Why did minister ‘shirk responsibility’ in 1MDB-IPIC arbitration

Second Finance Minister Johari Abdul Ghani must explain why Malaysia had 'given up' their case against IPIC with 'settlement' announced two days ago.

COMMENT

By Tony Pua

Last August, Second Finance Minister Johari Abdul Ghani said he was very confident that 1MDB would win the arbitration in the dispute with Abu Dhabi’s International Petroleum Investment Company (IPIC), given the documents that had been provided by 1MDB to the minister.

“As far as I’m concerned, I am very confident that we will win (the case), based on the documents that I have, supplied by 1MDB to me,” he told reporters after a 2017 Budget focus group meeting.

IPIC had claimed up to US$6.5 billion from 1MDB, including two bonds amounting to US$3.5 billion issued by the latter and guaranteed by the former.

Johari had insisted that 1MDB had already paid US$3.51 billion to IPIC or its purported subsidiary, Aabar Investment PJS Limited (“Aabar(BVI)”), a company registered in the British Virgin Islands.

IPIC on the other hand, has publicly declared that Aabar(BVI) is not its subsidiary even though it carries the same name as its own subsidiary, Aabar Investment PJS, a company registered in Abu Dhabi.

1MDB claimed it had already paid Aabar(BVI) the following amounts:

(i) US$1.367 billion as a “security deposit” for the US$3.5 billion of bonds in 2012;

(ii) US$993 million for the termination of options granted to IPIC or Aabar in November 2014; and

(iii) Additional sums of US$855 million and US$295 million as “top-up security deposit” in September and December 2014 respectively.

“It’s too bad for them not to acknowledge that (Aabar BVI), because as far as the record is concerned, the company belongs to them (IPIC). Now they suddenly say that the company does not belong to them. So we want to see them in court and let the arbitration look at our documents,” the Second Finance Minister had insisted last August.

Even in his open letter to me as recently as last month, Johari declared that “as for the dispute regarding the US$3.5 billion, which was paid to the IPIC group of companies by 1MDB, IPIC cannot continually deny that they have received the monies when 1MDB has already paid the same to them. I don’t think Malaysians in their right mind will want to just give up on that issue of the payment.”

So the question is, Johari must now explain why have the Malaysian negotiators “given up” their case against IPIC with their “settlement” announced two days ago.

Under the terms of the settlement, despite 1MDB having purportedly paid the US$3.51 billion above to IPIC or its subsidiary, the Ministry of Finance Incorporated (MoF, Inc) has agreed to assume all liabilities arising from the US$3.5 billion of bonds which were previously guaranteed by IPIC.

Given that 1MDB is clearly in no position to pay the debts, Malaysian taxpayers will now have to fork out another US$3.5 billion to bailout 1MDB as part of the above settlement.

This means that we will ultimately pay a whopping total of US$7.01 billion, or more than double the US$3.5 billion of bond borrowings by 1MDB.

What happened to Johari’s gung-ho statement that “we must fight and win this case”?

Why did we capitulate to IPIC’s demands before the fight even began?

Is it because 1MDB has finally conceded that Aabar(BVI) was clearly a fraudulent company to begin with and the US$3.51 billion originally paid has been clearly misappropriated and lost?

More interestingly, just two days before the settlement was announced, he suddenly washes his hands and said he wasn’t “involved in the negotiations. It (is) being done by (the) management and board of 1MDB with PMO’s (Prime Minister’s Office) officers.”

The Second Finance Minister had heroically claimed in his open letter to me that “it would be wholly irresponsible for [him] to shirk off this responsibility and opportunity to serve the nation.”

So may I ask, is agreeing to pay US$7.01 billion for a US$3.5 billion loan the “responsible” thing to do in “serving the nation”?

Tony Pua is Petaling Jaya Utara MP and DAP national publicity secretary. -FMT