1MDB’s announcement that its 2013 and 2014 audited financial statements should no longer be relied on is inconsequential, said Finance Minister II Johari Abdul Ghani.

He said this was because 1MDB has no outstanding debt with any local bank, nor would it use those accounts to apply for a bank loan.

“Before (this), there is a lot of implications because 1MDB has a lot of exposure with the banks in Malaysia; meaning that almost all banks in town – I think – 1MDB has exposure at that time.

“Today, all these banks don’t have any exposure anymore. None of the local banks has anything outstanding with 1MDB. It is all fully paid, so basically 1MDB doesn’t have any exposure with any local bank.

“As I have told the public before, there is no more borrowing from 1MDB. 1MDB should be a run-off company.

“They (1MDB) would not go to the bank and borrow anymore, and therefore these audited accounts – when they said that it should not be relied on anymore because Deloitte has decided to withdraw and because of the US Department of Justice case – as far as 1MDB is concerned, there is no impact,” he told reporters in Putrajaya today.

He was asked what are the implications of 1MDB’s announcement last week, which some financial experts have described as “unusual”.

In its announcement, 1MDB said that it still believes that the accounts are a true and accurate reflection of the company’s standing at the time.

In light of the US Department of Justice’s (DOJ) civil forfeiture suit seeking to recover about US$1 billion out of US$3.5 billion that were supposedly misappropriated from 1MDB however, it said these accounts should not be relied upon as a “precautionary measure”.

This is pending a final decision from the US courts regarding the lawsuits.

On the following day, Deloitte made a similar announcement saying that the information contained in the DOJ's court filings would have impacted its audit, if this information were known at the time.

'We are very confident'

Meanwhile on a related matter, Johari said the government is confident that it would prevail in the arbitration case initiated by the Abu Dhabi-based International Petroleum Investment Company (IPIC) and its subsidiary Aabar Investments PJS.

“As far as I am concerned, we are very confident because based on the documents that I have and what is supplied by 1MDB to me, I am very confident,” he said.

He said that although IPIC has denied links to the British Virgin Islands-based Aabar Investments PJS Ltd (Aabar BVI), there are documents to prove otherwise.

“It is too bad for them to acknowledge that (Aabar BVI is their company), because as far as the record is concerned, I think that the company belongs to them. The directors (of Aabar BVI) are both senior managers in IPIC group […]

“If they are there and they now suddenly say that the company does not belong to them, then we want to see them in court. Let the arbitration look at our documents,” he told reporters.

He added that the case is scheduled to be mentioned in September.

IPIC and Aabar took the Ministry of Finance Incorporated (MOF Inc) and 1MDB to arbitration at the London Court of International Arbitration. IPIC and Aabar are claiming US$6.5 billion from the latter two entities.

In 2012, 1MDB transferred US$3.5 billion to Aabar BVI as part of a joint venture between 1MDB and IPIC.

However, IPIC later said Aabar BVI is not its subsidiary, and none of its subsidiaries had received the money, despite the Malaysian government’s insistence to the contrary.

This led IPIC to back out of a deal where it would assume responsibility for repaying the 1MDB debt that it co-guarantees, although it later resumed payment and filed the request for arbitration.