KUALA LUMPUR: High-risk investments due to the pressure to declare high dividends had resulted in billions of ringgit in losses, breaches of accounting standards and financial reporting that did not reflect the actual position of Lembaga Tabung Haji— were among the issues flagged by the Royal Commission of Inquiry (RCI).
Minister in the Prime Minister’s Department (Religious Affairs) Dr Zulkifli Hassan, during his briefing in the Dewan Rakyat on Tuesday(Aug 11), said the RCI report identified 14 problematic investments, including Putrajaya Perdana, Al-Rawda, PT TH Indo Plantations (THIP), Trurich and FGV, which involved the interests of certain parties.
“For example, in 2015, 2016 and 2017, Tabung Haji leased four hotels in Makkah and Madinah and paid approximately RM1.55bil upfront to Al-Rawda for leases ranging from 10 to 18 years. This was an unusual and highly ‘abnormal’ transaction,” he said.
Al Rawda was appointed as the operator of all four hotels and Tabung Haji was given Promissory Notes (PNs) personally guaranteed by the owner of Al-Rawda.
“Since March 2019, Al-Rawda has failed to pay the rental income, and Tabung Haji initiated enforcement proceedings in Saudi Arabia. Arbitration proceedings commenced by Al-Rawda against Tabung Haji were ultimately resolved through a final award dated April 16, 2023 in favour of Tabung Haji. Al-Rawda was ordered to pay SAR899mil.
While Tabung Haji took all necessary enforcement measures against Al-Rawda, the latter lacked the financial capacity to pay the amount. This resulted in the two entering into a settlement agreement in November 2024 to recover the SAR899mil awarded.
“Al-Rawda paid only part of the agreed amount, totalling SAR14.9mil, before failing to comply with the terms of the Settlement Agreement. Tabung Haji terminated the Settlement Agreement and continued its efforts to recover the outstanding balance of the arbitration award,” he said.
The RCI flagged the listing of FGV Holdings, which, although it raised RM10bil during its Initial Public Offering (IPO), had resulted in losses amounting to more than RM1bil for Tabung Haji, when its share prices plunged.
Investments related to 1Malaysia Development Bhd (1MDB), including its link to Putrajaya Perdana and the purchase of land in TRX when the CEO of Tabung Haji was also sitting on the board of 1MDB, had also been flagged.
He said RCI found that profit distributions made before 2018 did not reflect Tabung Haji’s actual financial position and were inconsistent with the requirements of the Tabung Haji Act, which requires assets to exceed liabilities.
He added that RCI found that financial statements were manipulated through creative accounting, breaches of Malaysian Financial Reporting Standards (MFRS), and repeated changes to impairment policies.
Asset values were also presented using the Realisable Asset Value (RAV) method outside the audited financial statements, despite the method not complying with accounting standards, so that it would appear that Tabung Haji’s assets exceeded its liabilities. All of which was confirmed in an audit report in 2018.
The RCI also highlighted financial reporting practices whereby certain losses were not properly recognised in the income statement and balance sheet, resulting in "falsified profits".
He said that had Tabung Haji applied the MFRS standards, it would have recorded a net loss of RM1.4bil instead of a profit of RM3.4bil for 2017.
