Akhbar Satar also urges the government to set up an independent commission of inquiry to carry out a thorough investigation.
Transparency International Malaysia (TI-M) is deeply concerned with the corporate governance issues raised in the Parliamentary Public Accounts Committee (PAC) report on 1Malaysia Development Berhad (1MDB) which was tabled in Parliament recently.
TI-M finds that there are many issues raised in the report which suggest a lack of diligence – by the Board of Directors, the management of 1MDB and even the advisory board, which failed to adhere to good corporate governance practices in the business decision-making process – and even possible misappropriation of 1MDB funds.
The board of directors seems to have not been fully informed by the management on some of the decisions made by management on behalf of the company. There are also instances where the management did not comply with the instructions given to them by the board. While it seems that the RM42bn (or RM50bn?) has been accounted for, this does not justify how the funds were used as for example the case of the US$700m which seemed to have gone off the radar of the management and the board of directors.
TI-M is very concerned and disappointed with the failure of 1MDB’s three-tier check-and-balance system comprising a board of advisors, a board of directors and management team in discharging their duties. It is not really known for a fact whether there were any standard operating procedures and policies and due diligence requirements in the company and, if yes, whether they were actually followed.
These are not private equity funds; this is a government-controlled entity – with reputable and seasoned personalities on the board and an advisory board chaired by the prime minister himself – entrusted with government funds and loans financially backed by the government. This ultimately means it is the Rakyat’s hard-earned tax money which is at stake or alternatively the nation’s assets which will be used in any bailout.
Where was the risk analysis report? Where was the internal audit monitoring? It is reasonable to expect that such high value assets or highly geared government entities should be managed by a team of qualified persons of high integrity and responsibility who practise transparent and good corporate governance principles.
Instead, we find the term “management weakness” being used to describe how 1MDB was run. All the three groups in the company were expected to display a high standard of care, skill or diligence in managing the affairs of the company. Or were their hands being tied since, as alleged by the former 1MDB CEO, there was “no wrongdoing during his watch”?
Almost two years ago, on 22 February 2014, TI-M had issued a press statement urging 1MDB not only to be more transparent in its corporate reporting but also to report its financial position in a timely manner, demonstrate greater transparency and accountability and maintain high standards of accuracy and completeness in its records.
Mismanagement is one thing, but the scale of this financial debacle suggests that this may not be all there is to it. Are we to “close one eye and move on” when it is yet unclear where the money trail has gone?
To allow billions to be at risk due to poor management is one thing – that this has happened is clear enough. To find out where the billions actually ended is surely the next step or we would be guilty of allowing two wrongs to make a right!
TI-M also strongly urges the government to set up a royal commission of inquiry to conduct a full investigation into the numerous allegations of how the funds were used and where they ultimately ended and to probe further as to whether any party benefited personally from these government-owned or borrowed funds.
The next logical step, therefore, would be for the relevant enforcement authorities to look at and scrutinise the report in detail and take appropriate action, without fear or favour, against any officer or employee or parties connected with the company who may have committed any malpractices in the company while in office.
TI-M welcomes the statement given by deputy prime minister and home minister Zahid Hamidi that investigations will be carried out by the authorities on the PAC’s recommendations for any wrongdoing. If, from the result of the investigation, there is sufficient evidence of any person being involved in any criminal wrongdoing, they should be brought to justice and face the law.
Apart from the probe by the relevant enforcement agencies, TI-M recommends 1MDB to engage forensic accountants to conduct a forensic investigation into the past activities of the company to find out in depth whether there were any other irregularities and mismanagement which could have occurred. Perhaps such governance procedures should be more frequently used in the seven government-linked investment companies (GLICs) and over 200 government-linked companies (GLCs).
TI-M also urges that the auditor general’s report on 1MDB should be declassified and tabled as a full report in Parliament and made public. The purpose of the auditor general’s office is to serve the public interest.
The Federal Constitution and the Audit Act 1957 provide that the auditor general shall submit his reports to the Yang Di-Pertuan Agong, who shall cause them to be laid before the House of Representatives. This is constitutionally what is provided for, and there should be no blockage or excuse preventing the rakyat from seeing the full auditor general’s report. There should be nothing to hide.
Now is the time for the government to prove that it truly stands for integrity and transparency and the rule of law. There has been so much speculation and allegations due to the lack of disclosure of 1MDB dealings by the government.
The PAC findings and report have been a step in the right direction, but more questions have been raised which demand further probing and investigation, especially as to how the funds were ultimately used. Let the right independent and professional people finish the job – or the ghost (or empty shell?) of 1MDB will never be laid to rest.
Dato Akhbar Satar is president of Transparency International Malaysia, an independent, non-governmental and non-partisan organisation committed to the fight against corruption.