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Together with the Goldman Sachs deal, the gap between the original sum claimed and the settlement exceeds RM40 billion!
By P Gunasegaram. Copyright March 2023
The government’s US$1.8 billion (RM8 billion) settlement with the United Arab Emirates (UAE) over 1MDB represents a US$3.98 billion (RM18 billion) shortfall compared to the amount of US$5.78 billion (RM26 billion) that former attorney general Tommy Thomas was disputing.
In a repeat of the Goldman Sachs settlement done during the Muhyiddin Yassin administration, the current unity government led by Anwar Ibrahim also appears to have given too much to the UAE in the settlement .
Thomas had used a number of external lawyers, including a Queen’s Counsel from the UK, to set aside a previous settlement highly detrimental to Malaysia undertaken during the time of former prime minister Najib Razak.
The settlement involves two UAE companies, International Petroleum Investment Company (IPIC), a national wealth fund of the UAE, and its subsidiary Aabar Investments PJS.
The former two top officials of these companies - IPIC’s CEO then Khadem Abdulla Al Qubasi and Aabar’s CEO Mohamed Ahmed Badawy Al-Husseiny were involved in a scheme to defraud 1MDB. Reports associated them with some members of the UAE royalty.
The US Department of Justice report on 1MDB showed that Qubasi received US$473 million and Husseiny US$67 million from funds embezzled from 1MDB via bank accounts linked to Jho Low, an accessory of Najib in the 1MDB thefts. Both Qubasi and Husseiny were arrested, tried and imprisoned in UAE, Qubasi for 15 years.
The Goldman Sachs settlement was for US$3.9 billion out of which US$1.4 billion were guarantees that assets recovered from the bond proceeds arranged by Goldman would be at least that much. The cash settlement was only US$2.5 billion. It was unlikely that there would be a shortfall in the assets recovered.
As I explained in this article titled Probe multi-billion Goldman-Muhyiddin govt settlement Thomas was already asking for a settlement closer to US$9.6 billion, a huge shortfall of US$7.1 billion. Even if we use then finance minister Lim Guan Eng’s figure of US$7.5 billion, the shortfall would be US$5 billion or RM22.5 billion.
Thus, the total shortfall from both cases comes up to a massive RM40.5 billion, a huge sum which is befitting of the massive amounts stolen and the opportunity costs missed which could have been realised by having full use of the money for so many years.
Najib’s grand fraud
The case that Thomas took arises out of an attempt to cover up the theft at 1MDB by Najib. According to Thomas’ book My Story: Justice in the Wilderness (pages 270 to 277), 1MDB’s 2012 bonds totalling US$3.5 billion were guaranteed by IPIC. But in 2015, Najib renegotiated the deal.
Under this, IPIC agreed to lend US$1 billion and take on all interest and principal payments. In return, 1MDB was to transfer assets of an equivalent value to IPIC, effectively indemnifying 1MDB’s performance.
“This was fraud on a grand scale. The binding term sheet was self-inflicted upon Malaysia because the government assumed liability when it was previously not liable under any of the loans or bonds,” Thomas explained. Thus Najib had needlessly exposed Malaysia to this liability by agreeing to it.
In addition to Thomas’ book, this comment is also based on a number of articles written on the IPIC-1MDB deal (see below).
Articles on IPIC-1MDB Deal
27 Feb 2023 IPIC and Aabar to pay Malaysia $1.8 bln to settle 1MDB dispute
28 Feb2020 Tommy Thomas resigns as AG
Source: Malaysiakini, Thomas’ book
Thomas subsequently took action to set aside 1MDB’s settlement with IPIC under which Malaysia is to pay US$5.78 billion to IPIC and the bond trustee over a five-year period, on the basis that it was obtained through fraudulent means.
He employed external lawyers in Malaysia and the UK to do this. He said in his book that a UAE crown prince, through then PM Mahathir Mohamad, lobbied for a settlement in late 2018. Daim Zainuddin headed the negotiations but eventually it came to nothing as the settlement amounts between the two parties were too far apart.
