Chairman Mohd Bakke Salleh soon resigned in disgust
Sarawak Report has now received a devastating vindication of its
exposes of 1MDB through the release of further Board Minutes, which the
Prime Minister and 1MDB executives have been fighting to keep secret for
months.
Damning documents from a Special Meeting of the Board held on
Saturday October 3rd 2009, shortly after the signing of the joint
venture with PetroSaudi, reveal that furious Directors complained at how
US$700 million was siphoned off from the company’s original US$1
billion investment in the venture.
So extreme was their concern that the Board even demanded that efforts should be undertaken to ensure the return of the money!
“arising from the gravity of the situation, the following instructions/requests were made by the BOD to the Management:
a) To determine if it is possible to seek the return of the US$700 million from PSI [PetroSaudi International] so that the funds could be remitted through the originally agreed channel” [Minutes 3rd October 2009]
Get the money back!! – unprecedented debacle
The statement by the 1MDB Board further confirms the claim by the
Bank Negara Malaysia last week that the money invested in the joint
venture was not used in the manner agreed.
Yet, despite such devastating comments by the members of its own
Board, the present CEO of 1MDB, Arul Kanda, has maintained for weeks
that our reporting on the matter has been misleading and inaccurate and
that nothing had been untoward with the deal.
It is a matter of record that the then Chairman of the Board, Mohd
Bakke Salleh, one of Malaysia’s most senior corporate figures, resigned
shortly after this episode, along with another Director, Azlan Mohd
Zainol.
Wilful disobedience of the Board by 1MDB Management
The availability now of a series of relevant minutes shows a pattern of wilful disobedience of the Board by 1MDB management.
Critics believe this indicates they were taking orders from another
source, presumed to be the Minister of Finance/Prime Minister, who we
now know was secretly the only person authorised to sign investment
decisions and his official advisor, Jho Low (into whose bank account the
US$700 million eventually went).
The minutes make it absolutely clear that the Board considered
themselves inadequately informed and ultimately misled over the
siphoning of the US$700 million into Jho Low’s Good Star Limited.
Not informed
We now know from the previous minutes of September 18th that all the
members of the 1MDB Board had expressed unhappiness on learning that the
company PetroSaudi was not attempting to bring cash to the joint
venture, only a supposed injection of assets.
The Board had resolved that PetroSaudi should inject “at least” US$1 billion in cash to merit their 60% share of the company.
However, by October 3rd the minutes make plain that the Board of
Directors had realised these demands had been simply ignored.
PetroSaudi had been allowed to get away with merely injecting “assets”
into the venture.
What the minutes show is that at this juncture the Directors were
already alarmed as to whether sufficient checks had been made to be sure
that even these assets were genuine.
Significantly, the minutes record sharp questions by Board Members
over why this deal had gone through at such breakneck speed, when they
had understood that a thorough valuation of what PetroSaudi actually had
in the way of assets ought to have taken till the following March 2010 –
6 months instead of just two weeks!
Why the rushed job? Where the due diligence, asked Board Members?
These are precisely the issues which Sarawak Report and numerous
others have raised over the past few weeks as details of the PetroSaudi
deal have emerged and on each and every occasion 1MDB CEO Arul Kanda has
dismissed our concerns and sought to discredit our evidence.
Now we know that (unless Mr Kanda is going to deny the authenticity
of these minutes) 1MDB’s own Board of Directors had been arguing exactly
the same issues from the moment the deal was signed without their
proper permission!
It is worth mentioning that the conduct of breakneck speed deals has
subsequently become a signature feature of the loss-making 1MDB. None
was so breathtakingly fast at the 1MDB /Aabar “strategic partnership”
venture signed 12th March 2013, after which 1MDB raised US$3 billion
within exactly one week!
The bankers Goldman Sachs charged a staggering US$300 million for the
service of finding the money and gave the explanation that their client
had been in an exceptional hurry. One wonders why there was such a
hurry to raise the money for a proposed project to build the Tun Razak
Exchange, when two and a half years on little has been built?
