Malaysia’s 1MDB in university hard sell

BEN BUTLER and KYLAR LOUSSIKIAN
The Australian
November 15, 2016

An investigation by US authorities into the alleged theft of billions of dollars from Malaysia’s sovereign wealth fund 1MDB was in part fuelled by Attorney-General Loretta Lynch’s desire to divert attention from Hillary Clinton’s email scandal, according to materials distributed in private lectures given by the company’s chief executive Arul Kanda in Australia last week.

The glossy 20-page booklet claims the US Department of Justice investigation, which has so far resulted in the freezing of more than $US1 billion ($1.34bn) in ­assets allegedly removed from 1MDB, is “questionable, strange and bizarre” and threatens the stability of Malaysia.

When it was set up in 2009, 1MDB was touted as a development bank that would invest billions of dollars into energy, real estate and hospitality, but the DoJ alleges the pillaging of the fund began within months of its creation.

Under increasing pressure from the series of international investigations, 1MDB and the ­Malaysian Special Affairs Department, JASA, have been secretly shoring up support among backers of the country’s ruling party in a series of closed-door lectures at Australian universities.

The tour followed an apparent pivot towards China by Malaysia, a long-time US ally, with Prime Minister Najib Razak visiting Beijing a fortnight ago to sign a 55 billion ringgit ($17bn) railway construction contract with the state-owned China Communications Construction Company.

CCCC, which owns Australian contractor John Holland, has previously denied reports the railway deal was inflated to conceal 1MDB’s financial black hole.

Accompanied by JASA officials, 1MDB chief executive Arul Kanda last week appeared at three Australian campuses — in Melbourne, Sydney and Brisbane — where the pamphlet, entitled “DoJ’s summons is questionable”, was distributed.

When confronted by The Australian at the University of NSW about the alleged corruption, including the funnelling of hundreds of millions of dollars into the personal bank account of Mr Razak, Mr Kanda refused to answer questions and was quickly ushered into a waiting car.

Mr Kanda did not meet with any Department of Foreign Affairs & Trade officials while in Australia, nor anyone at the Australian Securities & Investments Commission or at ANZ, which owns a quarter of AmBank, the Malaysian bank where Mr Najib held the account that allegedly received the money.

ANZ last week attempted to distance itself from the scandal engulfing its Malaysian affiliate. The bank’s chief executive, Shayne Elliott, who was on the AmBank board until October last year, told a parliamentary inquiry the bank had not investigated activities of ANZ employees seconded into senior AmBank ranks at the time.

Responding in writing to questions after the hearing, Mr Elliott also declined to comment on his knowledge of an internal investigation into the vast flow of money through Mr Najib’s account, or discussions of the issue while he was on the AmBank board, citing “confidentiality requirements under Malaysian law”.

The contents of Mr Kanda’s presentation on Australian campuses is unknown, with The Australian ejected from the lecture shortly after it began.

However, the unsigned pamphlet, released ahead of the US presidential election, claims the US attorney-general was pursuing the fund as she is “eager to obtain a position under the leadership of the incoming president”.

“Loretta (Lynch) intends to align the media’s and citizen’s views away from the allegations that she was ‘choosing sides’ as she did not take any further action following the Hillary Clinton email scandal,” the document, which was written in Malay and translated by The Australian, reads.

The unsigned pamphlet also ­attempts to cast doubt that Mr Najib is the person referred to in ­DoJ court filings as “Malaysian Official 1” and in the Malaysian media as “MO1”, and who is identified as the beneficiary of much of the brazen theft from 1MDB via an account at AmBank.

“DoJ did not name MO1 because the complaint that was made did not contain information and evidence to link MO1 with any assets and criminal wrongdoing such as was mentioned in the report,” it claims.

But Malaysia’s Housing Minister Abdul Rahman Dahlan in an interview with the BBC in September admitted Mr Najib was “MO1”.

The Malaysian Ministry of Communications, of which JASA is a part, did not respond to questions from The Australian about the presentation or the pamphlet, although Malaysia’s Deputy Communications Minister Jailani Johari last week said Mr Kanda funded his Australian trip himself except for “his food and beverages”.

The pamphlet claims 1MDB will make a surplus of 2.96bn ringgit when it is finally shuttered in 2039 as part of a “rationalisation plan”. This forecast relies on cash flows including 12.29bn ringgit from 1MDB’s key urban renewal project in Kuala Lumpur, Tun Razak Exchange, part of which is to be developed by Australian developer Lend Lease.

It also relies on recovering $US1bn ($1.32) from Abu Dhabi sovereign fund the International Petroleum Investment Company under a disputed bond guarantee.

DoJ investigators believe $US1.367bn raised in a $US3.5bn 2012 bond issue was siphoned into a Swiss bank account and distributed to associates of a key player in the alleged scam, Malaysian businessman and Najib associate Jho Low.

IPIC has refused to pay the guarantee and has launched arbitration proceedings against 1MDB in London, which the pamphlet claims there is “full confidence” 1MDB will win.