US DOJ says “YES” but 1MDB says “NO”. Why?- Lim Sian See

The USA’s Department of Justice (DOJ) had alleged that billions were stolen from 1MDB and initiated asset seizures to recover this but 1MDB insist that it had not lost any money and that all its assets are accounted for.

Essentially, the DOJ says someone stole your money and I will get some of it back for you while 1MDB is saying “No. That one is not my money”.

Why is this peculiar situation happening?

Let’s follow the money trail – particular the 3 sources of funds that the DOJ explicitly said the alleged stolen money came from.

Alleged source of funds 1: Good Star, as part of the PetroSaudi-1MDB Joint Venture.

What did 1MDB pay:
USD1.83 billion of which USD1.03 billion was transferred to Good Star and USD800 million to PetroSaudi. The ownership and the responsibility of the funds in question had changed when 1MDB paid the money as per the agreements

What happened to the money:
JV was converted to a loan. Loan was repaid by PetroSaudi to 1MDB via USD2.32 billion worth of investment units (Principle + interest/dividends).

What happened to the investment units?
USD1.4 billion was redeemed and used for 1MDB working capital purposes with remaining USD940 million in investment units.

What happened to the remaining USD940 million in investment units?
The remaining USD940 million units was guaranteed by the disputed Aabar Investments PJS Ltd incorporated in the British Virgin Islands (Aabar-BVI) and was earmarked for the asset-debt swap arrangement between 1MDB and IPIC which is now in arbitration.

The bottom line:
1MDB cannot say or claim that Good Star or PetroSaudi funds is their money.

What happens next? :

As far as 1MDB is concerned, PetroSaudi has paid back all of 1MDB’s investment plus USD481 million of profits and dividends. There is no money to recover from either Good Star or PetroSaudi.

An interesting nugget here is that if Jho Low and Riza have been named and accused of wrong-doing here for receiving funds from Good Star then it is surprising why both the then Riyadh Governor Prince Turki, who is the 7th son of the then King Abdullah and fellow PetroSaudi founder Tarek Obaid are not similarly reprimanded even though the FBI also stated they received money from Good Star.

Alleged source of funds 2: The disputed Aabar-BVI as part of the Abu Dhabi-1MDB joint-venture
What did 1MDB pay?
USD3.51 billion to Aabar-BVI for collateral, joint investment ventures and options termination agreements. Additionally, there is a USD940 million guarantee of the Cayman investment units and guarantee for the USD1.5 billion GIL fund units recommended by the Swiss-based BSI bank.

What happened to the guaranteed assets and money given by 1MDB.
The entire USD6 billion of payments and guarantees was identified as assets for the 1MDB-IPIC asset swap agreement in exchange with IPIC based on the following:

Assets from 1MDB:
USD 3.5 billion cash deposits paid to Aabar BVI.
USD 1.5 billion GIL funds (Fund Manager introduced by BSI and guaranteed by Aabar BVI)
USD 940 million Brazen Sky fund units (Guaranteed by Aabar Investments ABU DHABI – not the disputed Aabar BVI – this is in the AG report and the PAC report)

Assets from IPIC:
Assume 1MDB’s USD 3.5 billion bond principal
Assume 1MDB’s USD 1.5 billion future bond interest
USD 1 billion in cash (paid to 1MDB in June 2015)

IPIC is now disputing that Aabar-BVI is their company and has cancelled the Asset swap agreement but 1MDB insist that the Aabar-BVI is an IPIC company. Therefore, it is now in dispute.

The case is now in the London Court of International Arbitration where initial proceedings had started last month.

Why did 1MDB even transfer or deal with Aabar-BVI in the first place when according to IPIC and Aabar Abu Dhabi, it is not owned by them?
When 1MDB signed the Joint-Venture agreement with Aabar Investments PJS in Abu Dhabi. The discussions was with Aabar’s duly-authorized Chairman, Khadem Abdullah al-Qubaisi and their Managing Director Mohamed Badawy Al-Husseiny – both of whom are also indicted by the FBI together with Jho Low.

During the agreement signing, 1MDB also engaged their internal and external lawyers to certify that Aabar Investments PJS Ltd in the BVI is owned by the Aabar Investments PJS in Abu Dhabi.

The attached document which came from here, is the Certificate of Incumbency issued by the incorporation of the disputed Aabar in BVI. This certificate is issued by Hong Kong based Offshore Incorporations Limited (OIL)- he leader in international incorporations and corporate services.

The Certificate of Incumbency states the two directors of Aabar Investments PJS Ltd in the BVI to be the Chairman and Managing Director of Aabar Investments PJS and the sole shareholder to be the Abu Dhabi based Aabar Investments PJS.

