In a recent court session, former Public Accounts Committee (PAC) member and ex-Parliamentarian Tony Pua took the stand to testify against Arul Kanda Kandasamy, the former CEO of 1Malaysia Development Berhad (1MDB). The testimony is part of 1MDB’s ongoing lawsuit, which seeks $6.59 billion in damages from Arul Kanda and Tan Sri Mohd Irwan Serigar Abdullah, the fund’s former chairman. Pua detailed a series of alleged misrepresentations by Arul Kanda, both to 1MDB's board of directors and to the public, concerning the company's controversial investments.
At the heart of the allegations is a $1.83 billion investment in 1MDB-PetroSaudi Ltd., a joint venture between 1MDB and PetroSaudi Holdings (Cayman) Ltd. This investment, known as the Brazen Sky investment, has been a focal point of scrutiny. Pua testified that Arul Kanda had provided inaccurate information about this investment, misleading the board and the public into believing that the funds had been placed into the Bridge Global Fund. However, Pua emphasized that no real investment had been made, and the entire scheme was designed to hide substantial losses suffered by 1MDB.
Pua's testimony further accused Arul Kanda of failing to take proper action after joining 1MDB in January 2015. Despite being in a position of authority, Arul Kanda did not investigate or take steps to recover the lost funds tied to the fraudulent investments. "He did not take any action to investigate the investments or ascertain the true facts behind them," Pua said. This lack of initiative, according to Pua, resulted in further losses for the already embattled 1MDB.
During the PAC’s examination of 1MDB's financial activities, Arul Kanda's responses were described as evasive. Pua stated that Arul Kanda digressed from answering key questions about the investments and often promised to provide supporting documents, which were never delivered. According to Pua, this behavior hindered the committee's ability to uncover the full extent of the fraud.
Pua's testimony also touched on events that transpired after the fall of Malaysia's Barisan Nasional government in 2018. Following the change in leadership, Lim Guan Eng, the new finance minister from the Democratic Action Party (DAP), held a meeting with 1MDB representatives. Pua, then serving as Lim's political secretary, attended the meeting, which was held on May 22, 2018. During this meeting, Arul Kanda allegedly claimed that he was unaware of the true value of 1MDB's investments, placing the responsibility for financial matters on the company's then-chief financial officer (CFO), Azmi Tahir.
Pua further argued that Arul Kanda had breached his fiduciary and contractual duties to 1MDB, pointing out that it was the CEO's responsibility to ensure the fund's financial stability. These breaches are now part of the broader lawsuit filed by 1MDB, which seeks to hold both Arul Kanda and Mohd Irwan accountable for the significant losses incurred by the fund.
The lawsuit, initiated in May 2021, accuses Arul Kanda and Mohd Irwan of several breaches of trust. Among the allegations is a claim that the duo conspired to misappropriate $3.5 billion of 1MDB's funds. The money was allegedly funneled to Aabar Investments PJS Ltd., a shell company masquerading as a subsidiary of the International Petroleum Investment Company (IPIC). Later, an additional $1.265 billion was paid to IPIC in May 2017. These actions, according to 1MDB, were conducted under the guise of legitimate business transactions but were, in reality, part of a broader conspiracy to defraud the fund.
Additionally, the lawsuit claims that Mohd Irwan and Arul Kanda conspired to implement an employment extension agreement for Arul Kanda, resulting in the latter receiving RM2.91 million, despite the detrimental financial position of 1MDB at the time. This payment, 1MDB argues, was a clear conflict of interest, as it prioritized the personal gains of Arul Kanda over the interests of the fund, exacerbating its financial losses.
In summary, 1MDB is seeking RM30.91 billion in damages from Arul Kanda and Mohd Irwan, including the recovery of the RM2.91 million related to the employment extension agreement. The case, which has drawn significant attention both in Malaysia and internationally, is a critical step in the efforts to recover the billions lost through the mismanagement and alleged corruption that has plagued the sovereign wealth fund for years.
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