1MDB management kept board of directors in the dark

PETALING JAYA: 1Malaysia Development Bhd's (1MDB) management wheeled and dealed behind the back of its board of directors that led to a trail of money funnelled from the state investment fund to dubious companies and personalities, the Public Accounts Committee (PAC) said.
In its report on 1MDB, the PAC said 1MDB executive director for business development Casey Tang had misled the board into believing that the joint-venture project between 1MDB and PetroSaudi International Ltd was a government-to-government matter at a board meeting on Sept 18, 2009.
Tang claimed that PetroSaudi was owned by the then King Abdullah of Saudi Arabia and had been in existence since 2000, when in fact it was only set up in 2005 as a privately owned company with no links to the Saudi government.
The PAC also found that PetroSaudi CEO Tarek Obaid, who had proposed the multi-billion-dollar joint-venture scheme in a letter dated Aug 28 2009, was the sole director in the company.
The letter outlined, among others, the proposed shareholding ratio, the channelling of US$1 billion in cash, asset values, goodwill and the joint-venture company's profit expectations.
The report noted that 1MDB's board was not informed of the joint-venture proposal letter, or the proposed terms of the joint-venture project agreed with PetroSaudi.
The PAC said the US$1 billion investment by 1MDB in the joint venture was done without a due diligence process, with details on the project missing from both the proposal paper prepared by management, and the feasibility study which was done on the investment project.
The board of directors was told of the date of the signing of the joint-venture agreement on Sept 18 2009, only 10 days before it was to be signed on Sept 28, 2009.
The PAC said there was no in-depth study of the project, including a background check of the partner in the joint venture and the total cost of the project.
"There were four different companies that were registered under the PetroSaudi name but the approval proposal paper that was presented to the board of directors did not contain this important information. Aside from this, the joint-venture agreement contained several clauses that did not look after 1MDB's interests," it added.
The PAC said the board was not informed of the clause in the joint-venture agreement stating that 1MDB PetroSaudi Ltd had to pay a US$700 million loan from its parent company PetroSaudi Holdings (Cayman) Ltd on or before Sept 30.
Out of the US$1 billion that 1MDB invested in the joint venture, US$300 million was transferred to an account belonging to 1MDB PetroSaudi Ltd on Sept 30 2009, while US$700 million went to an account belonging to Good Star Ltd – "another company that was not involved with the joint-venture project".
"The National Audit Department found that there was no approval from 1MDB's board of directors for the transfers of the money into two separate accounts," said the PAC report.