Malaysia’s 1MDB Fund Scandal Spreads to U.A.E.
(WSJ) – At issue is a $1.4 billion payment from 1MDB that officials at an Abu Dhabi investment fund said is missing
The corruption scandal around an economic-development fund in Malaysia is spilling beyond the country’s borders, as officials at a United Arab Emirates state investment vehicle raise questions about more than a billion dollars in money that they said is missing.
Abu Dhabi has long been a source of support for the fund, 1Malaysia Development Bhd., which was set up six years ago by Malaysian Prime Minister Najib Razak to develop new industries in the Southeast Asian country. Now, as 1MDB tries to fend off a cash crunch, its backers in Abu Dhabi are asking what happened to a $1.4 billion payment the fund said it made but which they never received, two people familiar with the matter said.
The dispute comes as Mr. Najib is battling a separate scandal linked to 1MDB. Malaysian investigators are examining the transfer of hundreds of millions of dollars into the prime minister’s alleged private bank accounts through entities linked to 1MDB. The disclosures have sparked a political crisis and set off a handful of investigations around the world, destabilizing the government and damaging confidence in Malaysia’s economy.
Mr. Najib has denied wrongdoing and said he didn’t take money for personal gain.
The U.A.E. is trying to sever its ties to the fund and restructure the entity that provided it with financial support, the people said.
The disputed payments are related to the purchase of power plants around the world by the Malaysian fund in 2012. A state investment fund in Abu Dhabi, the International Petroleum Investment Co., or IPIC, guaranteed the $3.5 billion in bonds that 1MDB issued to finance the purchase, according to the bond offering documents. In return, IPIC was to receive options to buy a 49% stake in the power plants as well as collateral for the bond.
According to 1MDB’s financial statements, the Malaysian fund made a collateral payment of $1.4 billion. A draft report into 1MDB’s activities by Malaysia’s auditor general, reviewed by The Wall Street Journal, said the payment went to a subsidiary of IPIC called Aabar Investments PJS.
IPIC’s consolidated financial statements, however, contain no reference to the receipt of the payment. Two people familiar with the matter said IPIC and Aabar never received the money. It isn’t clear what happened to the funds. 1MDB didn’t respond to requests for comment.
