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Malaysia’s scandal-hit 1MDB slams claims of cover-up

Michael Peel
Arul Kanda, president and group executive director of Malaysia's state investor 1Malaysia Development Bhd (1MDB).
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The head of Malaysia's scandal-hit 1MDB state investment fund has slammed "spurious" claims that it is holding back crucial information and is more interested in pursuing document leakers than the truth.

Arul Kanda, the banker brought in this year to deal with 1MDB's crisis, insisted the fund had found no evidence of past criminality and was in good shape to reduce its $10bn debt pile.

Allegations of large-scale misappropriation of money from 1MDB have engulfed Najib Razak, the prime minister, triggering a power struggle in Southeast Asia's third largest economy and the threat of a no-confidence vote against him.

In an interview at 1MDB's Kuala Lumpur headquarters, Mr Kanda defended the fund's decision to file a police report over a recent leak of documents including minutes of board meetings that dealt with some of its contentious past investments.

The 1MDB president said the claim that this was part of a cover-up was a "spurious argument", given the multiple official investigations under way into 1MDB — probes that critics allege have been hobbled by the Najib government. Mr Kanda added that 1MDB's pursuit of the leakers of its internal papers reflected "the same concern that any other person would have" about their private affairs.

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"I am sure you would not like it if somebody put up your bank statements for the public at large to have a look at," he said. "So, in the same way, we have a right to privacy and confidentiality."

Mr Kanda, an investment banker who used to work in Abu Dhabi, said internal investigations of 1MDB's activities since the Najib administration created it in 2009 had found no evidence of criminal offences. While the central bank this month said it had urged criminal charges over alleged breaches of the law in some of the fund's foreign investments, the attorney-general appointed by Mr Najib a few months ago rebuffed the effort and said there was no case to answer.

That dispute centres on $2.3bn of investment fund units 1MDB said it held in the Cayman Islands. Mr Kanda turned on critics who say he and the fund have failed to show what the assets are, where they are held — and whether they are worth what is claimed.

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"I only deal in facts, I don't deal in allegations or spurious statements made by third parties who have no access to the underlying documents or the underlying bank accounts," Mr Kanda said, adding that 1MDB had redeemed $1.4bn of the units in cash and would use the balance in a debt-for-asset swap.

He added more broadly: "If you look at our audited accounts, every cent that the company has borrowed and spent is very clearly described."

1MDB is already late in filing its accounts for the year to March, having won official permission to delay on the grounds that investigators hold documents it needs for the audit. Mr Kanda declined to give an up-to-date figure on the fund's debt, which stood at Rm42bn ($9.8bn) in March last year.

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Questions over 1MDB's multibillion-dollar international dealings have grown relentlessly this year to embroil Mr Najib, who chairs the fund's advisory board and has been under increasing pressure over mysterious payments of more than $680m into his bank account. The prime minister says the money has nothing to do with 1MDB and is a donation from an unnamed Middle Eastern source. These and other allegations linked to 1MDB have triggered investigations in the US, Switzerland, Singapore and Hong Kong.

Some Malaysian opposition politicians and others have raised the possibility of targeting the prime minister and his United Malays National Organisation-dominated government either through a confidence vote or via the budget due to be tabled on Friday. But the opposition is deeply divided and there are no public signs yet that a campaign led by Mahathir Mohamad, the influential former Umno prime minister, to oust Mr Najib has provoked a wider revolt among either the party's MPs or its powerful regional heads. Police have opened a defamation investigation against Mr Mahathir, it emerged on Thursday.

Mr Kanda said he would "be lying" if he said he had appreciated the full impact of the politics and investigations swirling round 1MDB when he joined the fund in January. But he said 1MDB was making good progress towards generating the cash it needed to pay debt interest and capital, including by selling more than Rm1bn of land and via an imminent deal to offload part or all of energy assets it bought for about $2.7bn.