Pandan MP Mohd Rafizi Ramli will be enlisting help from former prime minister Dr Mahathir Mohamad and Deputy Prime Minister Muhyiddin Yassin to urge for the return of a loan given by Retirement Fund Incorporated (KWAP).

He told a press conference today that he will be writing a letter to the two leaders urging them to lend their voice on the issue in order to "save" the pension fund for retired civil servants.

The RM4 billion loan was given by KWAP to SRC International in 2011, which was then a subsidiary of state development fund 1Malaysia Development Berhad (1MDB).

However the company has since been absorbed as a wholly owned company of the Ministry of Finance (MOF).

"1MDB may have clocked RM42 billion worth of loans, but these were mostly from bonds. But this one, the RM4 billion, was taken directly from the pension funds, which will directly affect the government’s ability to pay pensions," he said told a press conference today.

Trouble with loans?

Rafizi also questioned whether the over RM1 billion to be injected into KWAP following the passage of the supplementary budget yesterday is to counter the possibility that the fund would not be able to pay its pensions partly due to the RM4 billion loan.

He urged Prime Minister Najib Abdul Razak to expand the National Audit Department’s audit on 1MBD to include SRC.

"So far, the announcement only covers 1MDB companies and it conveniently excluded an ex-1MDB company like SRC, whereas SRC was set up as (part of) 1MDB, it took the loan on basis that it was part of 1MDB, and then it was quickly transferred out of 1MDB.

"Therefore it is only reasonable that any audit on 1MDB must also include former 1MDB subsidiaries, more so when it is a company with financial risk like this," he said.

Najib had previously announced that the audit department would go through 1MDB's books, following controversies about its dealings.

Hidden investments

Meanwhile, Rafizi also expressed concern over SRC's RM3.1 billion in Class Three investments, meaning that these are investments that auditors have no information on, and hence could not assess its value.

This is in view of the RM115 million in losses suffered by the company due impairment, which is a large portion of the company's RM164 million in overall pre-tax losses, and suggests that the actual impairment losses could be larger.

Impairment, the chartered accountant explained, reflects a loss in the earning potential of an investment, and is assessed annually by auditors following lessons from the collapse of the US energy company Enron in 2001.

He said he won't be surprised if SRC would record impairment losses for years to come when the Class Three investments fail to generate revenue, as the risks of this occurrence is "real and big".

"If I were an auditor and I went in, and you tell me that 'I don't have any information about RM3.1 billion' and therefore I cannot assess the potential value and so on…

"Yet at the same time, on the remainder of the investments that I have - as an auditor - some information, which has already caused an impairment of RM115, that would have frightened me," he said.