Headquartered in Hong Kong, OIL has offices in the BVI, Singapore, Taiwan, Shanghai, Beijing, Shenzhen, Guangzhou, UK, Cyprus and Dubai and has around 220 employees.

OIL is a group company of Vistra Group, which has 2,300 employees in 40 jurisdictions; its global headquarters are in Hong Kong.

If the official incorporation documents, the Chairman of the parent company, the Managing Director of the parent company and both the internal and external lawyers engaged in the joint-venture due diligence tells 1MDB that Aabar Investments PJS Ltd in the BVI is legitimately owned by Aabar Investments PJS in Abu Dhabi, then what else could 1MDB have done differently to certify that this is not a fake company?

The ownership of Aabar-BVI and the associated transfers were also verified through successive audits by external auditors KPMG and Deloitte’s over the next few years and no alarms were raised then. Both auditors would have certainly met or contacted Aabar in Abu Dhabi to verify the transactions too.

However, for reasons still unknown, IPIC agreed to the swap deal, paid USD1 billion, paid the interests on the USD3.5 billion bonds,and then only said in April 2016 – an amazing 10 months after the swap deal was signed and years after 1MDB had stated they had paid all those money to Aabar in publicly available financial statements.

But whatever the case, when 1MDB paid those money to Aabar-BVI or Aabar PJS in Abu Dhabi, the ownership and responsibility of the money has transferred to Aabar.

The bottom line:
1MDB cannot say or claim that the money that was transferred from Aabar BVI to Jho Low, Red Granite, Khadem et al as alleged by the US DOJ is theirs. As far as 1MDB is concerned, Aabar BVI is legitimate and owned by IPIC. If money from here was stolen then it was stolen from IPIC and not 1MDB.

For 1MDB to claim that the money is theirs would mean that the entire London arbitration case between IPIC and 1MDB will collapse and 1MDB will end up losing billions while Abu Dhabi’s IPIC will get away blameless – despite both of IPIC’s most senior executives, their former Managing Director Khadem from 2007 to 2015 and Aabar PJS’s Managing Director Mohamed Badawy Al-Husseiny being named as part of the DOJ case and asset seizures.

What happens next? :

1MDB will need to focus on winning their arbitration case by proving that the two senior executives of Aabar and IPIC had acted with full authority of the board and that all checks had shown that Aabar-BVI had legally belonged to Aaabar Investments PJS Abu Dhabi and IPIC.

1MDB believes it has enough evidence and a strong case in winning this case since it deliberately refused to pay for the scheduled interest payments on the bonds despite having RM3 billion in the bank then and allowed the two 1MDB bonds guaranteed by IPIC to default thus triggering the guarantee by IPIC, which forced IPIC to pay up.

If 1MDB wins this case then USD4.5 billion in assets can be recovered from IPIC. If this is the case, it is likely that IPIC will take-over the USD3.5b bonds and allow 1MDB to keep the USD1 billion which they had paid earlier. IPIC will then be the party responsible for reclaiming the USD4.5 assets in Aabar-BVI.

Alleged source of funds 3: The USD1.5 billion invested by 1MDB in BSI Bank investment funds.
What did 1MDB pay?
USD1.5 billion invested in registered investment funds recommended by the Swiss-based BSI Bank. This USD1.5 billion was part of the proceeds of the 2013 USD3 billion bond (also known as the 1MDB GIL money) that was raised as part of the proposed joint-venture with Aabar to develop Bandar Malaysia in the year 2013. The remaining USD1.5 billion was used by 1MDB as part of their working capital towards development of TRX, Bandar Malaysia and the power plants business.

Crown Prince of Abu Dhabi, General Sheikh Mohammed Zayed Al Nahyan, witnessed the signing ceremony in 2013.
The proposed Bandar Malaysia JV signed in March 2013 was planned to be an arrangement where 1MDB would raise USD3 billion and Aabar would raise USD3 billion and both parties would contribute to the 1MDB-GIL company to develop Bandar Malaysia.

As Aabar failed to raise their USD3 billion in time and the JV eventually did not take off, 1MDB then decided to use half of their money as working capital while investing the unused portion in an investment fund to avoid negative carry (or paying interest on unused funds raised from a loan).

What happened to the money in the investment funds?
The money is still invested in the funds and was originally also planned to be used as part of the asset swap with IPIC since it is guaranteed by Aabar-BVI.

What happens next? :
Since the asset swap is now in termination, this fund is already in the redemption phase. However, redeeming a unit of USD1.5 billion is not like withdrawing money from a bank. The fund itself would have to sell their investments before paying 1MDB. It is believed that this process is close to completion.

How much of actual “Wang Rakyat” was used by 1MDB so far?
The paid-up capital is RM1 million paid for by the Malaysian Govt. The rest of the funding that went up to RM42 billion at one time was raised from bonds and bank borrowings.

