1MDB insolvent, unable to repay debts: 2 directors

1MDB chief executive officer and president Arul Kanda Kandasamy had been touring the country just before the polls, saying that the fund's exercise to pare debts was working well.
1MDB chief executive officer and president Arul Kanda Kandasamy had been touring the country just before the polls, saying that the fund's exercise to pare debts was working well. PHOTO: REUTERS

PUTRAJAYA • State fund 1Malaysia Development Berhad (1MDB) is insolvent and unable to repay its debts, two of the company's directors have told the Finance Ministry.

The revelation was made at a meeting yesterday between the Finance Ministry and 1MDB directors Norazman Ayob and Kamal Mohd Ali.

"The directors of 1MDB confirmed that 1MDB was insolvent and unable to repay its debts," Finance Minister Lim Guan Eng told reporters after the meeting.

"The former CFO (chief finance officer) Azmi Tahir had also written to the ministry in March to state that 1MDB will not be able to service its interest due in April and May 2018."

Datuk Kamal also described the US$940 million (S$1.26 billion) worth of investment units held with Singapore's BSI Bank and US$1.56 billion worth of overseas investment funds belonging to 1MDB Global Investments Limited as scams.

"These investments are worth purportedly some RM9.8 billion (S$3.3 billion) which, if redeemed, would be more than sufficient to meet 1MDB's financial obligations for the next few years," said Mr Lim.

"The board of directors claimed they have repeatedly disputed the value and the existence of these investments during monthly board meetings. This is because the 1MDB management had repeatedly failed to supply the board with evidence of the existence of these investments over the past two years.

"Datuk Kamal called these investments a scam. That is the director himself saying it," said Mr Lim.

Set up by former prime minister Najib Razak soon after he took office in 2009, investigations into some US$4.5 billion allegedly misappropriated have been restarted by the new Mahathir Mohamad government after the Pakatan Harapan coalition won the May 9 polls.

1MDB chief executive officer and president Arul Kanda Kandasamy had been touring the country just before the polls, saying that the fund's exercise to pare debts was working well. But yesterday, he told a different story, said Finance Minister Lim.

Mr Lim met Mr Arul as well as former 1MDB CFO Azmi Tahir and former 1MDB general counsel Ivan Chen.

The new Finance Minister lambasted Mr Arul as "utterly dishonest and untrustworthy".

"Arul Kanda claimed that all financial matters were handled strictly by the company CFO and he is uncertain what the value of these investments are - or whether they exist in the first place.

"It is completely unbelievable that a highly paid and experienced investment banker can be so irresponsibly clueless as to not know whether RM9.8 billion worth of investments are even real," said Mr Lim.

The Finance Minister will appoint accounting firm PricewaterhouseCoopers to conduct a special position audit and review of 1MDB.

THE STAR/ASIA NEWS NETWORK

A version of this article appeared in the print edition of The Straits Times on May 24, 2018, with the headline '1MDB insolvent, unable to repay debts: 2 directors'. Print Edition | Subscribe