It was exposed much earlier that 1Malaysia Development Bhd had invested US$2.32 billion in a “seggregated portfolio fund” in 2013. It was discovered that the money was managed a mysterious fund manager in Cayman Islands. It was mysterious because the Government had refused, despite being asked multiple times in and outside of the Parliament, to disclose the fund manager which was given the investment mandate.
Instead it was the Singapore Business Times (SBT) which first discovered that the multi-billion ringgit investment was managed by a little known and relatively inexperienced small investment bank, Bridge Capital Partners based in Hong Kong. Both the SBT and The Edge Malaysia have uncovered the investment bank’s links to individuals of questionable repute.
While approximately half of the above investment, US$1.22 billion has been repatriated to 1MDB per the instructions of the Board of Director made on the 1 August 2014, the remaining balance of US$1.23 billion remains outstanding. 1MDB had promised their Auditors, Deloitte Malaysia that the balance will be redeemed and received by the end of November 2014. However, the amount remains outstanding despite 1MDB’s cashflow problems in repaying a RM2 billion debt which was due on 30 November 2014.
However, the above aren’t the only mysterious overseas investments by 1MDB.
Based on the latest information available in the 1MDB Financial Report for the year ending March 2014, the Company has another US$1.56 billion (RM5.55 billion) “placed in various investment portfolios under custody of a licensed financial institution with good credit ratings as rated by international credit rating agencies.”
The above amount originated from a US$3 billion loan taken by 1MDB in March 2013 meant for a joint venture investment with the Abu Dhabi Government to form the Abu Dhabi Malaysia Investment Corporation (ADMIC). However, 2 years later, ADMIC remains stillborn while the balance of US$1.44 billion “have been utilised by the Company for working capital and debt repayment purposes”.
The question I have is, where is the US$1.56 billion invested and located? Are these funds also similarly managed by a mysterious fund manager who cannot-be-named based in the financially secretive Cayman Islands?
Similar to the controversial Caymans investment, the above US$1.56 billion investment with “a licensed financial institution” was also classified as a “Level 3 asset” by the Auditors in the Financial Report.
An asset is classified as “Level 3” when “fair value measurements are those derived from valuation techniques that include inputs for the asset or liability that are not based on observable market data (unobservable inputs).” In layman’s terms, Deloitte Malaysia is saying that it has no way of verifying the real value of these “investments”.
Therefore, we call upon the new 1MDB CEO, Arul Kandasamy to embark on a new journey of transparency and accountability by disclosing the nature and status of the additional US$1.56 billion investment including, but not limited to the name and location of the fund manager and the investment’s rate of return. Furthermore given that ADMIC is unlikely to commence real work any time soon, will 1MDB consider redeeming these funds to assist with the debt repayment problems faced by the Company? Malaysians deserve to know if 1MDB is in greater trouble than it cares to share.