How much in loans does 1MDB still have?
Other than 3 bonds, all the remaining borrowings, lines of credit and other bonds have been paid off by 1MDB during the debt rationalization exercise started in the year 2015.

Since the beginning of 2015, 1MDB has cleared and removed all the following loans from its book:

fully paid RM3.5 billion Powertek loan from a consortium of banks
fully paid RM1 billion standby credit from the govt
fully paid USD150m EXIM bank loan
RM2.4 billion Bandar Malaysia sukuk taken over by 60% buyer of 1MDB.
transferred RM800 million Socso loan into project financing for TRX. This loan is self-amortizing and is already significantly repaid.
removed RM6 billion of legacy power debts previously assumed, as part of the Edra sale
fully paid RM2 billion Marstan loan arranged by Ananda Krishnan which was used to repay the RM2 billion Maybank bridging loan
fully paid USD975m Deutsche Bank loan

After all these other loans had been paid of, 1MDB is still left with RM2.3 billion in cash but has the following renaming bonds.
RM5 billion 2009 long-term bonds that matures in the year 2039- these bonds are tied to the continued development of TRX and is matched to the cashflows of this development.
USD3.5 billion 2012 bonds guaranteed by IPIC that matures in the year 2022. (if 1MDB wins the arbitration then these bonds will likely be taken up by IPIC)
USD3 billion 2013 bonds that matures in the year 2023. – these bonds are tied to the continued development of Bandar Malaysia, which 1MDB still owns 40% of, and is matched to the cashflows of this development.
How much of actual “Wang Rakyat” has actually been lost so far due to the DOJ civil suit?

None so far. Since the amounts alleged “stolen” are from the loans that 1MDB took above and the loans are not due, no actual Malaysian money has been lost as yet. This is assuming that the IPIC dispute can be settled in 1MDB’s favour and the USD1.5 billion GIL bonds is redeemed.

It is also important to note that other than the USD3.5 billion bonds which are in dispute with IPIC, 1MDB have not defaulted on any loans or bonds. In fact as pointed out above, many loans have been completely repaid or settled.

The final bottom line.
It must be noted that all 3 sources of funds which the DOJ report listed were all direct dealings with the governments and royal families of two different Arab countries and 1MDB paid directly to accounts instructed by them. If 1MDB was to be scammed, then these countries would have helped to scam 1MDB.

Or if 1MDB itself was a scam then those countries pakat with 1MDB to help scam.

But the real bottom line is this:

If 1MDB manages to win the IPIC arbitration and also redeem the USD1.5 billion GIL funds then 1MDB can truly say that none of their money was missing or stolen.

This means that it is impossible for Jho Low, Riza, Khadem, Malaysia Official 1 (ie PM) or anyone else for that matter to have stolen any money from 1MDB to buy or invest all those assets that the FBI now wants to seize.

But it could mean that someone else would have been cheated instead. It could be Abu Dhabi’s IPIC or it could be legitimate profits made from fund investment ventures.

But whose money would that be then that was used to buy art, gamble, buy properties?. It could be Abu Dhabi’s IPIC money, Saudi Arabia money or it could be legitimate profits made from fund investment ventures.


6 thoughts on “US DOJ says “YES” but 1MDB says “NO”. Why?- Lim Sian See

  • July 24, 2016 at 12:47 PM

    Yes, gambaran seperti ini lah yg berlegar di kepala saya selama ini ,namun tidak dapat memastikan nya kerana ketidaan sumber utk di rujuk.Sekarang ianya nampak lebih jelas dan membenarkan apa yg saya fikirkan berkaitan perkara ini dan pertikaian dgn IPIC.Tak mungkin 1MDB membayar berbillion ringgit jumlahnya tanpa meneliti kesohehan penerimanya,dan mustahil juga khidmat pakar luar tidak di gunakan sebelum bayaran berbillion US di buat,tambahan pula sudah beberapa kali proses audit telah di jalankan oelh para auditors profesioinal,tidak ada qualified opinion pun yg di keluar,sedangkan nilai yg terlibat adalah besar(materials)yg boleh memberi kesan kepada keseluruhan penyata kewangan .

    Kalau keadaannya benar begini ,kedudukan 1MDB sangat jelas tapi IPIC lah yg terpaksa berhadapan dgn masalah.Manakala geng ANC pula akan mengalami kekeciwaan yg muktamad.

