1MDB and blood feuds: Laying out the facts for once

Photo: Khairil Yusof/Wikimedia Commons

By Holly Reeves

“Prove it,” boomed Malaysia’s ageing statesman Mahathir Mohamad in an interview this weekend. In the wake of months of political positioning, the former strongman wants the country’s current Prime Minister, Najib Razak, to provide the paperwork behind a $681 million donation found in his personal bank account.

I have a better demand. Let’s deal simply in the facts, not the scoring of political points. Right now, Malaysia needs better.

The facts

To begin at the beginning, the strategic planning fund 1Malaysia Development Berhad (1MDB) was set up in 2009 by Prime Minister Najib, who chaired its advisory board. A board of directors oversaw its day-to-day management.

1MDB borrowed money to buy major real estate and power assets in Malaysia and abroad, with the intention of developing them and turning them into profitable entities. Jewels in its crown were land and energy assets, some now sold to cover debts. These debts, in combination with political power plays, today leave the fund mired in mud and controversy in equal measure.

Murky waters

The issues; $13 billion of debt. Accusations of corruption by the Wall Street Journal. Overpaying for assets. Regular changes in auditors. Patronage. Large cash transfers to accounts with names which are, at best, deliberately confusing.

And a bipartisan parliamentary committee report released last week that identifies at least $4.2 billion of unauthorized or unverified transactions.

Nothing suspicious, insisted the embattled Prime Minister, hardened from months of attacks to his reputation by Mahathir and others. The millions of dollars found in his personal account were a legitimate political donation from Saudi Arabia – given with no obligation or expectation. It’s clean, he says. The Saudi Government – belatedly – backs him up.

The house tumbles

Meanwhile, the bombshell report just passed to parliament lays out the Public Accounts Committee’s version of what’s been happening at 1MDB. It calls for former CEO Shahrol Halmi and other managers to be investigated for moving money without permission. It also says the group of advisers headed by Najib – who was not otherwise mentioned in the 106-page document – should be disbanded.

The committee criticises the fund’s business model, which involves raising debt to acquire assets – some of that being against property given to it at nominal prices by the government. On publication of the report, the fund’s board of directors quickly offered to resign.

Commenting on the findings, Najib is conciliatory, saying they, “identified weaknesses in 1MDB’s capital structure and management. We will study and act on the report’s recommendations.”

In a nod to his personal priorities he added, “Equally, it is now clear that Mahathir’s allegations against 1MDB have been false. He was motivated by personal interest, not the national interest, and a desire to unseat the government.”

Allegation on allegation

It’s a whitewash to protect the prime minister, says Mahathir. According to the report, Shahril, as the fund’s former CEO should instead shoulder the responsibility for cash moved without proper authorisation. However, many wonder how a prime minister that was required to sign off all transfers out of the fund can remain blameless.

Najib’s lawyer, Hafarizam Harun, shot back saying that the Prime Minister’s signature on 1MDB documents was merely to meet corporate governance requirements. “How can someone like this [who doesn’t read what he’s signing] be the prime minister?” rails Mathahir in reply.

Alongside investigations at home is the recently-expanded inquiry by the Office of the Attorney-General in Switzerland (OAG). It’s looking at, “suspected corruption of public foreign officials, dishonest management of public interests and money laundering.” Their figures suggest $4 billion may have been misappropriated.

The view so far is that “1MDB subsidiaries issued two series of bonds to finance investments in electric power plants.” They explain, “The Swiss authorities have elements in hand allowing them to suspect that the amounts paid in connection with this guarantee were not returned to the Abu Dhabi sovereign fund that supported the commercial risk.”

Instead the money went to two Emirati public figures and a film company connected to Najib’s family, it is now alleged.

Under suspicion

Since this story broke at the end of last year Mathahir has been using the investigation to insistently ramp up pressure on his former cabinet colleague turned sworn enemy, Najib, to resign. It is the kind of strong arm tactics one might expect from the controversial figure.

However, if you read just the facts as we know them today, “In the ongoing criminal proceeding of the OAG, Mr. Najib Razak is not one of the public officials under accusation,” Andre Marty, the Swiss office’s spokesman, told business publication Nikkei Asian Review. Malaysia’s attorney-general in January also cleared the prime minister of wrongdoing.

All about Mathahir

So all investigative efforts, both in Malaysia and overseas, have so far given the Prime Minister clean hands. Though when the waters are already so murky and stink of graft, that’s no ringing endorsement. So what is this really all about, Mathahir?

The 90-year old former leader no longer has government machinery or institutions at his disposal, and hardly a sliver of support within the United Malays National Organisation (UMNO), the party he led for 22 years.

Datuk Mustapha Yaakub, chairman of the UMNO Veteran’s Club just came out in support of the Prime Minister saying, “The foreign media loves controversial news which they regard as a business. In this case, they are mistaken and need to apologise to Najib.”

“The same goes for the Opposition. If they truly love this country, are gentlemen and credible, they should apologise and admit their mistake.”

Questions remain

But please don’t assume this is a defence of Najib. Important questions remain.

If former 1MDB head Shahrol was solely responsible for transferring billions of dollars overseas, how was he so easily allowed to override checks and balances on the abuse of state funds? Important point one, this scandal must create a greater public appetite for transparency in government.

Also, the prime minister’s defence of his actions as an administrative oversight does not wash. If any plan or document I sign is inappropriate, I can’t say it is the typist’s mistake. Najib may have used the situation to crack down on freedoms, in particular with his security bill, but it’s time for the electorate to demand better. It’s about accountability.

Indeed, as the 1MDB scandal continues to rage other stories are falling from Malaysia’s front pages. Economic performance is poised to improve in Southeast Asia as the large economies of Indonesia and the Philippines ramp up investment.

Right now, Vietnam is sustaining its expansion and Thailand is gathering momentum. But Malaysia’s already ailing economy will slow further thanks to weak oil prices.

Against this backdrop the country’s systems of government and financial management have important questions to face. Not just of the mishandling of state funds, but of keeping focus on the people’s priorities. Employment, security, growth.

This is not a time to be distracted from what’s truly important by the tit for tat of political blood feuds. Personality has already reigned in Malaysia for far too long.