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Malaysia says too early to conclude fraud in 1MDB-Abu Dhabi deal

38187187.1 (38188616) - 26_04_2016 - MALAYSIA-SCANDAL_BOND.jpg
Malaysia said Tuesday it's too early to conclude if fraud had occurred in dealings between its troubled state company and an Abu Dhabi sovereign wealth fund.

[KUALA LUMPUR] Malaysia said Tuesday it's too early to conclude if fraud had occurred in dealings between its troubled state company and an Abu Dhabi sovereign wealth fund.

1Malaysia Development Bhd, which is the subject of global investigations, said last month it could be a victim of fraud if payments of US$3.5 billion intended for Abu Dhabi's International Petroleum Investment Co never made it there. IPIC had denied ownership of a company that received the funds known as Aabar Investments PJS Limited, or Aabar BVI.

"1MDB is still reviewing and taking steps to prove that IPIC and Aabar Investments PJS are responsible for the funds that had been paid by 1MDB to Aabar BVI totaling US$3.5 billion," the Malaysian finance ministry said in a written reply in parliament.

A report by a Malaysian parliamentary committee last month identified at least US$4.2 billion of questionable transactions by 1MDB, including those involving the Abu Dhabi companies. The bipartisan group said it couldn't verify a US$2.1 billion payment to Aabar Investments PJS Ltd, while another US$1.37 billion was sent to the company without the approval of 1MDB's board. 1MDB has consistently denied wrongdoing over its finances.

IPIC has a unit that goes by the name of Aabar Investments PJS (without the Ltd) in the company that 1MDB transferred money to. 1MDB said it negotiated "various legal agreements" with the previous heads of IPIC and Aabar and called it a "surprising claim" that neither of the Gulf companies knew of payments to Aabar BVI.

Swiss authorities said last month they are investigating two former public officials from the United Arab Emirates, who handled Abu Dhabi sovereign wealth funds that guaranteed 1MDB bonds. Authorities from the US to Switzerland and Singapore are trying to determine if some of the billions of dollars that 1MDB raised were siphoned out inappropriately.

1MDB and IPIC have been locked in a dispute that spilled over to repayments on bonds of the Malaysian fund. That led to a default by 1MDB in April, hitting the reputation of the Malaysian government who is its sole shareholder and adding to financial scandals that have rocked the company and nation.

Separately, the Malaysian government said those spreading false information including that about 1MDB could have legal action taken against them, according to a written response in parliament. Laws under the Sedition Act and the Penal code could be enforced, the home affairs ministry said.

BLOOMBERG