KUALA LUMPUR, June 8 — Putrajaya’s failure to uphold corporate governance on a “massive scale” in its management of 1Malaysia Development Berhad (1MDB) is a clear example of how everything can and will go wrong, Penang Chief Minister Lim Guan Eng said today.

He claimed the fact that the state-owned fund was allowed to amass a RM42 billion debt pile, apart from various controversial investments that have not been clarified, is proof of a systemic absence of everything from regulatory oversight to proper audit procedures and internal governance procedures and processes.

“This only shows how the lack of proper corporate governance can create an environment where all things which can go wrong does go wrong... and in the case of 1MDB, going wrong in a spectacular fashion,” he said when presenting at the 7^th Annual Corporate Governance Summit here.

Lim, who described 1MDB as “Satu Malaysia Dalam Bahaya” (One Malaysia In Danger) claimed that the rot in 1MDB set in from the very start, when the firm took just 10 days to sign a US$2.5 billion (RM9.4 billion) deal with PetroSaudi International Ltd in 2009, leading to a convoluted process of transferring billions of dollars in funds that are said to now be parked in Singapore’s BSI Bank.

The DAP secretary-general also questioned how flamboyant billionaire Low Taek Jho allegedly had the power to “seemingly call the shots” on several major investment decisions despite not having any formal position in the firm.

Adding to the mess was the recent sale of around 1.5 acres of land in 1MDB’s Tun Razak Exchange to pilgrimage fund Lembaga Tabung Haji for nearly RM190 million, when the latter fund’s group managing director Tan Sri Ismee Ismail sits on 1MDB’s board of directors, Lim said.

“Some have tried to justify 1MDB’s financial health by saying that its assets of RM50 billion outweighs its debts of RM42 billion.

“But what is left unsaid and unexplained is that RM13.4 billion of these ‘available-for-sale’ investments may not be worth that much,” Lim said.

1MDB is currently under investigation by the Auditor-General’s Department and Parliament’s Public Accounts Committee for alleged impropriety in some of its deals.

On May 29, Second Finance Minister Datuk Seri Ahmad Husni Hanadzlah said Abu Dhabi-based International Petroleum Investment Company and its Aabar Investments unit will pump in US$1 billion to 1MDB for the firm to pay off a US$975 million loan by June 4.

He also said the Tun Razak Exchange (TRX) and Bandar Malaysia projects will be spun off into separate autonomous firms, but did not state what would happen to 1MDB itself.

National news agency Bernama later reported that 1MDB will be wound down by next year and its operations transferred to three separate firms.

Asked to comment later, however, Husni said the report was “not true”.

The TRX will be built on 70 acres of land sold to 1MDB four years ago for just RM4.5 million or RM64 per square foot.

The yet-to-be-built Bandar Malaysia is located in nearly 500 acres of land in Sungei Besi that was previously occupied by the Royal Malaysian Air Force airbase.

1MDB was incorporated in 2009, after the prime minister announced the decision to turn the Terengganu Investment Authority state fund into a federal agency.

Since then, 1MDB has been dogged by negative publicity over its finances and debt, and most recently cash flow problems that saw it struggle to meet a RM2 billion loan payment.