As Sarawak Report has previously mentioned, two days after this money
was raised US$681 million was transferred into the Finance Minister/
PM’s bank account from an “anonymous donor” to support the election
which was called just a few days later.
Once again the loan has turned out to be disastrous for 1MDB, which
soon lost the money on ill defined payments, thus adding to its mountain
of debt.
Board demanded PetroSaudi Assets be properly valued
The October 3rd minutes also confirm the concerns we have reported
about the so-called valuation of PetroSaudi’s assets by the US banker Ed
Morse. Arul Kanda may have dismissed the matter when it was raised by
opposition MPs, but the Board of Directors was also clearly extremely
shocked at the situation that had developed with a billion dollars
signed off into a joint venture where plainly not the slightest checks
had taken place.
The demands that the board are minuted as being forced to make AFTER
THE EVENT are as breath-taking as anything so far produced in this
lamentable story of malpractice:
Imagine asking for such checks AFTER signing away a billion dollars!
Section iv of the minutes (above) makes plain that the Board was
forced to demand from management that they make some of the most basic
possible checks on the deal AFTER they had paid out the money!
These checks included getting confirmation that the assets PetroSaudi
claimed were genuine; checking that the assets were of the value
claimed; getting a copy of the Ed Morse ‘valuation report’ (meaning 1MDB
had still not got a copy five days after the deal had been signed); to
drag Morse in for questioning on his findings and also to get a separate
“independent valuer” to do another report on PetroSaudi’s worth,
because as the Board clearly realised, Morse was not independent and had
been hired by PetroSaudi!
What an unbelievable mess the 1MDB Board Directors had found
themselves facing that Saturday 3rd of October in the aftermath of a
deal that had been driven through like lightning without them having
signed off on the details!
In the final paragraph (above) CEO Shahrol Halmi was ticked off like a
boy in the Headmaster’s study and told to obey rules in future and that
if he was unsure of his remit he should ask his bosses on the Board.
Yet, in truth Halmi had got his way, however meek his response. The
money had been got out of 1MDB and into the Good Star account and it was
never coming back: this was plainly the purpose of the PetroSaudi deal,
since there has not been a squeal of complaint from the Minister of
Finance over the loss of the money nor from PetroSaudi nor 1MDB’s
management either!
Was the 1MDB JV signed behind the backs of the Board of Directors?
The fear and panic radiating out of normally dry minutes, in the case
of this dramatic October 3rd meeting, represents a realisation by Board
Members that US$700 million had just been snatched from public funds
through the Jho Low PetroSaudi heist of the century.
What they imply is that the entire signing had been done behind their backs and without their knowledge!
Minutes from 18th September made clear that the Board were originally
informed that the planned date for signing the deal was the 28th of the
month – they were told (untruthfully) by Casey Tang that the King
Abdullah himself would be needed to ink the paper.
The Board knew mid-September when the deal was due to be signed, despite talk of no valuation before March
However, the same September 16th minutes also show that the Board had
demanded PetroSaudi commit cash rather than mere assets for the deal to
go ahead.
From the later minutes on 3rd October one concludes that notice had
later been given that the Saudis would nevertheless only be paying in
assets, in which case the Board had responded that the date must be
postponed until those assets could be checked (not before March).
If so, this request from the Board had plainly been ignored by the
powerful forces propelling the deal, including Jho Low, his ‘Big Boss’
the Prime Minister and the tame figures in 1MDB management.
As we know none of the Board’s demands were met.
The Chairman resigned to be replaced by a compliant long-term agent
of the Prime Minister from his days at the Ministry of Defence, Lodin
Wok Kamaruddin, who has waived through every 1MDB deal without a murmur
ever since.
The new Prime Minister had got his way with little resistance from
the supposed decision makers of 1MDB – after all, they weren’t really
the decision-makers anyway, as we now know.
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