1MDB: Will Najib ever pay for his scandalous house of cards?

Image: Jorge Láscar/CC BY 2.0 with changes.
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By Holly Reeves

In the house of cards around the 1Malaysia Development Berhad (1MDB) scandal, the players are rapidly falling from grace. But as the money, ministers and guarantees fall away, the ace in the pack, Prime Minister Najib Razak, stands stronger than ever.

The latest casualty is the International Petroleum Investment Company (IPIC), the Abu-Dhabi based investment fund that is supposed to have provided guarantees on behalf of 1MDB. It is to be merged with the larger fund Mubadala, as according to one industry expert,”IPIC’s name has been somewhat tainted by [1MDB].”

But as IPIC disappears the dispute over millions of dollars in guarantees and bond payments does not. It is expected the merger of the fund will have no impact on IPIC’s request to a London court to arbitrate over a debt restructuring where it’s claiming around $6.5 billion from Malaysia’s strategic development fund.

“I don’t think the merger will take away any of these rights of the companies on the claims. This will not be a deciding factor,” said Mohammad Ali Yasin, managing director of NBAD securities.

According to IPIC, it is the failure of 1MDB and Malaysia’s Ministry of Finance to perform their obligations, cure their defaults or put forward acceptable proposals that makes this action necessary.

1MDB says it plans to file a “robust response” to the court’s request before the 11 July deadline.

A transparent future?

Meanwhile, incoming Finance Minister II Johari Abdul Ghani agrees 1MBD needs to be dealt with urgently saying he would “try my best to resolve it professionally, transparently and make sure we move on to develop this country.” He added, “From now on and in the future, we will strengthen good governance in the government and ensure proper check and balance in all government investments.”

However, his very appointment is raising eyebrows. He replaces Ahmad Husni Hanadzlah, who oversaw the formation of 1MDB together with Najib and very unexpectedly resigned and went into retirement. Institute for Democracy and Economic Affairs (IDEAS) chief Wan Saiful Wan Jan said, “It’s a surprise as he hasn’t said anything about retiring. This raises questions over possible disagreement within the Finance Ministry.”

If that is the case, he wouldn’t be the only one. Other recent parting of ways within the government include Abu Kassim Mohamed, the chief commissioner of the Malaysian Anti-Corruption Commission (MACC). He is reported to have asked for an early contract termination at least twice before and will now leave on 1 August.

“There was no pressure from any parties towards the decision made by Abu Kassim to shorten his contract,” his agency’s statement said, dismissing speculation that Najib’s office pressured him to go. Also gone this week are former deputy prime minister Muhyiddin Yassin and Datuk Seri Mukhriz Mahathir, the son of former prime minister Mahathir Mohamad.

The thing all of these men have in common? They are all deeply involved in the 1MDB investigations and the latter two have regularly called on Najib to resign under the allegations of graft and mismanagement.

Ever-deeper investigations

But for all Najib can do to remove his critics, he cannot stop the rot from ever-deeper investigations into what happened at the fund. Although being swallowed into a larger entity, executives at IPIC plan to investigate companies set up outside its group structure and in other jurisdictions that may be connected to dodgy dealings.

In particular they will look for companies that use a variation of the name of their subsidiary, Aabar Investments. Remember, it was the fact that 1MDB sent $3.5 billion to a company known as Aabar BVI, which IPIC says it has no connection to, that started the wobble in Najib’s house of cards in the first place.

This is very relevant to public feeling on the scandal as statements made to the Public Accounts Committee investigation into 1MDB talk about investment guarantees provided by Aabar of about US$940 million. This was a key statement from the auditor and the basis for the fund’s valuation.

The money trails are complex but according to the official story parliament heard the guarantees came from fund units in a Cayman-registered investment tool owned by the Singapore-based 1MDB unit, Brazen Sky. “Both IPIC and Aabar confirm there is no record of any such guarantees being provided by Aabar,” IPIC said in a statement. “Neither IPIC nor Aabar has received any payments, assets or fund units from Brazen Sky.”

Why did Parliament believe otherwise?

And so ministers, money and guarantees are disappearing from the story but the scandal continues. Business partners have become opponents in court, political allies have become uneasy collaborators and government officials have been pushed into the limelight to fix problems they didn’t create.

Yet in the absence of a better choice the architect of this uncertainty, Najib, has built himself a safe place in the corridors of power.

Will there come a time when he will need to disappear too? It seems not – the house may wobble but he may soon be the only part of this story left standing.