Source: Audit team finds directors not consulted
The National Audit Department's probe into 1MDB has shown that many of the company's investment decisions were made without the prior approval of its board of directors.
"These questionable decisions were made through written resolutions, instead of conducting proper board meetings," said a highly-placed source with knowledge of the department's interim report.
The National Audit Department's probe into 1MDB has shown that many of the company's investment decisions were made without the prior approval of its board of directors.
"These questionable decisions were made through written resolutions, instead of conducting proper board meetings," said a highly-placed source with knowledge of the department's interim report.
"The audit team described it as though the board was sidelined or that the decisions were influenced by others."
Prime Minister Najib Abdul Razak, who is facing criticism for his role in government-owned 1MDB, is not a member of the board of directors but heads its advisory board.
The audit team also found that on many occasions, the company's management had failed to follow instructions from the board.
"They also claim that there were instances where the board was given inaccurate or incomplete information on investment decisions," said the source.
The source added that the audit team also found that the company lacked an investment committee to ensure that there was due diligence before making an investment.
These processes, said the source, resulted in a poor management structure.
Not in line with 1MDB’s objective
According to the source, the audit team cited 1MDB's joint-venture with London-based PetroSaudi International Ltd (PSI) as an example.
Since this deal did not bring in any direct foreign investment, the audit team noted that the deal was not in line with the objective of establishing the strategic development company, which was supposed to help develop Malaysia, said the source.
"The audit team also noted that the investment was transformed a few times in a short period and it showed a lack of long-term planning," said the source.
This joint venture was 1MDB's first investment and remains one of its most controversial deals.
1MDB's predecessor Terengganu Investment Authority (TIA) had raised RM5 billion through Putrajaya-backed bonds in August 2009.
Putrajaya took over TIA on Sept 2, 2009 and renamed it 1MDB on Sept 25, 2009.
Three days later, 1MDB went into the joint venture, pumping in RM3.5 billion (US$1 billion at the time), or 70 percent of what it raised just a month ago.
Deal went south
The money was channelled into a company called 1MDB-PetroSaudi International, incorporated in the British Virgin Islands on Sept 18, 2009.
A day after the joint-venture was inked, US$700 million was transferred to PSI's subsidiary, Good Star Limited, from 1MDB-PetroSaudi International, according to whistleblower website Sarawak Report . Neither Putrajaya nor 1MDB has denied this.
Six months later, the deal went south. 1MDB said that its US$1 billion investment had been converted into Murabaha notes (a form of term notes) valued at US$1.2 billion.
Former prime minister Dr Mahathir Mohamad has been repeatedly demanding proof of where the initial investment sum went.
Putrajaya has been vague on this , claiming that the sum from Good Star was held in cash in a Singapore bank. Later, Putrajaya told Parliament that it was not in cash but in "units".
Adding to the intrigue was the Finance Ministry's claim that 1MDB's decision to loan US$1.9 billion to PSI - a company which it saw no value in pursuing a joint venture with - had nothing to do with the government.
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