Democracy at work at 1MDB puzzle

By admin-s Last updated Mar 5, 2015

Generally, you can buy a piece of land at above market prices and an Auditor will just certify that you actually did, whether it was a fair price or not is not their business. Because of the objective nature of accounts auditing, crooks devised ways to satisfy Auditors yet pull a fast one.

Umar Mukhtar

Congratulations are due to the Prime Minister for ordering the accounts of 1MDB to be probed by third parties. And to the Cabinet for being cautious with public funds.

Auditors only certify that an approved payment is made. Never if it is a wise consideration. It will be up to the Parliamentary Public Accounts Committee (PAC) which is bi-partisan to evaluate if management’s decisions on a particular critical matter was wise.

The PAC is different. They have the right to question the wisdom of critical transactions on behalf of stakeholders. I am sure they will do an excellent job given the controversies that have arisen here and even abroad on 1MDB. Nevertheless, it doesn’t hurt to have certain rules of thumb to watch out for:

1. Was the price paid for the land on Penang island fair? In this respect, the PAC members have vast resources of information to rely on. The subjective response by management, if not too glaringly weird, have to be accepted. They are the ones who run the company. Cut them some slack. As to who was the financial beneficiary of the sale and whatever implications thereto, are for public interpretation once PAC does the necessary questioning.

2. The cost of borrowing funds, both interests payable and payments to institutionalised facilitators like loan arrangers, etc., need to be looked at objectively. Again, interest rates must hover around what the market charges at that period taking into account the intrinsic and extrinsic circumstances in which the loan was offered. Risks and all that mumbo jumbo are determining factors.

Who were paid as intermediaries and whether they were not too much need to be known. With adequate questioning by PAC, stakeholders can form their fair opinion about particular critical management choices. Again, if management responses are not too glaringly stupid, we have to accept them.

3. Again, the choice for Joint Ventures, whether in the choice of partners or projects, were management’s, and it is not fair to dispute it in hindsight, no matter if the choice did not conform to conventional wisdom. What if it turned out to be a goldmine in spite of our reservations? We would still take the money! Of course, stakeholders will voice out if they are not comfortable with such risks, after the PAC probe.

4. In the final analysis, stakeholders want to know if anyone was enriched inappropriately or worse still, illegally. An objective query would be, “if a JV was aborted for whatever reason, why the necessity to covert your equity into a loan to your previous partner? Such a big sum at that?” “The JV company just paid your partner a large sum from your cash input into the JV to pay for a loan with unsubstantiated grounds? Details, please.”

5. “Was 1MDB paid back in cash? Not in worthless papers or other junk they valued at billion of dollars that satisfy the value of your loan. What did you do with the money and so-called profits? Where are they? Why did you borrow money without a predetermined plan for repayment at redemption or interests? Especially when your borrowings are costly?”

6. Also, in the final analysis, if decisions were made that lost 1MDB money, were they of wilful intent to enrich a third party, or mere stupidity? Were the consequential steps to cover-up the error, wilful or not? These are questions that can result in someone landing up in jail or unceremoniously sacked.

Thank God, as a result of persistent pressure and the PM’s responsiveness, the rot may have been stopped. Still, we are talking about billions here and billions more in contingent liability to the nation, if there were hanky-panky in 1MDB. PAC knows it’s job, without our pointing it out. I only ask because the Rakyat needs to know what’s at issue. It’s better than Rafizi or Phua questioning, lest it looks too politically motivated, even though it’s their job.

Let’s remember that stupidity is not a crime, feigned stupidity as disguise to rob is. Let the appropriate punishment be meted out, if need be. But if a supervisory body like the Board of Directors, Chairman or Advisor implied that how would they know the house is broken into because they were asleep, that merits a different kind of punishment.

We pray for the best.