The London court agreed to intervene in the settlement in Oct 2019, and then in November 2021 Malaysia succeeded in its attempts when the London court allowed Malaysia to challenge the 1MDB-IPIC settlement in open court.
Thomas had already resigned at the end of February 2020 following the Sheraton move but the detailed, lengthy and meticulous actions he had initiated had eventually borne fruit.
Meantime the new attorney general Idrus Harun said in Aug 2020 the government had no intention to halt court proceedings related to the settlement while the then foreign minister Hishamuddin Hussein went to Abu Dhabi in Feb 2021 when Muhyiddin Yassin was PM, ostensibly to work out some kind of settlement.
The open arbitration would have put enormous pressure on IPIC and UAE to settle and it may have been better for it to proceed first from a negotiating point of view instead of settling now. Tragically, despite all the work that Thomas put in, the government certainly appears to have settled for a raw deal, despite having obtained the upper hand.
On Feb 27 this year, the settlement was announced. Reuters reported - and this was picked up by most newspapers - that IPIC and Aabar had agreed to pay “US$1.8 billion to settle a legal dispute over the scandal at Malaysian state fund 1MDB, Malaysia's finance ministry said”.
When I checked the Ministry of Finance website, I could find no press release. It was almost as if details were deliberately kept sparse. Even the settlement is not clear. Does the Malaysian government still have obligations to pay the bonds? If it is, it’s a bad deal. Why have the terms not been fully disclosed so that we know what exactly the deal entails?
If the case had gone to full arbitration, all the dirty details of how the deal was made would have come out into the open, including the unanswered question of why Najib Razak, the one responsible for the 1MDB scandal, agreed to such a bad deal for Malaysia, sacrificing billions of ringgit.
There needs to be investigations to ensure that everything was above board. If there is the slightest hint of underhand dealing involving both Goldman Sachs and IPIC-Aabar, there must be a full independent inquiry to establish the facts and bring all responsible to book.
The settlement, unlike the Goldman settlement done during Muhyiddin Yassin’s time, with UAE was made during PM Anwar’s tenure - he has a duty to ensure that nothing underhand or irregular has happened. The only way he can do that is to disclose deal details - for both Goldman Sachs and IPIC-Aabar - to show that we as a country got a good deal.
If the situation is one where he does not have a good grasp of the details and what’s happening, then it behoves him to get someone who understands it to unravel and then piece together what is really happening and take all necessary action. If the deals involve corruption, then Anwar can take steps to reverse it.
To do anything otherwise is to cause and unnecessarily prolong grave public concern and a deep and dangerous erosion of public confidence in a matter of very great public importance. The public has a right to know the full details of any 1MDB settlement - they eventually bear the costs.
Otherwise this 1MDB saga, started and perpetrated by Najib Razak and cronies, and defended by most Umno leaders will continue to go on and on and on. This government, which came to power partly on the premise that it would put an end to 1MDB problems, must meet its obligations.
Surely all uninvolved Malaysians, which is almost all of us, want a definite and definitive end to 1MDB and all shenanigans, past and present, associated with it once and for all and for always.
Surely this unity government must want it too to go forward to a better Malaysia for all. If it does not, the eventual cost to the country and people will be much higher in the longer term than the tens of billions foregone in these deals.
It will simply hide, propagate and encourage grand corruption which Anwar says he is so keen to destroy. How do you kill corruption when you don’t even disclose details of a deal arising out of grand corruption?
(P Gunasegaram, author of the book, 1MDB: The Scandal that Brought Down a Government, believes in the old Indian adage that you can’t hide a whole pumpkin in the rice pot.)
P Gunasegaram is a content creator under the Newswav Creator programme, where you get to express yourself, be a citizen journalist, and at the same time monetize your content & reach millions of users on Newswav. Log in to creator.newswav.com and become a Newswav Creator now!
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