Scandal-hit Malaysia investment fund files accounts late

Michael Peel in Bangkok
Financial Times
October 1, 2015

The Malaysian state investment fund at the centre of an international corruption scandal has failed to file its accounts on time.
1 Malaysia Development Berhad blamed the delay on a lack of access to documents held by investigators.

The fund said it was given permission by the companies regulator to miss the September 30 deadline, adding that two of its subsidiaries also wanted to submit their accounts late.

Critics said the delay was the latest example of a lack of transparency in the face of a large debt burden and allegations of misappropriation of funds that have also engulfed Najib Razak, Malaysia’s prime minister. Both 1MDB and Mr Najib have denied wrongdoing.

“Such complete disregard for timely regulatory compliance demonstrates 1MDB’s contempt for good corporate governance and financial accountability,” said Tony Pua, an opposition MP who was barred from travelling outside Malaysia after he raised questions about the fund.

1MDB said it was “currently finalising” its accounts for the year to March 31 but did not have “original financial files and other information” which are now with investigators. The affair has spawned multiple probes in Malaysia and sparked investigations in the US, Switzerland and Hong Kong.

The fund did not respond to questions about how long an extension it had been granted. The Companies Commission of Malaysia, the regulator, could not be reached for comment.

1MDB also refused to comment on whether Deloitte, its auditor, had even started its work on last year’s accounts. Deloitte, the fund’s third big four auditor in six years, declined to discuss its position, citing client confidentiality.

Concerns about 1MDB, which is 100 per cent-owned by Malaysia’s finance ministry and was set up by Najib Razak in 2009, have intensified. The fund, created to develop new industries and turn the capital, Kuala Lumpur, into a global financial hub, financed itself through issuing debt, and today owes more than $11bn.

The fund said its Edra Energy and 1MDB Real Estate subsidiaries were also seeking an extension to their account filing deadlines for “further clarifications” and input from “additional third-party documents” as a result of official investigations and media reports. Edra is being examined by four shortlisted bidders in a quick auction of more than $2bn of energy assets that is aimed at cutting 1MDB’s debt pile of more than $11bn.

1MDB’s accounts have attracted increasing scrutiny as more details have emerged of its opaque multibillion-dollar international dealings with partners in the Middle East and elsewhere.

Ipic, the Abu Dhabi state wealth fund, is investigating what happened to at least $1.4bn that was reported in previous 1MDB financial statements as being paid to it — but was never recorded as received in Ipic’s own accounts.

In a BBC interview broadcast on Thursday, Arul Kanda, the former Abu Dhabi banker drafted in to restructure 1MDB at the start of this year, denied the fund had done anything improper. But he admitted: “Perceptions . . . are poor and a lot of effort needs to be made to fix that.”

The 1MDB affair has rocked Malaysia, Southeast Asia’s third-largest economy, and prompted a campaign by both the opposition and Mahathir Mohamad, the influential former prime minister, to oust Mr Najib.

The premier and 1MDB have denied allegations that almost $700m linked to the fund was paid into a bank account in his name. Mr Najib says the money came from an unnamed Middle East donor.

Critics say the Malaysian government is trying to stifle scrutiny through detentions, travel bans and by removing investigators from their posts. But after the launch of international investigations, the case has proved difficult to contain.

Additional reporting by Ben McLannahan in New York

  1. #1 by Bigjoe on Friday, 2 October 2015 - 9:33 am

    What a freaking joke, Najib intend is to sue the WSJ here in Malaysia where the system is stacked particularly for him?

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