter. He referred questions to another business in the Chinese territory, named Bridge Partners, which he said was the ultimate manager of the funds in question — whereas Bridge Global had only an “oversight” responsibility.
Bridge Partners did not respond to questions about its background and alleged involvement with 1MDB. Its website says it is active across financial services sectors ranging from consultancy to aerospace leasing. Asked in Malaysia’s parliament last year about Bridge Partners Hong Kong, Mr Najib did not dispute that it had a relationship with 1MDB.
1MDB itself has declined to give full details of its Cayman arrangements. Arul Kanda, the man brought in this year to tackle a crisis of cash flow and confidence, insists all the Caribbean money is now redeemed and accounted for. 1MDB has said it recouped almost $1.4bn in cash by November 2014, with the balance of almost $1bn of fund units then being sold in January to Aabar, a United Arab Emirates state investment fund, for a deferred payment.
“These are facts. These are not things I’m making up for your benefit,” Mr Kanda told the FT.
But the doubts over 1MDB’s Cayman dealings have not gone away. The Malaysian central bank said this month it had recommended the attorney-general press criminal charges against the fund for allegedly making inaccurate or incomplete disclosures between 2009 and 2011 in relation to its Caribbean assets.
Malaysia’s new attorney-general — who was appointed after Mr Najib removed his predecessor in July — retorted that 1MDB had no case to answer. The central bank has now ordered the bulk of the Caribbean funds to be repatriated.
More potential Cayman concerns have sprung from a legal action thousands of kilometres from Kuala Lumpur, on Australia’s Gold Coast. An Australian federal judge on Tuesday appointed provisional liquidators from Deloitte to investigate Avestra Asset Management, a Queensland-based investment business linked to Bridge Global of Cayman. The Australian Securities and Investments Commission says Avestra, which did not respond to a request for comment, is being probed to find out if there were suspected breaches of the law or potential losses to investment scheme members.
A 200-page affidavit filed to the court last month by Glenn Childs, a senior securities commission investigator, says Avestra owned a stake in Bridge Global as of March last year. Other corporate records show the two businesses share directors. No other entity of a similar name to Bridge Global is listed in Cayman Islands Monetary Authority records.
1MDB would not confirm or deny whether the Bridge Global in the Avestra case was the manager of its billions. Since 1MDB was not mentioned in the Australian case, the fund argued, it was unable to offer any comment.
Additional reporting by Peter Wells
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Avestra paid millions to Cayman Island company, court told
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ASIC alleges Avestra paid $5.6m to Cayman company Bridge Global CMC
Troubled Australian fund manager Avestra sent millions of dollars to a Cayman Island entity linked with scandal-plagued Malaysian sovereign wealth fund 1MDB at the expense of retail investors, a court has heard.
The corporate watchdog alleges Avestra paid $5.6 million in cash and Malaysian stocks from its Advantage Fund to Cayman company Bridge Global CMC between February and July.
The Advantage Fund plunged 80 per cent in value in August, with its unit price falling from 43c to 7c, according to a Federal Court affidavit filed by Australian Securities & Investments Commission investigator Glenn Childs.
Bridge Global CMC, which Mr Childs said held 86 per cent of the Advantage Fund before the redemptions started, is a portfolio of Cayman Islands company Bridge Global Absolute Return Fund SPC (BGARF).
BGARF is named in Malaysian and Singaporean media reports as playing a key role in a complex deal allegedly used to cover up a $US2.2bn ($3.1bn) hole in a joint venture between 1MDB and PetroSaudi, a company owned by Saudi royal prince Turki Abdullah Al Saud.
The 1MDB scandal has gripped Malaysia amid allegations hundreds of millions of dollars found their way into an account held by Prime Minister Najib Razak at Ambank, a Malaysian bank a quarter owned by ANZ. Mr Razak denies any wrongdoing.
Mr Childs said there were “numerous apparent discrepancies” in documents produced by Avestra and fund administrator Apex Australia relating to BGARF’s redemption of its stake in the Advantage Fund.
“However, it appears that the Bridge Global CMC fund redeemed all of those units between February and July 2015, at unit prices between 63c and 42c,” he said in an October 13 affidavit.
He said Avestra “may have enabled the Bridge Global CMC fund to redeem its units in the Advantage Fund ahead of the fall in unit value”.
“Alternatively, the Bridge Global CMC fund’s redemptions may have caused or contributed to the fall in value, to the detriment of the retail investors who comprised the remaining 14 per cent of the fund.”
Mr Childs said Bridge Global CMC may also have been overpaid by $445,000. Apex operations manager David Potter declined to comment, citing “client confidentiality”.
Avestra executive Clayton Dempsey, who could not be reached by phone or email yesterday, told the court that on legal advice he would not respond to ASIC’s allegations.
“I am concerned that criminal charges may be proffered against me and other current and former directors of (Avestra),” he said in an October 15 affidavit.
It is not known who benefited from Bridge Global’s redemption. Federal Court judge Jonathan Beach denied The Weekend Australian access to ASIC evidence detailing ownership and control of the Cayman Islands structures.
According to an earlier affidavit filed by Mr Childs, as of August last year BGARF’s directors were Avestra executive Paul Rowles and Singaporean businessman Samuel Goh Sze-Wei.
BGARF was owned by Bridge Global Asset Management, also of the Cayman Islands, which had the same directors and ran the Bridge Global CMC fund.
Avestra held 40 per cent of Bridge Global Asset Management, with the remainder belonging to Connect Capital Group.
Hong Kong company records show a company of that name, owned and controlled by Mr Goh, was registered in December 2013 and voluntarily deregistered on May 29 this year.
Two companies associated with Mr Goh — UAE-registered Merrill Capital and BVI-registered Shariott Investments — own 16.7 per cent of Avestra, Mr Childs told the court.
Mr Goh could not be reached.
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