  • July 24, 2016 at 4:30 PM

    jadinya betul aku kata ‘Malaysia Official 1’ itu patut ditukar kepada ‘IPIC Official 1’ atau ‘Aabar Official 1’ oleh DOJ…nak tukar pun belum lagi terbukti benar si ‘Khadem'(IPIC Official 1) atau si ‘Mohamed Badawy'(Aabar Official 1) yang sebenarnya beri pinjam dana kepada Reza Aziz & Jho Low untuk membuat filem, beli hartanah dll dengan menyalah-guna dana(kononnya mengikut dakwaan DOJ) IPIC USD1.5 bilion itu untuk diberikan sebagai pinjaman

    jika kita perhatikan IPIC tidak membuat kecoh pun tentang si ‘Khadem’ & ‘Mohamed Badawy’ ini yang boleh kita andaikan telah ‘melesapkan’ dana IPIC USD1.5 bilion itu…jika mereka berdua ini ‘melesapkan’ dana tersebut mana mungkin IPIC tidak tahu ianya merupakan satu perbuatan jenayah…IPIC sudah tentu akan memfailkan laporan salah-laku tentang mereka berdua ini kepada mana2 pihak berkuasa tapi IPIC telah memilih untuk membuat proses ‘arbitrari’ di London bagi memperoleh semula dana tersebut…sebenarnya bukan proses untuk memperoleh semula dana tersebut tapi lebih dilihat sebagai proses untuk mengesahkan 1MDB telah benar2 membayar(menyerahkan) USD1.5 bilion itu kepada IPIC

    kepada macai2 mamak kutty madey & pembangkang, korang faham tak maksud ‘arbitrary’?

    apabila memilih proses arbitrari ini, kita boleh juga andaikan si Khadem & Mohamed Badawy mempunyai hak memindahkan dana USD1.5 bilion itu ke institusi perbankan lain…jika mereka mempunyai hak seperti ini mereka juga berhak memberi pinjaman kepada Reza Aziz & Jho Low atau sesiapa sahaja…IPIC tidak membuat kecoh tentang mereka berdua ini mungkin sebab mereka berdua ini ada memberi jaminan kepada IPIC yang dana USD1.5 bilion itu akan dikembalikan kepada IPIC dengan ‘keuntungan’

    *komen aku diatas hanya pendapat peribadi sahaja, cuma pertanyaan aku kepada macai mamak kutty madey & pembangkang tentang ‘arbitrari’ itu sahaja perlu mereka jawab, itu pun kalau mereka pandai nak jawab…kalau bodoh, duduk diam sudah!

  • July 25, 2016 at 10:14 AM

    Terima kasih LSS, sman dan Pemerhati. Harap dapat diterjemahkan dalam bahasa mudah bagi orang awam lebih tahu dan lebih informatif sebelum menuduh, membuat andaian dsbnya.

    Kita carilah pahala sebanyak mungkin dan jangan mengeruhkan keadaan.

    Sebenarnya, pencangak, opportunis ada di mana-mana.

    YAB DS Najib, dan rakyat Malaysia yang sayangkan keamanan, sama-samalah kita berdoa agar yang benar terbongkar dan terbukti segera.


  • July 27, 2016 at 8:31 AM

    dedahkan laporan Audit. jgn bnyk cengkadak…

  • July 27, 2016 at 9:06 PM

    jangan banyak cekadak nak minta laporan audit yang diklasifikasi OSA didedahkan kepada rakyat kerana ada rakyat jahil & bodoh seperti ‘rockers’ tidak faham butiran dalam laporan JAN itu…tidak faham bermaksud si ‘rockers’ yang bodoh & jahil ini akan memanipulasi untuk tujuan tidak baik jika didedahkan kepadanya

    laporan JAN yang diklasifikasi OSA itu hanya boleh didedahkan kepada ahli2 PAC yang menyiasat 1MDB kerana hanya mereka sahaja arif untuk memahami butiran dalam laporan JAN itu

    apa pun, jangan kata ada rakyat seperti rockers sahaja yang jahil & bodoh malah ada seorang ahli PAC dari DAP pun boleh tidak faham & cuba membuat pelbagai spekulasi & dakwaan negatif mengenai laporan JAN itu selepas laporan JAN itu didedahkan kepadanya

    kalau 9 ahli PAC(termasuk dari pembangkang) yang lain tidak bersikap seperti seorang ahli PAC dari DAP itu, mana mungkin kita boleh berkata seorang ahli PAC dari DAP itu seorang yang pandai & berwibawa bukan seorang yang jahil & bodoh atau buat2 bodoh seperti ‘rockers’ juga

  • November 29, 2016 at 10:07 PM

    aku x fhm kenapa rockers nk sgt report audit.dia keje audit ke?or dia keep approve report tu?aku x fhm….

    kita kan dh ada wakil rakyat dlm parlimen tu.mesti dorg dh tau dh report audit cane.

    yg penting najib boleh saman gang2 yg tuduh dia.tu aku nk tunggu.nm baik Malaysia tu…..


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