SINGAPORE: Prominent banker Datuk Seri Nazir Razak (pic) took the board of 1Malaysia Development Bhd (1MDB) to task and said that its directors should resign if they were unable to come clean and explain the poor financials of the fund.
He opined that the fundamental problem with 1MDB was that the board and management were not facing the public and instead were waiting for the Auditor-General (AG) to verify the books, something that he described as being irresponsible.
“Why should 1MDB wait for the AG to do it?” he asked. “It is the responsibility of the board to do it. I think what 1MDB should do now is to go and appoint an independent audit firm to audit its assets, liabilities and future cash flow so that we can get to the bottom of what the issue is.
“The problem now is that there is a huge trust deficit of the company and its board has all gone silent. It is urgent for 1MDB to get to the bottom of what its assets, liabilities and cash flow are to bring back the trust so that it will no longer be toxic,” said Nazir.
To address the growing mistrust in the financials of 1MDB, he said the board should take steps immediately to handle the matter or resign to allow others to take over.
“It is your basic responsibility. There’s a complete mistrust in your financial situation. You have to responsibly deal with that,” said Nazir.
“But instead, you sit there and wait for the AG. To me, that’s irresponsible. If you do that, then it’s better for you to step down and let someone else come in and take over.
“If I am a board member and I can’t explain, I would appoint someone who is independent to audit my numbers or I should quit,” the CIMB Group Holdings Bhd chairman told reporters during a luncheon at the Asean Business Club forum here yesterday.
1MDB, a fund established by the Finance Ministry in 2009 and has its business concentrated on property development and power generation, is saddled with debts to the tune of RM42bil.
The chairman is Tan Sri Lodin Wok Kamaruddin, and so far, he and his board members have not explained why the fund took on “expensive” borrowings and the reasons for its cash-flow problems.
In March this year, Prime Minister Datuk Seri Najib Tun Razak ordered the AG - Tan Sri Ambrin Buang - to audit the books of 1MDB to verify the accounts, with its report to be handed to the Public Accounts Committee for scrutiny.
Although 1MDB has assets in excess of RM51bil to back the debts, 1MDB is facing cash-flow problems to meet its debt obligations.
“If there are any concerns about CIMB’s financials today, what I would do immediately is appoint an independent auditor (who is not my auditor) to have a look at the numbers so that I’ve two credible people saying my numbers are legitimate.
“That’s what should be done. I don’t know why they have to wait for the AG to do it.
“The immediate check for a responsible board is to appoint an independent (auditor) now … otherwise the board and management, in my view, should resign,” said Nazir.
This year, 1MDB has obligations of RM5.1bil to meet and the bulk is in the form of a US-dollar term loan amounting to US$975mil (RM3.5bil) that matures on Aug 31.
In relation to the US-dollar term loan, a report from Singapore on Tuesday stated that a consortium of banks led by Deutsche Bank had asked for the repayment of the loan four months ahead of its due date.
According to the report, the lenders were jittery after doubts arose on the collateral of the loan held in a foreign bank based in Singapore.
Nazir said that the board had gone silent when there was a lot of noise coming from the social media and the public.
“And then, you have the Lembaga Tabung Haji (LTH) transaction that is making the public edgy … just get to the bottom of it. Get to the truth quickly,” he said.
Last week, LTH came under fire for purchasing a piece of land in the Tun Razak Exchange (TRX), which is being developed by 1MDB, for RM188.5mil cash. It was viewed as LTH coming to 1MDB’s rescue because the fund was facing cash-flow problems and the deal was conflicted because 1MDB and LTH had three common directors.
After coming under fire, the board of LTH came out to say that it was selling the land to ready buyers for a profit of RM5mil.
On 1MDB’s debts of RM42bil, Nazir felt that there were a significant amount of assets in the books to back the liabilities.
“The question is how significant (are the assets). They have power plants, the TRX land and cash … although there are questions about whether the cash is really there,” said Nazir, who is well-known in the region as an investment banker.