Background: JAN (the national audit dept) was asked to verify 1MDB's accounts & to give PAC a report.
This report covered an analysis of fin.statements & investment in joint venture co w PetroSaudi
(Please look up these fin.terms yourself as it's not within scope of these tweets to explain)
Auditing continued till 31/1/2016, a Final Report w analysis of fin.statement & fin.position of 1MDB Group...
Analaysis also done on investment performance in equities, murabahah notes, fund portfolios, SRC, real estate & energy sector(?)
Glaring note though: JAN was limited in carrying out its duties due to some original & vital docs submitted late or NOT AT ALL.
Among docs not given: 1MDB's management accts for year-end 31/3/2014 & oversea institutions bank statements.
Btw 2009 & 2010, 1MDB had only one subsidiary & was involved in equity & real estate investments. 1MDB then expanded into the energy sector...
By 2014, 1MDB now had 96 companies.
Now we get to 1MDB group's investment:
Suddenly a wild Terengganu Investment Authority (TIA) appears.
Fed Gov agreed to give a guarantee to TIA to borrow up to RM5b from the local & foreign fin. markets through IMTN(?) in accordance with the Loans Guarantee Act (Bodies Corporate) 1965
Followed by the approval of the TIA Board of Directors on 15/4/2009.
The prog.agreement was signed 15/5/2009 btw TIA & AmBank.
Fed gov provided the guarantee for the endeavour
This led to him being dropped as a company director 27/5/2009.
But the deal was done & the money apparently earmarked for devt of Bidong Island.
The first joint investment deal was btw 1MDB, PetroSaudi Holdings (Cayman) Ltd & 1MDB PetroSaudi LTD on 28/9/2009.
1MDB held 40pc equity holdings w US1b cash contribution...
The investment decisions were made in 8 days, without detailed analytical processes/resolving issues brought up by 1MDB board.
...report then mentions an asset assessment report prepared by Edward L. Morse on 29/9/2008 - the same date he was made CEO of 1MDB, received just a day after the joint investment deal was signed.
Summary so far if you're lost - a lot of money was involved and a lot of things happened in a crazy short time.
Makes you wonder was due process/due diligence followed? Onwards we go.
TLDR: things were signed that did not benefit 1MDB.
Among them a huge US700m advance received by 1MDB PetroSaudi from the Cayman PetroSaudi Holdings.
On 30/9/2009 however...1b was moved BY 1MDB to 2 separate accts - 300 into a JV company & 700m to another company to pay back the advance.
This should not have happened? Like how could 700m be transferred w/out board signing off. Mind boggles.
In the first 4 yrs since 1MDB was formed, from the initial capital (that RM5b), 1MDB investment instruments have changed four times.
Investments were cashed in 2015 to pay off various commitments...
So in the beginning, there were billions.
Then there was more billions. And supposed 'investments'. And yet, where were the actual returns? Hmm.
Its grand plan? To supply MY's long-term coal needs by 2014.
This subsidiary received money from a grant, EPU approved RM20m & the SRC received 15m AS WELL AS a huge loan from the KWAP - RM2b.
"The SRCI board had approved USD45.50 million for investment in the coal industry in Mongolia without providing a feasibility study."
So a huge investment again greenlighted w/out standard procedure.
Why was this done? The report doesn't mention it.
Land in Air Itam
Land in Alor Gajah
Land in Pulau Indah.
All worth in total: RM2.111b
A supposed JV with Aabar for TRX didn't happen, impacting TRX dev.
1MDB also used RM288m from gov allocation to pay off debt, instead of its original purpose.
A lot more money was borrowed for these real estate deals-domestic/sukuk alone was RM3.98b.
So much money here - JVs ventures w China & Qatar into aluminium refinement in S'wak among them.
From 2012-14, 1MDB invested nearly RM12.07b in three IPPs.
Then there's Mastika Lagenda - its acquisition happened w INCOMPLETE proposal paper, also no due diligence report was presented for it. ????
In summary - we spent/borrowed a lot of money and don't have much to show for it besides debt.
1MDB group's outstanding debt (foreign & dom.): RM33.71b.
NOT INCLUDING INHERITED LOANS. WTH?
Including the 11 inherited loans? RM41.86b as of 31/3/2014.
Explains GST alright.
Yet 1mdb's paid up capital was in reality...only RM1m. Which meant it was not financially stable since it had to rely so much on loans.
These loans did not generate enough cash flow to repay said loans.
RM4.88b in 2016
RM14.74 in 2023
RM5.14b in 2039
1mdb needs RM1.52b annually from Nov 2015 to May 2024 to repay its loans.
Management & internal controls = 'less than satisfactory'.
Mgmt decisions/board decisions made w/out due process.
Huge investment decisions made via written resolutions w/o discussion, proper valuation.
Many on short notice, high risk...
Management sometimes took action WITHOUT board approval.
Or info presented inaccurate, did not correlate.
Record keeping/filing not systematic
Thanks for reading & think of me if you need translation/writeups done since I'm probably as broke as 1MDB (though maybe not in billions).
Hope you learned a lot!