29 Dec 2015
If 2014 was the year of Malaysia Airlines where it lost two Boeing 777s, one disappeared while another shot down; the year 2015 is definitely the year of Prime Minister Najib Razak. The prime minister’s multi-billion dollar scandals easily eclipse any other financial scandals one could imagine in the history of the country, including Mahathir’s.
The Wall Street Journal dropped another bombshell (*yawn*) yesterday, Dec 28, 2015, linking the highly explosive RM42 billion 1MDB scandal with PM Najib Razak’s private banking account, which had suddenly swollen with US$700 million (then RM2.6 billion but now RM3 billion due to ringgit depreciation) from some unknown generous donor(s).
Najib had called and met a group of senior (UMNO) leaders in July to remind them everyone had benefited from the money. A cabinet minister who was present claimed the prime minister said the US$700 million funds weren’t used for his personal enrichment, but channelled to politicians or into spending on projects aimed at helping the ruling party win elections in 2013.
According to minutes from 1MDB board meetings seen by The Wall Street Journal, hundreds of millions of unreported political spending were made possible because of 1MDB (1Malaysia Development Berhad), a state investment fund controlled by PM Najib Razak. Therefore, it’s safe to presume that 1MDB was setup merely to suck taxpayers’ money to political party UMNO.
That explains why despite Najib’s repetitive drumming about 1MDB making good investments and profits, it has registered more than US$11 billion in debt instead. That also explains why the prime minister had tried to convince, without much success, that the US$700 million found in his private banking account wasn’t from 1MDB.
In a meeting on Dec. 20, 2014, 1MDB board members discussed what to do about police who came to investigate allegations of financial irregularities, according to the minutes. The 1MDB fund also transferred at least US$14 million (then RM42 million but now RM60 million due to ringgit depreciation) to politicians through Ihsan Perdana Berhad.
Ihsan Perdana Berhad, a company formed in 2011 but exempted from filing financial statements, sent the US$14 million in cash to Najib Razak’s personal accounts but received the money from SRC International Berhad, a company controlled by Malaysia Finance Ministry, of which the prime minister himself heads.
According to a Malaysian cabinet member interviewed by The Wall Street Journal, the prime minister signed checks from his personal accounts to lawmakers, who used the money as they saw fit. Until today, Najib Razak hasn’t explained where the US$700 million in his accounts came from or how it was used.
The best explanation offered by senior UMNO politicians, perhaps after brainstormed and agreed by prime minister himself, was that the money was a political donation from an unnamed Middle East donor. Surprisingly, former Attorney General Gani Patail was relieved of his duty as he was allegedly drafting a warrant of arrest for PM Najib Razak.
The Malaysian prime minister had chosen to hide himself from the 16th International Anti-Corruption Conference (IACC) held from 2-4 September in Putrajaya. Instead, he sent two low ranking Ministers – Paul Low and Abdul Wahid – to shield him from potential humiliation by the international delegates, numbering 1,000 from 130 countries.
Unfortunately, Najib’s “chickening out” didn’t stop the Transparency International chief Jose Ugaz from grilling him over the US$700 million scandal, openly asking the Malaysian prime minister to explain who paid the money, why, and what happened to it. And it’s not hard to see why – the 1MDB scandal has attracted investigations in at least 6 countries.
U.S. Federal Bureau of Investigation (F.B.I) is looking at assets owned by Mr. Najib and his family, including luxury real estate in New York and Los Angeles. The F.B.I. is also looking at the funding of a film-production company – Red Granite Pictures – which was set up by the prime minister’s stepson, Riza Aziz, and produced “The Wolf of Wall Street” starring Leonardo DiCaprio.
Although Mr. Najib and 1MDB executives said the fund was supposed to attract investment in energy, real estate and tourism, people are not convinced simply because Malaysia already had a sovereign-wealth fund pursuing similar aims – Khazanah Nasional Berhad (KNB). So, why should 1MDB be created and put under his personal control?
Najib Razak told parliament that his stewardship of 1MDB was to ensure it spurred economic development and foreign investment so that wealth “can be distributed equally regardless of race and ethnicity, but for 1Malaysia.” However, under his stewardship, 1MDB couldn’t even serve interest on its loans, including from Deutsche Bank and required bailouts.
Najib regime also couldn’t explain why out of a US$1 billion investment from 1MDB, approximately US$700 million moved to another company’s bank account – Good Star Ltd – a Seychelles-based firm owned by Low Taek Jho, the architect of 1MDB and acted as a director in 2013 election spending, who happens to be Mr. Najib stepson’s good friend.
How 1MDB trumpets its profits is equally amusing. It bought land from the government at extraordinary cheap prices. It was like getting each unit of iPhone at US$10 a pop when the actual value is much higher. In the financial year ended March 31, 2011, the fund revalued the land by 426%, even though it had neither sold nor developed it.
The fund also borrowed heavily. Goldman Sachs Group helped it raise US$6.5 billion in bond issuances in 2012 and 2013. At least US$3 billion of bond money was diverted elsewhere when it should be used to fund development of the Kuala Lumpur financial centre. The 1MDB fund also financed free trips to Mecca for more than 1,000 village headmen before the 2013 election.
After the 2013 general election, to which UMNO lost the popular vote for the first time, let alone recapture its two-thirds majority, 1MDB was left with US$20 million in cash and US$10 billion in liabilities. It got so bad that one board member worried whether they could be charged for “criminal breach of trust (CBT).”
The board’s chairman suggested convening in the future outside of 1MDB’s offices to “reduce the risk of bugged meeting rooms.” But why should Najib Razak and his board of warriors worried about it at all if they haven’t done anything wrong, legally? Those politicians may have taken millions of ringgit from their boss but how much has Najib personally taken?
Considering that 1MDB has accumulated US$10 billion in debt right after the 2013 election, money flashed personally by Mr. Najib to his politicians for the election may not have come from the US$700 million discovered in his personal account at all. The money could be still intact because if Sarawak Report’s revelation is true, he had transferred US$650 million back into Falcon Bank in Singapore on August 30, 2013.
Therefore, the myth that the US$700 million found in his private account was a political donation from an unnamed Middle East donor meant for 2013 election does not hold. How Mr. Najib could received US$700 million and transferred out US$650 million, thus spending only US$50 million on the election?
The educated guess is at least US$3 billion in bond money had been spent to the last penny, and the remaining US$3.5 billion from the total US$6.5 billion raised by Goldman Sachs Group before the 2013 election could be utilised, hidden somewhere or simply gone missing. If there’s one thing people are convince, that is – Mr. Najib Razak is a billionaire.