Finance Minister vows to probe $900m 1MDB Penang land deal

Malaysia's Finance Minister Lim Guan Eng alleged that the 2017 land deal was an attempt at "roundtripping".
Malaysia's Finance Minister Lim Guan Eng alleged that the 2017 land deal was an attempt at "roundtripping".PHOTO: ST FILE

KUALA LUMPUR • Malaysia's Finance Minister Lim Guan Eng has vowed to investigate how scandal-hit state fund 1Malaysia Development Berhad (1MDB) received RM2.7 billion (S$907 million) in August last year for land which it never handed over to the buyer.

Mr Lim told Parliament on Tuesday that 1MDB subsidiary My City Ventures, which owned the 95ha land in Penang, was sold to a Cayman Islands firm Silk Road South-east Asia Real Estate.

"Money has been paid but until today, the shares haven't been transferred to the buyer," he said, adding that it was not known who Silk Road belonged to. "This is a classic case of money laundering. We will definitely investigate this."

He alleged that the deal was an attempt at "round-tripping", an accounting term for the sale of an asset while agreeing to buy back the same or similarly valued assets later, a tactic largely used to launder money or evade tax.

The transaction took place in 2016, when Mr Lim was Penang chief minister and the state had frozen the plot acquired by 1MDB. He had said then that questions surrounding the firm would have to be answered before the sale freeze was lifted.

Mr Lim said: "They circumvented the restriction on the Penang land by not asking for a land transfer, merely purchasing the company."

The land was bought by 1MDB in 2013 for RM1.38 billion, meaning it nearly doubled its value with the 2017 sale.

 
 
 

Financial paper The Edge reported on Monday that payment for the land may have flowed from a RM10 billion gas pipeline project awarded by Suria Strategic Energy Resources (SSER) - which is owned by the Finance Ministry - to China Petroleum Pipeline Bureau (CPP) in November 2016.

CPP received 88 per cent of the project's payment despite completing only 13 per cent of the work.

The Chinese company yesterday denied that funds from its two pipeline projects in Malaysia were used to pay debts linked to 1MDB.

Mr Tony Pua, a special officer to the Finance Minister, has said the ministry believes cash from SSER was used to cover 1MDB debts.

Malaysia's anti-graft agency is now investigating the pipeline project. 

A version of this article appeared in the print edition of The Straits Times on August 02, 2018, with the headline 'Finance Minister vows to probe $900m 1MDB Penang land deal'. Print Edition | Subscribe