QUESTION TIME And so the cabinet has said 1Malaysia Development Bhd (1MDB) has done no wrong. But whichever way we look to find new perspectives, we cannot but resign ourselves to the fact that it is simply too early to exonerate 1MDB.

There are very primary things which are wrong with self-styled strategic development company 1Malaysia Development Bhd or 1MDB. Thus it is rather premature for the cabinet to conclude that there has been no wrongdoing , which is what a statement from the Prime Minister’s Office says.

This is especially so after the prime minister announced that the auditor-general has been instructed to independently verify 1MDB’s accounts.

The right thing to do will be not to simply wait for the verification process by the auditor-general but to expand the scope into a full-blown, urgent, forensic audit to uncover wrongdoing. Only that can clear 1MDB.

It appears that the cabinet maintaining that there is no wrongdoing at 1MDB comes following briefings by 1MDB officials and its auditor Deloitte. That in itself is not sufficient to clear 1MDB of wrongdoing because that can take place even with accounts that have not been qualified.

Indeed, much of what is wrong at 1MDB is not just at the accounting level of things.

Here are 10 groups of questions - by no means exhaustive - that the cabinet should look into and ask 1MDB to explain. So far - over two years - we at KiniBiz have not managed to get answers from them. Surely the cabinet will have a better chance.

  • Why borrow to the extent of RM46 billion (as at end March 2014) when the only solid assets are in power generation which cost around RM11 billion? Where is 1MDB going to get over RM3 billion in interest payments yearly on these loans from the assets it has? And we are not even talking repayment.
  • After taking RM11 billion out for power assets out of borrowings of RM46 billion, there is RM35 billion left. How exactly have these assets been invested, what is the return and what is the strategic impact upon the country of these acquisitions?
  • Why are some RM13 billion of assets (as at March 31, 2014) classified as assets-for-sale? Why are they for sale? Will money be lost when these assets are sold?
  • With so much of liquidity, why was 1MDB very publicly scrambling to raise money to repay RM2 billion to Malaysian banks? Did it have to borrow the money from tycoon T Ananda Krishnan for this? Is all the money intact and accounted for?
  • Is it viable to borrow at effective rates of around 7 percent and then invest this money to try and get a better return and to attract strategic investments into Malaysia? What are the strategic investments and benefits to Malaysia so far?
  • Why were its bonds so badly underpriced, giving those who obtained first bite of these bonds the chance to repeatedly make billions of ringgit upfront when they sold their bonds at much higher prices on the open market?
  • For arranging what are effectively government-guaranteed bonds and borrowings, it paid hundreds of millions of ringgit in fees, primarily to Goldman Sachs, far above the norm seen for the industry. Why?
  • Why did it overpay so much for the power assets and what was the strategic impact if any at all of buying power assets owned and operated by Malaysians, much of it in Malaysia? Remember these were largely independent power producers which have now become government owned. Please explain how that can be strategic.
  • Why were the accounts delayed numerous times and the auditors changed a number of times?
  • What is its strategy moving forward?
Considerable scope for wrongdoing

Good account keeping - if indeed that is good at 1MDB - does not necessarily indicate that there are no wrongdoings. If you price your bonds wrongly for instance, nothing will show up as wrong in your accounts.

But you would have squandered billions of ringgit of public money through the higher interest rates that 1MDB has to pay, sometimes for as long as 30 years. Smart people don’t misprice by mistake, they usually do so for gain. There is considerable scope for wrongdoing here.

Likewise for high fees paid, overpaying for assets , questionable use of assets and so on.

The kind of investigation required for 1MDB is different and not an auditor’s report which examines books and expresses that all is fair and well with account keeping.

What is required is a forensic audit of 1MDB which is aimed at uncovering all kinds of wrongdoing at 1MDB, determining the money flows, the points at which corruption can occur, the people involved, and bringing them to book.

If the auditor-general is simply going to do a normal audit, he is not going to discover much – it will be pretty much an echo of the Deloitte report.

There is plenty of evidence of wrongdoing at 1MDB - what we have outlined here and others beyond that. The thing to do is to direct the investigations into those specific areas. The smell is already in the air but the problem is that no one in authority wants to admit that it stinks!

P GUNASEGARAM is founding editor of business news portal KiniBiz .