PAC report: 1MDB paid US$700m to company unrelated to PetroSaudi joint venture

1MDB is currently under probe by the authorities in several countries, with Luxembourg the latest to investigate the state investment firm for alleged money laundering. — Picture by Yusof Mat Isa
1MDB is currently under probe by the authorities in several countries, with Luxembourg the latest to investigate the state investment firm for alleged money laundering. — Picture by Yusof Mat Isa

  KUALA LUMPUR, April 7 — 1Malaysia Development Berhad (1MDB) did not have board approval when it paid US$700 million (RM2.72 billion) to Good Star Limited in 2009, a company unrelated to the state investment firm’s joint venture with Saudi oil company PetroSaudi International Ltd, the Public Accounts Committee (PAC) report revealed today.

The PAC said that out of the US$1 billion that 1MDB had invested in the joint venture, US$300 million was transferred to a JP Morgan (Suisse) SA bank account belonging to 1MDB PetroSaudi Ltd, the joint venture company set up in the British Virgin Islands, on September 30, 2009, while US$700 million went to an RBS Coutts Bank Ltd account, which former 1MDB CEO Datuk Shahrol Azral Ibrahim Halmi testified belonged to Good Star Limited.

“The National Audit Department found that there was no approval from 1MDB’s board of directors for the transfers of the money into two separate accounts,” said the PAC report.

The report noted that 1MDB’s board of directors had approved the transfer of US$1 billion to 1MDB PetroSaudi Ltd’s bank account, but 1MDB management instead had transferred US$700 million of that amount to an RBS Coutts Bank Ltd bank account that belonged to “another company that was not involved with the joint venture project”.

International business paper the Wall Street Journal reported last November that Good Star Limited is a Seychelles-registered company set up by businessman Low Taek Jho, better known as Jho Low.

The PAC report did not mention the owner of Good Star Limited. The only mention of Low in the report was that the prominent businessman was appointed on April 8, 2009, as one of the advisers to 1MDB’s predecessor Terengganu Investment Authority.

According to the PAC, Shahrol Azral told the panel on November 25, 2015, that Good Star Limited has been a subsidiary of the PetroSaudi Group since September 1, 2009.

The PAC noted that the agreement on the joint venture between 1MDB and PetroSaudi contained a clause saying that 1MDB PetroSaudi Ltd, which was set up on September 18 2009, received an advance loan of US$700 million on September 25, 2009, from the mother company, PetroSaudi Holdings (Cayman) Ltd, that must be paid back in full by September 30, 2009.

“The existence of the advance loan of US$700 million for five days raises questions,” said the PAC.

“The National Audit Department’s checks found that there were no minutes or documents to show that 1MDB’s board of directors were informed about the advance loan of US$700 million before the agreement on the joint venture was signed.

“Besides that, the National Audit Department’s interview with the 1MDB board of directors (former and current) in June 2015 found that the advance loan was never presented or discussed by 1MDB’s management before the joint venture project was finalised,” said the PAC.

1MDB is currently under probe by the authorities in several countries, with Luxembourg the latest to investigate the state investment firm for alleged money laundering.

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