30
Mar
17

Pua: Illogical for minister to say 1MDB’s debts are not MOF’s

Pua: Illogical for minister to say 1MDB’s debts are not MOF’s

DAP lawmaker Tony Pua said Second Finance Minister Johari Abdul Ghani has made an “illogical and embarrassing” statement by saying the Ministry of Finance Inc (MoF Inc) would not take over the debt of its wholly owned subsidiary, 1MDB.

He was responding to Johari’s comment that the debts incurred in 1MDB’s wholly owned subsidiaries TRX City Sdn Bhd (TRXC) and Bandar Malaysia Sdn Bhd (BMSB), as operating debt.

“No finance minister worth his salt would argue that the ‘operating debts’ of a wholly-owned subsidiary does not belong to the parent company’s accounting books,” Pua said in a statement today.

“Johari tried to wriggle his way out of it by claiming that these were merely the ‘operating debts’ of the real estate subsidiaries.

“Malaysians fail to understand his convoluted argument that ‘there is therefore a clear distinction between 1MDB debts, which will not be taken over by MOF Inc, and the BMSB/TRXC project company operating debt, which are part of the assets and liabilities of the company’,” he said.

Pua said he hoped Johari did not make the statement himself, as for a former corporate man, his statement does not make any financial sense.

The second finance minister might do well to consult 1MDB’s newly appointed auditors, Parker Randall for an accounting opinion before issuing such embarrassing statements, urged Pua.

“The minister confirmed the very facts which I had stated. He confirmed that real estate owned by the Government was sold to 1MDB at ‘nominal’ prices.

“A check on 1MDB financial statements would show that the 70-acre TRX land was priced at RM64 per square feet (psf) for a total of RM194 million, while the 486-acre Bandar Malaysia was at RM72psf for a total of RM1.67 billion.

Pua likened Johari’s admission that 1MDB real estate companies took up to RM800 million from Socso (Social Security Organisation) and another RM2.4 billion worth of sukuk for Bandar Malaysia, and that the debts of RM3.2 billion have been assumed by the MOF, as a bailout.

“The Government granted these parcels of land at ‘nominal prices’ to 1MDB, but when effectively less than 50% of these parcels of land were ‘returned’ to the Government, they came with an attached liability of RM3.2 billion?” Pua asked.

The Petaling Jaya Utara MP noted that Johari had also failed to mention that the proceeds from 1MDB’s sales of TRX and 40 percent of Bandar Malaysia for over RM11 billion, did not go towards settling 1MDB debts, and instead, the MOF had to carry its subsidiaries liabilities.

“What is worse is that, even if Johari’s illogical statement holds, he has failed to acknowledge that both the auditor-general and the Public Accounts Committee (PAC) have discovered that the bulk of the money raised from the borrowings did not go towards the real estate projects.”

“Page 43 of the PAC Report would tell you that out of RM800 million borrowed from Socso, only RM338 million went towards 1MDB Real Estate and its projects. The balance was ‘advanced’ to the 1MDB parent company for other purposes,” he said.

“Even more shocking, Page 45 of the same report would tell you that not a single sen of the RM2.4 billion sukuk raised went towards the development of Bandar Malaysia or TRX, or any other 1MDB real estate projects.

“The net proceeds from the sukuk were ‘advanced’ to the 1MDB parent company for other purposes as well as to refinance previous borrowings, which were also utilised for non-real estate purposes,” Pua added.

1MDB CEO Arul Kanda Kandasamy himself, had confessed to the PAC that due to cashflow difficulties within the 1MDB group, these funds were “diverted” from their intended purposes, according to Pua.

“Hence while the intent of the RM3.2 billion of borrowings was perhaps ‘operational’ as emphasized by the Johari, in reality, the overwhelming bulk of the borrowings was brazenly utilised for ‘non-operational’ purposes,” he said.

Hence, 1MDB must pay back these advances to the MOF, he added.

“Otherwise, it’s a triple-whammy for the Malaysian tax-payers where 1MDB made multi-billion ringgit profits from nominally priced land from the Government to partially cover up tens-of-billions of ringgit of losses from other 1MDB transactions, the government takes back less than 50% of the land attached to a RM3.2 billion liability, and the RM3.2 billion borrowed was never invested in the land in the first place.”

This means the MOF itself has to further invest in the projects to realise their value, he said.

…more
Pua: Illogical for minister to say 1MDB’s debts are not MOF’s
17 Mar 2017 – Malaysiakini

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